Weak Rupiah Spells Export Boon
Jakarta. Businesses see opportunity in the weakening rupiah to boost the Indonesia’s manufacturing exports, and have asked government to expedite the issuance of policies that they say should boost the factories’ global competitiveness.
“I think we need not to panic, as a weakened rupiah means a windfall for exporters,” said Anton J. Supit, a deputy chairman at Indonesia Employers Association.
“Still, the strong dollar affects producers that rely on imported materials. So it’s crucial for the government to eradicate red tape and bottlenecks that undermine our export-oriented industry,” Anton said.
Indonesia’s top manufacturing exports — which range from paper to machinery and electronics — only account a fifth of the country’s total non-oil and gas exports. Most of the local producers rely on imported materials to make the finished goods.
Finance Minister Bambang Brodjonegoro said on Thursday that the government plans to announce a policy that benefits exporters by the end of this month, including tax cuts for exporters and a waiver on the value added tax for shipbuilders.
The government, however, did not lay out plans to ease the cost burden of raw materials and capital goods on importers. It instead plans to erect a temporary anti-dumping tariff to block cheap materials from abroad.
The rupiah has weakened 6 percent against the greenback so far this year, to trade at 13,176 per dollar on Thursday.
Bank Indonesia, the country central bank, is reluctant to use its $116 billion forex reserve to defend the rupiah against the strengthening greenback as capital returned to the United States to benefit from rising yield in the country.
Economists said that Indonesia’s economic fundamentals are better compared to its condition two years ago in facing a rupiah sell-off.
The nation’s current account deficit — the broadest measure for the country’s goods and services trade as well as income transfer — has narrowed from a high of 4.2 percent of gross domestic product in third quarter 2013 to just 3 percent of GDP in fourth quarter 2014.
“The current-account deficit is going to be increasingly driven by capital goods more than consumer goods,” Singapore’s DBS bank said in a note.
Source: The Jakarta Globe