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
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