Govt to Use Momentum to Strengthen Rupiah

KOMPAS/BAHANA PATRIA GUPTA

Workers prepare to load a railroad car made by PT INKA that will be exported to Bangladesh on a ship at Tanjung Perak Port, Surabaya, Sunday (20/01/2019). PT INKA began sending 15 railroad cars to Bangladesh Railway for an order of 250 meter gauge cars.

JAKARTA, KOMPAS -- The government is optimistic about the rupiah rising again, as there is plenty of room for the Indonesian currency to reclaim the level of Rp 13,000 per US dollar, and it sees this as a moment to strengthen exports to new markets and attract direct investment.

The US Federal Reserve’s dovish signal of holding back its reference interest rate increase has helped the rupiah strengthen this year. Positive domestic sentiment, namely improvements in the current account balance and foreign exchange reserve, has contributed to this strengthening. The rupiah’s exchange rate increased from Rp 14,072 per US dollar on Thursday (31/1/2019) to Rp 13,978 as of mid-Friday (1/1), based on the Jakarta Interbank Spot Dollar Rate (JISDOR).

Coordinating Economic Minister Darmin Nasution said in Jakarta on Friday that there was ample room for the rupiah to get even stronger against the US dollar, as it had yet to reach its fundamental value. On Jan. 8, 2019, the rupiah’s exchange value was Rp 14,031 per US dollar. Since the start of the year, the rupiah has increased by 2.7 percent against the US dollar.

External risks include the Fed’s monetary policy, the Sino-American trade war, China’s economic slowdown, Brexit and geopolitical dynamics in several countries. The World Bank predicts that the global economy will grow by 2.9 percent this year, while the International Monetary Fund (IMF) projects growth of 3.7 percent.

KOMPAS/ALIF ICHWAN

A foreign exchange officer counts money at a money changer in Jakarta, Friday (1/2/2019). The rupiah exchange rate against the US dollar strengthened slightly at the close of trading on that day, when the rupiah rose in closed spot exchange trading by 25 points or 0.18 percent to Rp 13,947 per US dollar. The rupiah moved to the range of Rp 13,945 to Rp 13,985 per US dollar.

The rupiah will continue to rise with stable domestic economic conditions. The government will focus on indicators such as economic growth, the poverty rate, inflation and job creation. Despite continuous fluctuation in the rupiah this year, inflation is stable at around 3.5 percent.

The government’s duty right now is to improve the current account balance by increasing both direct investment and exports. Direct investment must be aimed at investment into exports and labor-intensive industries, while exports are developed by opening new markets.

Improving Indonesia’s investment climate is necessary to attract more investment into the country. Companies relocating from China provide ample opportunity for this. “Companies have begun to relocate their production facilities from China. Movement to Indonesia will help our exports,” Bank BTPN board of commissioners chairwoman Mari Elka Pangestu said.

Mari said Indonesia should improve its investment climate and proactively encourage relocation and attract parts of the supply chain. Indonesia should also diversify its markets. Product diversification in the long run is needed to push Indonesian exports.

The Trade Ministry facilitates export funding to encourage exports to Africa, South Asia and the Middle East. Facilities include funding, warranty and insurance on the export of goods and services.

The ministry, through the Directorate General of National Exports Development, has allocated Rp 1.6 trillion (US$114.74 million) for the export funding program. Director general Arlinda said that facilitation was needed by export-oriented businesses.

Hopefully, the facility can increase products’ competitiveness and added value, support industry growth and increase exports to high-potential markets in Africa, South Asia and the Middle East. (KRN/CAS/E18)