U.S commends Indonesia's measures to stabilize rupiah
U.S commends Indonesia's measures to stabilize rupiah
JAKARTA (JP): The U.S. undersecretary of state for economic
affairs, business and agriculture, Stuart E. Eizenstat, yesterday
commended Indonesia's prompt action to stabilize the rupiah.
Eizenstat said Bank Indonesia had acted appropriately by
widening the intervention band from eight to twelve percent to
discourage speculation on the currency.
He also commended Bank Indonesia's earlier moves to restrict
loans to the property sector to dampen speculation in the real
estate market.
"That has already had very positive effects on the market,"
Eizenstat told a press conference here yesterday.
The Indonesian rupiah has been recovering against the U.S.
dollar with the spot price quoted at 2,572/2,576 yesterday
afternoon, compared to 2,665 on July 21 when the rupiah plunged
to its lowest level this year.
Eizenstat said targeting economic fundamentals was the
solution to currency fluctuation problems.
"We commend countries such as Indonesia which take quick and
decisive policy action. That is the way to deal with problems,
not looking for scapegoats," Eizenstat said.
Eizenstat countered Malaysian Prime Minister Mahathir Mohamad's
recent claim that speculators have deliberately undermined local
economies by engineering currency volatility.
He said Mahathir's allegation was baseless, arguing that
currency fluctuations in the region were driven by problems with
economic fundamentals rather than by speculation.
"We have carried out studies in 1992 in the wake of the
European currency fluctuation problem, and then in 1994 following
the Mexican peso crisis. In each case, it's absolutely clear that
neither was caused by speculators," he said.
He said regional currency instabilities had emanated from the
strained economy of Thailand. Financial markets detected problems
and reacted accordingly.
Financial services
"Speculators take advantage of the trends and make money. Of
course they will, but they do not cause the trend. What caused
this particular problem was fundamentals, economic issues,"
Eizenstat said.
Eizenstat said his government wanted Indonesia to lead the
concluding round of financial services negotiations at the World
Trade Organization (WTO).
He contended that the United States would be unable to
conclude a financial services agreement without a critical mass
of developing countries like Indonesia and it's ASEAN partners
making offers over transitional periods.
"We're hoping that Indonesia will take the same kind of
leadership role in the financial services negotiations, which
have twice failed, as it did in the Information Technology
Agreement (ITA)," Eizenstat said.
Indonesia was the only developing country to sign the ITA at
the first WTO ministerial meeting in Singapore last year. Some 40
countries, including some developing countries, have signed the
agreement.
Indonesia would have to further deregulate the financial
services sector and bind this to WTO practice to take up the
leadership role urged by the United States Eizenstat said.
"We have made an offer to immediately open our market to
foreign competition at the earliest possible date," Eizenstat
said.
He said the U.S. position was respected by many Indonesian
officials but faced resistance in some quarters.
Indonesia's quest to build a more sophisticated economy, will
call for a better-regulated and open financial sector, he added.
"Indonesia will recognize the value of this and by September
we will get a better offer, so that we can reach an agreement by
December," Eizenstat said. (rid)