Saturday, April 09, 2005

Rupiah, who cares?

In the last 12 months, rupiah had lost its value by almost 11.7%. So if you are an employee, your income in US dollars decreased by 11.7%. Combine that with inflation of 7.2% (yoy) until February, you need to ask your employer to raise paychecks by at least 19% to keep your purchasing power in the same level last year.

But I don't think average companies in Indonesia will do that. The sad thing is, this is might be only the beginning. The impact of fuel price hike will take its full effect in the coming months.

In short, the economy is worsening. Others might argue the economy actually improved as stock prices increased dramatically in the last 12 months. Newspapers are in frenzy to run stories of how Jakarta Stock Exchange composite index everytime book new record, echoed by government officers that those records are results of right policy to attrack investors.

But, wait a minute. How many investors do we have in the market? Thousands? Hundreds of thousands? What about millions of workers with fix income? Do we really care about them?
Do we really have policies to strengthen rupiah?

Central Bank said it will further raise interest rates. Well, don't expect it would significantly improve rupiah. Our reserves at US$34.8 billion is simply too small for a country as big as ours. Look at Malaysia at US$68.8 billion, not to mention our tiny neighbour Singapore at US$113.9 billion.

Why we only have that amount? We spend millions of dollars for luxury villas overseas for our ambassadors. We support our beloved conglomerates to invest huge amount in China while at the same time our banks write-off their companies' debts here. Who cares?



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