Try says forex ethics important

Try says forex ethics important

JAKARTA (JP): Vice President Try Sutrisno called on local foreign exchange (forex) dealers and bank managers to respect the code of conduct in their money market transactions.

When opening the 17th Asia Pacific Forex Assembly here yesterday, Try also made an appeal to forex dealers and bank managers to uphold business ethics in all dealings.

Try acknowledged that forex dealers of banks generally conduct their transactions on the basis of a profit target set by their top management.

"This has sometimes led the dealers to disregard business ethics and social responsibility, which should always be respected by everybody in the business, including the top management," he said.

In their efforts to make Indonesia one of the international financial centers, he said, Indonesian forex dealers must continue to consistently follow the rules, including the code of conduct approved by the Association Combiste Internationale.

Indonesian dealers do not have their own code of conduct yet. Currently, Bank Indonesia (the central bank), in cooperation with the Forex Club Indonesia, is designing a code of ethics.

Try said Indonesia should cater to the tremendous financial growth in the Asia-Pacific. This growth has prompted considerable increases in financial transactions between region's countries, as well as between the region and the rest of the world.

Quoting results of a survey, Try said foreign exchange dealings currently amounted to US$1.2 trillion per day, compared with $880 billion per day recorded in 1992.

Perception

The Vice President also called on forex dealers to be more cautious in drawing conclusions about any country's conditions as their perceptions influence the direction of the international money market.

"A negative perception of a country's foreign exchange position, or its economic or political conditions, can easily cause a fall in its exchange rate, irrespective of whether the perception is based on reliable information or mere rumors," Try told 700 local and foreign forex dealers and bank managers.

Because international money market developments can have far reaching repercussions as a result of forex dealers' perceptions, Try said, it is imperative that central banks work closer together to influence exchange rates.

"It is impossible for a central bank to mitigate the fluctuations in its foreign exchange rate on its own," Try said.

Supporting Try's argument, Governor of Bank Indonesia J. Soedradjad Djiwandono said central banks in the Asia-Pacific region had concluded an agreement in Hong Kong recently to cooperate in fighting possible speculative attacks.

Speaking at yesterday's assembly, Soedradjad noted that the task of maintaining currency stability is becoming more difficult regarding instability which might occur due to speculative attacks on the currency.

He said the government would continue to maintain macro- economic stability both through prudent fiscal and monetary policies, as well as through realistic exchange rate policies.

"The central bank wants financial stability. Financial market players, however, don't want it as they say it makes for a dull market," Soedradjad said.

In bridging its investments-savings gap, Soedradjad said, the government would continue to invite foreign capital inflow through direct and portfolio foreign investment.

The government will not issue debt instruments to close the gap, Soedradjad said. It remains concerned about the level of foreign participation in its debt market.

This does not mean that the domestic debt market will not grow because the government will continue to assign state-owned companies to issue bonds to stimulate domestic bond markets, he said.

It is expected that rupiah commercial papers issued by a number of state-owned and also leading privately-run companies will eventually create a benchmark for bond issuances from Indonesian companies, Soedradjad said. (rid)