|
|
|
> magazine
|
|
||||
|
|
|||||
|
> magazine |
|||||
|
|
June 16, 2000 VOL. 29 NO. 23 | SEARCH ASIAWEEK BUSINESS BUZZ A Bad Idea That Won't Die By WARREN CARAGATA What does a government do when its currency slides down around its ankles? If it doesn't have the heart to push through reforms it turns to currency controls, in which it decides to tell the world how much its money is worth -- take it or leave it. The problem of course is that most people select option No. 2. On June 2, Indonesia's Trade Minister Luhut Pandjaitan said the government was considering controlling the trade in rupiah. With its value down 18% so far this year, Pandjaitan decided that "the foreign exchange regime is too free." And Central Bank governor Sjahril Sabirin, a critic of controls, seemed to soften last week, telling CNN that perhaps there are "gray areas" that could benefit from setting limits on the buying and selling of rupiah. By Sunday June 4, the idea was gaining momentum when Finance Minister Bambang Sudibyo said controls were being considered mainly to keep Indonesian exporters from parking their hard-currency export earnings in offshore banks. Fast forward to Monday morning June 5, as the International Monetary Fund's new managing director Horst Köhler breakfasted with President Abdurrahman Wahid. Maybe it was the soggy Wheaties. Or blame the decaf. Whatever the reason, after the morning tête-a-tête Wahid, never a paragon of consistency, noted there was "a mistaken impression that we are going to introduce capital controls." He didn't change his mind by lunch, so it became something akin to official policy. Since the economic crisis, Indonesia's debt has soared and this year will reach an estimated $157.2 billion -- 91% of GDP. About 40% of that amount is denominated in foreign currencies. The World Bank estimated in late May that a 10% fall in the rupiah against, say, the Japanese yen would add another $2.3 billion to the debt. But the problem with the rupiah has little to do with economics. The fundamentals, as economists like to say, are good. An example: exports in April jumped 29% from the year previous. Traders and bankers blame the government's inconsistent economic policy. What the rupiah really needs, Köhler said, is a "steady and feasible implementation" of the economic program agreed with the IMF." That, however, could be the problem. Currency controls may not work very well, but they may be easier to swallow. Write to Asiaweek at mail@web.asiaweek.com
Quick Scroll: More stories from Asiaweek, TIME and CNN |
|
|
|
|
|
|
||
| Back to the top |
© 2000 Asiaweek. All Rights Reserved. Terms under which this service is provided to you. Read our privacy guidelines. |
|
ASIAWEEK'S
LATEST