what are forex reserves? and why would they be related to fixing or not exchange rates?
Angela _________
Jakarta Post October 27, 1999 http://www.thejakartapost.com:8890/iscp_render?menu_name=frontpage
Kwik Kian Gie prioritizes IMF relations
JAKARTA (JP): Newly appointed Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie said on Tuesday that mending relations with the International Monetary Fund and other international donors would be his top priority to help the country overcome the economic crisis.
"What's now important is how to continue again the cooperation with the IMF which was broken off," Kwik told The Jakarta Post by telephone after Vice President Megawati Soekarnoputri announced the new Cabinet team.
Kwik said that he had yet to propose a meeting with IMF representatives, adding that he would consult with former economic chief Ginandjar Kartasasmita, who had established a good relationship with the fund and other donors.
The IMF is organizing a multibillion dollar bailout to help finance the country's economic recovery programs. The fund and the World Bank suspended loan disbursements to the country in the wake of the East Timor problem and the Bank Bali scandal.
The IMF has demanded the government publish the full PricewaterhouseCoopers (PwC) audit report on the high profile bank scandal and to resolve the matter satisfactorily as a prerequisite for the resumption of loans.
The previous administration of B.J. Habibie declined to comply with the IMF demands.
The Bank Bali scandal centers around the "illegal" transfer of some US$80 billion from the bank to a private firm linked to Habibie's inner circle.
The Supreme Court ordered the Supreme Audit Agency last week to hand over the PwC report to the House of Representatives.
House Speaker Akbar Tanjung said on Monday that two commissions had been assigned to study the legal and political implications of publishing the PwC report.
Kwik said that since the PwC report was now in the hands of the House, it should be made public.
He said the full report should be made available to the media, the IMF and the World Bank.
Kwik said earlier in the year that adopting the fixed exchange rate could strengthen and stabilize the rupiah at Rp 5,000 per U.S. dollar, a level which he said could help the private sector repay their overseas debts.
However, Kwik said on Monday that the move was not viable.
"During a meeting between the IMF and the Indonesian Democratic Party of Struggle (PDI Perjuangan) it was concluded that implementing a fixed exchange rate was risky because of the lack of forex reserves," he said.
Kwik is a deputy chairman of Megawati's Indonesian Democratic Party of Struggle (PDI Perjuangan), which won the June general election.
Kwik is the only ethnic Chinese member in the new Cabinet team.
Some analysts said that the appointment of Kwik could help encourage the return of billions of dollars parked overseas by Indonesian business people, mostly ethnic Chinese, following the mass unrest and deepening economic crisis last year. Ethnic Chinese were often targeted during riots. The return of the money is considered a crucial factor in helping the economy to recover.
But Kwik said the government would not appeal to business people to bring their funds home, because it would return by itself if the business environment in the country was conducive, which included social and political stability.
"The funds will return home if the government doesn't do absurd things ... Indonesia has great potential, including in terms of market and natural resources," he said. (rei)