Although Rupiah value had sunk deep to Rp.14,000.- per USD, the Minister of Public Works and People’s Housing Basuki Hadimuljono stated he was not planning to make adjustment in terms of contract value of projects underway because the exchange rate was still regarded as safe in the infra-structure sector.
Basuki explained that raw materials for infra structure projects in Indonesia were still taken from domestic resources, so it was not affected by Rupiah fluctuation. Things would be different if the raw material were imported. “In the Public Works Sector, nearly 100% of raw materials like cement, steel etc were local. Yesterday we visited the Indarung cement factory, they assured stock was plentiful, they even exported cement to the Philippines.” Basuki stated on Tuesday (25/8).
Although so far infra structure projects were notably safe, it did not mean the Ministry was sitting on their laurels. Minister Basuki claimed he was preparing anticipative measures to respond to worst adversity, as there were some heavy equipments and high tech instruments to be imported which needed dollars. :”We had such experience. Under such circumstances the solution was probably to reduce the volume of projects or probably some projects be reschedule and cost be carried over to 2016.”
According to Basuki, normally the projects being affected by Rupiah depreciation were multi-year projects. “In case of change in exchange rate normally the affected projects were contractors of projects including those who undertook Government projects. Normally some multi-years projects of the previous period were based on the past exchange rate,” said Basuki while explaining that the excalation was because there was change of price in raw materials or imported materials like iron, concrete, asthpalt, etc. Contractors who were under pressure would normally propose excalation of contract cost to the Government that the project value might be adjusted.
Separately, the Coordinating Minister of Economy Darmain stated in Bougor on Monday (24/8) the only way to tackle Rupiah weakening was not follow its rhythm but take the opposite position. The first thing to be done was to increase Government’s expenditure especially capital expenditure which was today only around 20%. The second step was to promote investment. In this case the Government must not just drum up domestic and overseas investors but also disclose their plan to run large scale deregulation in very department. This was to energize investment and economy, not just to be carried away by destiny.
The limited meeting which discussed the latest economic development at the Bogor Palace was attended by leaders of BUMN and prominent national businesspeople in Jakarta. The President of PT Garuda Indonesia Tbk (GIAA) Arif Wibowo stated that the case of Rupiah devaluation must be communicated massively to the public.
Arif himself was of opinion that Indonesia’s economy was today under pressure being affected by global sentiment which was also in turbulence, but fundamentally Indonesia’s economy was still OK as indicated by some economic indicators which were still good.
Although economic growth was only 4.7% in Semester I-2015, inflation was still under control. Current Account Deficit (CAD) which was a burden was beginning to cool off. in the banking sector, the condition of national bank capital was still safe and NPL was still at reasonable level. “Some fundamental factors are in fact still OK starting from eased inflation, deficit in current account which was shrinking, low NPL, and CAR at safe level. “In fact our position is not bad.”
Furthermore Ari said that to re energize positive sentiment in the market, it would be necessary to run a positive ‘campaign’ How to counter people’s anxiety about Rupiah depreciation. Rupiah was just a matter of psychology. We need to build positive sentiment among the people. Being in airline business, Rupiah weakening is a challenge and its must be anticipated. Let’s together thing positive”: he said.
Meanwhile the Minister of Finance Bambang Brodjonegoro stated in Jakarta on Monday (24/8) that so far there was no indication that Indonesia was in crisis, although admittedly was slowing down. “We are not talking about crisis as there is no indication of crisis” Minister Bambang said in response to Aburizal Bakrie’s recommendation to set up a crisis center.
Bambang himself admitted that today economy was adverse so support was needed from Government’s budget to uplift economy. “We know that today the market is bad, not just in Indonesia but in the whole world. Surely as stated by President Jokowi at the Bogor Palace who said that to minimize adverse economic condition the solution is to increase Government’s spending which is specified in APBN and APBD budget” Bambang said.
In that opportunity Bambang also mentioned in macro economic assumption stated in RAPBN 2016 in which Rupiah value was set according to the latest economic condition especially USD strengthening and devaluation of China’s Yuan. (SS)
Business News - August 28, 2015