Speculators

Speculators

From Bisnis Indonesia

A plunge in the rupiah's exchange rate against the U.S. dollar
and the government's tight money policy following it have started
to cause economic trouble to both the government itself and the
private sector.

Many projects have been canceled and some rescheduled. Many
companies have undergone a drop in their production and have been
compelled to lay off some of their employees.

The hike in the exchange rate of the dollar against the rupiah
is attributable in many cases to the demand for greenbacks needed
to repay offshore loans or the import of goods/raw materials.
This demand exceeds the supply of dollars in the market, giving
the impression as if there were a rush for dollars.

Ironically, in a country which is noted for mutual help among
its people and whose economy is based on Pancasila, many
Indonesians have turned into speculators and have purchased
dollars in order to gain a profit should the rupiah slide
further. These people do not care a dime about the difficulty now
faced by the government and private businesses as supplies of
dollars have become scarce. Is profit seeking in this manner
justified by any of the existing religions?

Until now, the government and the business sector have been
going all out to stem the soaring exchange rate of the dollar
against the rupiah. The government has even begun to seek help
from international financial institutions such as the IMF and the
World Bank.

The government has never called on community members to let go
of their dollar savings (perhaps because for the government it is
a matter of prestige or because it doesn't want to spread panic
among community members). In fact, dollar savings of private
citizens are large and are perhaps more than enough to meet the
demand for foreign payment at this time.

There are still other options for the government. It may find
leverage in the form of a short-term dollar liquidity injection
to meet the demand of businesses whose foreign loans are due.

Or, it may resort to psychological tactics, including actions
which may suggest that keeping dollar deposits would be neither
profitable nor secure. In this way people would be discouraged
from purchasing dollars for deposit purposes.

At this juncture, speculators would immediately release their
dollars making the exchange rate for the dollar against the
rupiah quickly return to its normal level.

As for businesses whose offshore loans are due for repayment,
they should be granted special status which would allow them to
obtain dollars as otherwise they would be squeezed in between a
high exchange rate and a high loan interest rate in rupiah.

BUDI ATMOKO

Administrator of Teleindonet

Businessmen Group

Bandung, West Java