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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Paul Berliner who wrote (8742)	6/15/1999 9:34:00 AM
From: Paul Berliner	Read Replies (1) \| Respond to of 9980

INTERVIEW-Timely for fixed rupiah rate, opposition (adds paragraphs on medical checks, presidential election process) By Neil Fullick SINGAPORE, June 15 (Reuters) - Indonesia's leading opposition party's senior economic adviser said on Tuesday it was the right time now to introduce a fixed exchange rate for the rupiah. ''Probably now is the best moment to bring the rupiah down by introducing a fixed rate,'' Kwik Kian Gie told Reuters. Referring to the dollar/rupiah rate, he said a fixed rate however, should not be introduced at the cost of breaking ties with the International Monetary Fund (IMF). Kwik is senior economic adviser to Megawati Sukarnoputri, leader of Indonesia's top opposition party and frontrunner following the hotly-contested June 7 general election. They were both in Singapore for routine medical checks. Megawati's Indonesian Democratic Party-Struggle (PDI-P) was likely to win most votes in the election but was unlikely to walk away with a majority of seats in Parliament, he said. But PDI-P would probably form a government in a coalition with the National Awakening Party (PKB), running in second place. The presidential election is scheduled for November. On Tuesday morning, PDI-P had just under 38 percent of the vote, and PKB 19 percent of the vote, with 35 percent of votes counted. PDI-P was coming to power as Indonesia tries to emerge from two years of economic crisis, which saw the rupiah plunge to around 17,000 to the dollar. On Tuesday, the rupiah was at 7,350 to the dollar. Kwik said IMF policies have helped the economy get back on its feet, but the downside has been industries going bankrupt because of volatile import costs of raw materials. Indonesia's relationship with the international lending agency, however, was still pre-eminent. ''This is not to say that if the IMF does not agree, that we will break up with the IMF. A fixed rate is not everything for us. The whole package is very important. There is no way we will break up with the IMF.'' He said the PDI-P may have a chance to raise the issue of a fixed rate at the August review of the IMF economic policies, although the current timetable meant that theoretically B.J. Habibie would still be president. Kwik said PDI-P hoped to be able to bring forward the election for president to September, once the parliamentarians have been sworn in. The president is elected by a People's Consultative Assembly, made up of Parliament and 200 appointees. His comments on a fixed rate had previously caused alarm because it countered the IMF view of allowing the rupiah to float. It sparked worries that PDI-P might introduce sweeping changes that would threaten the country's relationship with the IMF and derail the more than US$40 billion rescue package. He said these comments were scare mongering and political rhetoric. ''If your own opinion differs from the IMF, that is okay. That is one thing. Breaking up with the IMF is another thing.'' A future government would also have to face the recapitalisation of the shattered banking sector. Ratings agency Standard & Poor's last week said it represented the worst banking crisis in 30 years and would cost US$87 billion, or 82 percent of gross domestic product. Kwik said he saw no alternative to recapitalising the banks other than through government bonds. ''I think we would just do the same thing because we see the problem very well, but we are not able to find a solution. The hole is just too big,'' he said. He said PDI-P would encourage foreign banks to invest in Indonesian banks but that future stability was likely to be the biggest factor that would help the banks return to a sound financial position. He said the bonds would pay interest, but the banks needed to start building up deposits and putting those deposits to work. -------------------------------------------------------------------------------- Related News Categories: currency, international, IPOs, US Market News