Indonesia Working on Dollar Pressures: Finance Minister

Minister, it’s really good to get your perspective. How big a headache is the strong dollar for you right now? Well, certainly the movement of the exchange rate, it will affect many of the Indonesian economy and financial. On the export side, of course the revenue is going to be much better because they are going to receive a local currency, but we also in this case dependent on some import and that will then translate it into a higher rupiah to the dollar and imported inflation. It can also affect the inflation in Indonesia. So we have to be very careful at this very moment, especially because of the movement coming from the policy coming from the advanced country especially United States, then the emerging country have to be very, very vigilant with this development. But what we’ve already done since the financial crisis, global financial crisis, a lot of exercises been done in order to of the financial sector and the oh, it looks like we might have lost something. So on economic point of view, we are actually having a very good structure and resilience to that point. What else can you do because the speed of upside for the dollar as well as the absolute level is quite intense. What are some of the tools at your disposal to help the strong dollar to help the sovereign and fiscal market also? Well, we have to make sure that the macro stability will continue to be maintained. And in this case on the monetary and fiscal side, we work very closely with Governor Perry in order for us to be able to adjust the macro stand in order to adapt with this new level of pressure. In this case for the Central Bank, they definitely have their interest rate policy rate And in terms of responding the current situation for us in the fiscal side, we have to make sure that the budget can play an effective and credible shock absorber. On the one hand, we have to make sure that the deficit is going to be within or below the 3%. This is what the Indonesia fiscal prudence which is going to be continued to be implemented. On the other hand, we have to make sure and be more selective in actually expenditure side and making sure that the revenue that will also increase due to this strong dollar because some of our revenue is actually in the Forex denomination that can also be used in the most optimal way. So a combination of monetary fiscal in order for us to be able to maintain the macro stability and prudence will be very important. On the corporate side, I think they need to be really look at how their exposure to the Forex and many of them is already playing or in this case doing the hedging policy at the corporate level. I think Indonesia will be continued resilient in this kind of situation. But yes, need to be very vigilant. So Minister with when it comes to economic growth and some of the policies that have been implemented already under why Dodo and of course some of the new policies that will probably be implemented when the new President takes over in October. Here the growth targets that most foreign investors have set is still around that 5% mark. Is that still achievable? Well, we are very confident given the resiliency of the economy during previous shock post pandemic, in this case high commodity price now the higher for longer with the interest rate and inflation. Globally, I think Indonesia still maintain a 5% growth and supported by strong export as well as current account surplus. This need to be maintained and I think within the new government this kind of policy will be continue implemented. First, strengthening the structure of the economy, including continue progressing on a downstreaming industry so that the value added and competitiveness is going to be creating a much more buffer for the Indonesia. Second one, the macro prudence in this case both on the monetary central bank independent and focus on stability and fiscal policy that is adjusting to many structural issue. But at the same time maintaining A prudent principle is going to be very important under under your watch, under Wadoto’s watch, you’ve done a lot to increase foreign investment particularly in the manufacturing sector. Just this week we heard from Tim Cook, he was visiting there in Bali in Indonesia making the case that maybe potentially Apple would be willing to set up manufacturing operations there. How far along are you in those discussions with Apple, if at all? Well, we’ve actually very consistent in reforming the investment climate in Indonesia. We have passing a very difficult omnibus law to improve the investment climate and to simplify many of the business process. That’s become one of the very important fundamental for us to attract policy reform, regulatory reform. On the other hand, we also in this case have many potential in our economy. You have a downstream industry of strategic mineral, the electronic electric vehicle battery industry. Indonesia have a lot of natural resource which fit with this kind of trend. And then in this case our ability to continue improve our investment climate with the bigger and very potential market will attract more investor including Apple. In this case, there are some discussion is already being made and we do hope the IT can be translated into the FDI.