Weakening rupiah expected to drive up non-oil exports

Weakening rupiah expected to drive up non-oil exports

JAKARTA (JP): The declining rupiah is a blessing in disguise
for Indonesia's weakening non-oil exports, senior ministers said
here yesterday.

This depreciation would likely help drive up Indonesia's non-
oil exports, especially those of natural resource-based products,
Coordinating Minister for Production and Distribution Hartarto
and Minister of Industry and Trade Tunky Ariwibowo said after
attending a monthly ministerial meeting.

Bank Indonesia governor J. Soedradjad Djiwandono warned again
yesterday that speculations on the rupiah would continue for some
time until tranquility returned to the region's financial
markets.

Hartarto and Tunky predicted that Indonesia's non-oil exports
would reach the target of $55 billion for this year because of
the weakening rupiah.

"Depreciation (of the rupiah against the U.S. dollar) has a
positive impact on our exports," Hartarto told journalists.

He said Indonesia's non-oil exports reached a new record high
of $3.6 billion in May, higher than the previous record of $3.4
billion last December.

Tunky said the weakening rupiah would help exports of products
with low import-contents, natural resource-based products like
agricultural and forestry products and minerals.

But the depreciation would affect exports of products with
high import-contents, especially exports of manufacturing
products like machinery, components and steel products, Tunky
said.

He said non-oil exports grew by only 9 percent during the
first five months of this year over the same period last year.
Non-oil exports grew more than 10 percent for 1996.

"With this depreciation, we are optimistic about achieving our
non-oil export target of 55 billion for this year," Tunky said.

Meanwhile, Soedradjad said that speculations on the rupiah
would die down when attacks eased on other currencies in the
region, especially the Thai baht.

"We hope -- as most analysts have predicted -- when Thailand
is stable, the assaults (on regional currencies) will eventually
die down," Soedradjad said.

Dealers in the Jakarta financial market said the rupiah was
stable yesterday but the volume was thin as people were waiting
for the outcome of the Thai stability package from the
International Monetary Fund.

Thailand is holding a meeting with the IMF to work out a
package to revive its ailing economy. A final agreement is
expected to be submitted for cabinet approval today.

But Soedradjad warned that the rupiah, like other currencies
in the region, would remain volatile in the short-term.

He contended that speculators, who suffered losses during the
currency turmoil, now reentered the market to reduce their
losses.

And investors who in the past did not hedge their foreign
exchange position now also entered the market to protect their
position.

Dealers said the rupiah was stabilizing within the 2,595-2,610
range. Spot rupiah closed at 2,603/2,605 against an opening of
2,590/2,595.

The central bank did not offer Bank Indonesia Certificates
(SBI) and was absent from the short-term securities (SBPU) market
yesterday, they said.

The central bank offered overnight SBI at 14.0 percent,
two-to-four day at 15.0 percent, one-week at 10.0 percent, two-
week at 10.5 percent, one-month at 11.125 percent, three at 11.0,
six at 11.625 and one-year at 12.25 percent.

The central bank kept its intervention band at 2,378/2,682 but
lowered the conversion band to 2,580/2,628 yesterday from
2,585/2,633 Friday. (rid)