From Indonesian Observer (2/2/98)
President suggests curbing speculative
forex trading
TOKYO - President Soeharto said he will
make all-out efforts to restore trust in
Indonesia's financial sector, a Japanese financial
daily reported on Sunday.
The president said in an exclusive interview with
the Nihon Keizai Shimbun that he will
implement reform plans in line with the IMF's
aid package for the country.
He suggested curbing speculative foreign
exchange trading, which he said was the main
cause of Indonesia's crisis. He would like to
see the World Trade Organization establish a
world body to monitor forex trading, it said. He
also said he expected Japan's private and public
sectors to provide economic assistance for
Indonesia, it reported.
Japanese banks are the biggest lenders to the
country.
The president, running for a seventh term in
Indonesia's March 10 election, said the
dramatic fall in the rupiah against foreign
currencies has destroyed many of the economic
advances the country has made over the past 30
years, the paper reported.
The president said he wants to take the leading
role for implementing IMF reforms and to
review the dominant position of companies
operated by his family in line with rebuilding the
economy, it said.
It did not say when the interview was
conducted.
Indonesia last week proposed a temporary
freeze on foreign debt servicing for distressed
companies to allow time for new arrangements
to be worked out between lenders and
borrowers. It also announced major bank
reforms.
Analysts have said most Indonesian companies
have stopped servicing debt since the beginning
of the year, when the rupiah plunged below
10,000 to the dollar from the level last July of
2,400.
Indonesia said it estimated some 228 companies
in the country had debt servicing problems.
Approximately US$66 billion of Indonesia's
$140 billion in overseas debt consists of
corporate debt, although not all of that amount
will be affected by the servicing freeze.
A key advisor to the Indonesian government on
the country's mammoth corporate foreign debt
said on Saturday he was confident that dramatic
reforms of the economy would boost
confidence and stabilize the currency.
"I am confident that the rupiah will be stabilized
rapidly as confidence is bolstered by the
decisive implementation of the comprehensive
program of economic reforms announced on
January 15 and the subsequent bank
restructuring plan," Radius Prawiro said in a
statement sent to Reuters.
"The strengthening of the rupiah to a level more
closely in line with fundamentals will play a
crucial role in alleviating the external debt
burden of the corporations and restoring their
financial viability," he said.
Prawiro, a former finance minister, released the
statement late on Saturday before leaving on a
trip to Japan for talks with Japanese banks.
Prawiro was tentatively due to return to Jakarta
on Monday.
The crisis, which has dramatically increased
unemployment and seen the banking industry
almost grind to a halt, forced Jakarta to accept a
US$43 billion IMF rescue package in October
that is forecast to hit the nation of more than
200 million people hard this year.
Indonesia enters a crucial week today as
markets get their first chance after a holiday
period to pass verdict on the latest financial
reforms and efforts to tackle the country's
massive private foreign debt.
Markets around Asia, including Jakarta, reopen
after the Chinese New Year and Muslim Eid
Al-Fitri festivals last week which kept activity to
a minimum.
The rupiah strengthened after reform and debt
measures announced last Tuesday, and was last
quoted at 10,000/10,060 per dollar after hitting a
record low of 17,000 earlier in January-more
than 80% down from last July.
The JSX stock market firmed in response to the
stronger rupiah-but banking sources have said a
critical period for the currency will come this
week.
Investors will be watching closely for Asian
markets' reaction to Indonesia's announcement
last week of a temporary debt freeze and bank
reforms.
"I think we are now in a very difficult period for
Bank Indonesia (the central bank) to manage,"
one foreign banking analyst said.
"Monday could see a lot of pressure on the
rupiah, and what ammunition does Bank
Indonesia have to deal with that?" he asked.
A Contact Committee of Indonesian debtors is
also being set up, but bankers expect the debt
issue will be dealt with on a case-by-case basis
due to the large number of companies involved
and that it will not be a quick fix for the
creditors. Japanese and German banks are the
two biggest creditors to Indonesia.- Reuters
Developed and Designed
by
Indonesia NET Exchange
INTERNET SERVICES by
RADNET
2nd February 1998
Top Stories
President suggests
curbing speculative
forex trading
TOKYO - President
Soeharto said he will
make all-out efforts to
restore trust in
Indonesia's financial
sector, a Japanese
financial daily reported on
Sunday.
World Bank to address
Asian social woes
SINGAPORE - The
World Bank plans to
focus on the social
aspects of Asia's
financial crisis by
addressing growing
problems of
unemployment and
poverty, World Bank
President James
Wolfensohn said on
Sunday.
US investors brace for
Asian verdict on RI
NEW YORK - US
investors are closely
watching how Asian
markets will respond this
week to Indonesia's
temporary debt freeze
and bank reforms.
'IMF more harm than
good'
WASHINGTON - The
chairman of the US
Senate Foreign Relations
Committee said he would
oppose the Clinton
administration's request
to boost the agency's
funding.
Cohen says US raids
would not destroy Iraq
WASHINGTON -
Defense Secretary
William Cohen warned
against "unreasonable
expectations" from any
US military raids on Iraq,
saying no attempt would
be made to destroy the
country or depose
President Saddam
Hussein.
World Bank to address Asian social woes
SINGAPORE - The World Bank plans to
focus on the social aspects of Asia's financial
crisis by addressing growing problems of
unemployment and poverty, World Bank
President James Wolfensohn said on Sunday.
"I think it's important to bring stability to these
countries, because if you don't, it's not just the
wealthy or the bankers that suffer," he told
Reuters Financial Television.
"The real drama in Asia are the tens of millions
of people who have a fractional difference
between getting enough nutrition, enough heat,
enough water and being destitute," he said.
Wolfensohn arrived in Singapore on Sunday
from Thailand as part of a week-long tour of
Southeast Asia, during which he will meet with
political and business leaders and labor bodies.
He said his talks during the trip would deal with
the restructuring of supervisory mechanisms in
banking and financial systems and with the
poverty and damage inflicted by months of
currency depreciation and loss of investor
confidence in the region.
"When we talk of the support we're giving to
Thailand, Indonesia and Korea, the main thrust
of what we're doing is geared to these two
elements," he said.
"One is to strengthen the financial and business
system and parallel to that, to deal with the
social implications of this crisis," he said.
"And the two go together, because unless you
have growth in a country, unless you have
stability in the financial system, you're not going
to help poor people," he said.
The World Bank has pledged some US$16
billion to Thailand, Indonesia and South Korea
since July, when several Asian economies were
hit by a spiral of falling currencies, asset prices
and investor confidence.
Wolfensohn, who will also be visiting Malaysia,
Indonesia, the Phillipines and South Korea, said
he did not see a role for the World Bank in talks
between Indonesia's corporate debtors and
international creditor banks.
"Personally, I think it's important the private
sector understand that private sector risks are
private sector risks." he said.
"And maybe that will teach people next time that
you cannot rely on being bailed out just because
you're dealing in another country."
Wolfensohn said Indonesia had come a long
way in reducing poverty and improving literacy,
achievements that were often overlooked in the
current anxieties over Indonesia's massive
foreign debt burden and uncertain political
future.
On mounting pressure in the US Congress
against approving further funding to the IMF, he
said it was no longer possible to leave a country
to languish alone due to the increasingly
integrated global economy.- Reuters
"Asia has been such a fundamental part of
recent growth, as
a trading partner, a financial partner, there's no
way you can
let that go," he said. Reuters |
