---------------------------------------------------------- Visit Indonesia Daily News Online HomePage: http://www.indo-news.com/ Please Visit Our Sponsor http://www.indo-news.com/cgi-bin/ads1 -0-0-0-0-0-0-0-0-0-0-0-0-0-0-0-0-0-0-0 Free Email @KotakPos.com visit: http://my.kotakpos.com/ ---------------------------------------------------------- Indonesian Rupiah, 1999's Star, Fades By Anjana Menon Indonesian Rupiah, 1999's Star, Fades (Update1): Currency Focus (Adds detail on the currency's performance in the 10th paragraph. Shortens 1st sentence.) Singapore, Nov. 17 (Bloomberg) -- The Indonesian rupiah, 1999's top-performing currency, may have trouble climbing further as some of the region's least experienced leaders tackle some of its worst social and economic problems. The country, led by President Abdurrahman Wahid, a cleric by training, faces unrest in independent-minded provinces, mounting external debt and pressure to keep the economy growing after a recession last year -- its worst in at least three decades. ``It's going to be hellishly difficult to get the economy back on track,'' said Simon Mahadevan Flint, a senior currency strategist at Bank of America in Hong Kong. Flint said the rupiah may still climb to 6,500 against the dollar, from 7,082 now, though it won't go higher this year. The rupiah has risen more than 17 percent since the beginning of this quarter as investors wagered the new government, which took office last month, would usher in quick economic growth. The gain is more than three times the advance posted by the next-best currency, the Thai baht, during that period. Yet investors' honeymoon with the fresh leadership may becoming to an end. Portfolio managers want to see progress on economic reform: returning banks to solvency, rebuilding investor confidence in the nation and renewing suspended aid from the International Monetary Fund. Prove It ``The government has to prove it can carry out the reforms,'' said Steven Lim, a portfolio manager at Daiwa SB Investments (Singapore) Ltd., which has S$50 million (US$30 million) in Indonesian stocks. ``Investors want to see that before getting back in.'' He won't put money into Indonesia until next year. People are also fretting that calls for independence in Aceh province may snowball into violent demonstrations and make it tougher to do business in the country. Up to 1 million Acehnese rallied at the main mosque of Banda Aceh last week, demanding a vote on self-determination, after two million had signed a petition supporting it. A decade of human rights abuses and resentment over lost revenue from natural resources are fueling the protests. In East Timor, Pro-Jakarta militias waged a campaign of violence after the people voted in favor of independence in a U.N.-sponsored referendum Aug. 30. That helped send the rupiah tumbling 20 percent from the beginning of July to the end of September, when United Nations peacekeepers took control of East Timor. Only the Romanian leu fell more during that period. Concerns that computers in Indonesia may not be prepared for the Year 2000 changeover are yet one more reason to stay away. Legal System The legal system doesn't offer much comfort, either. Indonesia's bankruptcy court, established last year part of a International Monetary Fund bailout, has failed to protect creditors. As much as 80 percent of the loans at Indonesia's banks are still not being paid. ``The key thing is the banking system and debt,'' said Kate O'Donoghue, an analyst at Barclay's Capital. ``It's going to be difficult to get people to repay loans if there is no effective legislation to do that.'' The country may even have a tough time paying its debts. Indonesia's principal payments on public external debt are set to rise to $9 billion in two years from $2 billion this fiscal year. That could throw the nation into default, according to Standard & Poor's. If economic problems aren't enough, the new government has to try former ruling party members accused of taking more than 80 million from PT Bank Bali. That will be difficult because cronyism is so ingrained in the system. President Wahid has even said he will pardon former President Suharto if the deposed ruler is found guilty of stealing from the government, partly because Suharto has too many allies in the country. Low Inflation a Boon Of course, 1999's top-performing currency still has some things going for it. Inflation has slowed in Indonesia, and that will help protect the value of the currency. Inflation climbed 1.58 percent for the 12 months ended October, the lowest in almost three years. A lower inflation rate would also give Indonesia more room to cut interest rates, making it cheaper for businesses to borrow. The government lowered rates steadily since March, moving the rate to about 13 percent from more than 70 percent last year. The archipelago will also be helped by rising prices for oil, its No. 1 export. Crude oil prices, which have more than doubled this year, helped hand Indonesia a 18.8 trillion rupiah budget surplus. Indonesia's economy is also on the mend. It expanded for a third straight quarter, rising 1.5 percent on quarter in the July- September period, as rising oil prices aided the mining industry, and the growth of telecommunications and transport accelerated. The International Monetary Fund is even expected release some of the $47 billion of aid slated for Indonesia by the middle of December. Of course, the wait may stall the currency rally. ``We're not expecting funds to return to Indonesia that soon,'' said Patricia Lui, a currency analyst at Thomson Global Markets in Singapore. ``Even if they sign the letter with the IMF, it will take at least a month to get the money.'' ++++++++++++++++++++++++++++++++++++++++++++++++++++ Didistribusikan tgl. 3 Dec 1999 jam 08:21:49 GMT+1 oleh: Indonesia Daily News Online <[EMAIL PROTECTED]> http://www.Indo-News.com/ ++++++++++++++++++++++++++++++++++++++++++++++++++++
