Rupiah's sharp rise may hurt RI's exports

Adianto P. Simamora, The Jakarta Post, Jakarta

Indonesian exporters fear that the sharp appreciation of the rupiah against the U.S. dollar will make their products more expensive in the export market compared to products from competitor countries whose currencies have not appreciated as fast as the rupiah.

"If the rupiah strengthens to beyond Rp 9,000, we'll be in difficulties," Anton J. Supit, head of the Indonesian Footwear Association (Aprisindo), said on Monday.

An overappreciation of the rupiah would make the dollar price of Indonesian products more expensive overseas, thus theoretically making them less competitive compared to the products from other countries.

Anton cautioned that if the rupiah strengthened too fast, the shoe export target of around US$1.5 billion this year would be difficult to achieve.

Previously, an executive with a local electronics maker warned that if the rupiah strengthened to beyond Rp 8,500, the country's electronics exports would be badly hit.

The rupiah has been on the rise since the beginning of this year. The local unit breached the psychologically important level of Rp 9,000 Monday, a level not seen since September 2001, before closing at Rp 9,050.

Analysts said that the rupiah could still get stronger amid hopes of more dollars entering the local market with the upcoming sale of state assets.

Anton said that to help the country's already sluggish export performance amid the global economic slowdown and to offset the negative impact of the rupiah's sharp appreciation, the government must take action to curb the high cost of doing business at home, and avoid a further rise in energy costs.

The main competitors for Indonesia's shoe products are China and Vietnam.

Meanwhile, executive director of the Indonesian Textile Association (API) Indra Ibrahim also warned that the rapid appreciation of the rupiah would hurt textile exports.

But he declined to say the ideal level of the exchange rate, saying that the association had yet to make the calculation.

He said, however, that if the rupiah continued to strengthen from the current level, the textile export target of $7.8 billion could not be achieved.

"I was previously very confident that the textile exports would increase this year to $8 billion but...if the rupiah continues to strengthen, it may be lower than $7.6 billion," Indra said.

Last year, the country's textile exports totaled $7.6 billion.