Sumitro calls for revision of foreign exchange regime

Sumitro calls for revision of foreign exchange regime

JAKARTA (JP): Economic pundit Sumitro Djojohadikusumo called
on the government to revise the current free foreign exchange
regime so as to better monitor the flows of capital in and out of
the country.

"In my opinion, the free foreign exchange system which is
currently in force must be revised or improved," Sumitro was
quoted by Antara as saying on Thursday.

Speaking at a congress of the civil service cooperatives
movement, Sumitro suggested that the government require all
exporters to sell their export earnings to Bank Indonesia at the
market rate with a guarantee that they could repurchase the
foreign exchange from BI at any time they needed it.

That way, he said, the central bank would be able to monitor
the flows of foreign exchange in a more timely manner.

He noted that in the past the government also required all
exporters to repatriate their export earnings. Such a policy was
pursued until 1983.

In a time of crisis like now, the central bank must have
accurate data on the flows of capital, especially short-term
capital, through registration or reporting of all capital flows.

To improve its data collection, Bank Indonesia should require
all local firms wanting to raise loans overseas to report to the
central bank.

If necessary, BI could oblige such companies to have a permit
to obtain foreign loans.

Sumitro, nevertheless, warned that the revision of the current
free-foreign exchange system should also take into account all
factors affecting efforts to restore a sound economic situation.

It needs a solid team of economic ministers in the current
reform cabinet to revise the forex system without affecting the
recovery process, he said.

However, he cast doubt on the ability of the current cabinet
to pursue such a safe forex system improvement as several
ministers had their own political agendas.

He warned that the country's economy would return to its
growth path only if there is stability on the political front.
Nevertheless, he said: "Politics would stabilize only when the
economy is going well."

Sumitro, who held various economic ministerial posts under
both the Sukarno and Soeharto administrations, warned the current
reform cabinet not to repeat the mistakes of the New Order
administration under Soeharto.

He singled out trade arrangements on various commodities like
cloves, rattan and oranges that had just benefited certain people
close to the power holder.

Soeharto's administration had also allowed excessive
exploitation of both manpower and natural resources like forests,
oil and gas by a small number of people.

The development of lucrative infrastructure projects had also
benefited a limited number of people as the government did not
openly tender such projects but instead appointed people close to
the political elite to carry them out.

Also, the use of science and technology neither supported nor
optimized domestic capability so that it was only a waste of
foreign exchange.

Those mistakes, Sumitro said, should serve as educative
experience in drafting a better economic policy which sided more
with the people as a whole. The empowerment of the people's
economy would eventually create a feeling of justice among the
people. (rid)