Stronger rupiah will not hinder exports: Rahardi

JAKARTA (JP): Minister of Industry and Trade Rahardi Ramelan dismissed on Thursday fears that the revitalized rupiah would adversely affect Indonesia's exports.

He appealed to all parties not to worry about export performance following the sharp appreciation of the rupiah against the U.S. dollar in recent weeks.

The notion that a stronger rupiah would inevitably lead to a decline in exports was purely theoretical, he said.

He argued that Indonesian exporters would be flexible in responding to the situation.

"The strengthening of the rupiah is not hampering our export performance," Rahardi told reporters after opening an export forum at the 1998 Indonesian Export Products Exhibition at the Jakarta Fairgrounds.

"Certainly, I am happy with the strengthening of the rupiah because it is a stepping stone toward Indonesia's economic recovery."

The rupiah achieved its highest point in eight months on Wednesday when it broke the 7,000 level against the dollar.

The local unit has gained about 30 percent since the start of the month as the dollar weakened against other currencies, notably the Japanese yen. Overall, however, the rupiah has fallen by about 50 percent in the past 12 months.

Although Rahardi conceded that overappreciation of the rupiah could hamper exports, he declined to mention an appropriate rupiah exchange rate level for exporters.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said on Wednesday the ideal level would be between 7,000 and 8,000 to the greenback.

Some experts contend the appreciation of the rupiah will make it easier for local firms rendered inactive by the crisis to get running again.

Rahardi noted that the rupiah's appreciation alone was not enough to revive the moribund real sector, which would also need support from the banking sector.

Most banks have frozen lending to corporations because of choking high interest rates which most companies cannot afford.

The Jakarta chapter chairman of the Indonesian Chamber of Commerce and Industry, Soekardjo Hardjo Soewirjo, agreed and said most corporations were still unable to operate normally because of the high interest rates.

"The reinforcing of the rupiah is good, thank God. But this gives only a little benefit to the real sector, especially small businesses, because interest rates remain so high," Soekardjo told reporters at the Business Partner City Round Table 1998.

Bank Indonesia's benchmark interest rate for its one-month promissory notes currently stands at 58.66 percent per annum, a drop from 59 percent last week and 70 percent in early September.

Soekardjo said no companies could operate with interest rates of over 50 percent per annum. The appropriate levels of interest rates would be from 16 percent to 18 percent per annum.

He warned that economic recovery would never be attained unless the central bank cut the interest rates. (29)