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)