Jakarta – Business players and analysts have strongly criticized the central bank's recent policy that required all business transactions conducted in the Indonesian territory be carried out in rupiah.
They said that the mandatory use of the rupiah in local transactions was counterproductive because it brought more harm than good to the business community, especially those involved in export and import activities.
"The central bank always said that the policy is for our national sovereignty, but it doesn't make sense," said Anne Patricia Sutanto, president director of garment producer PT Pancaprima Ekabrothers.
Anne, who is also member of the Indonesian Employers Association (Apindo), said the policy had especially hurt companies involved in export and import activities because, with the mandatory use of rupiah, they had to renegotiate their business contracts with their foreign partners.
She said before the policy was implemented, all the export and import related transactions were conducted with US dollars.
"Now we have to change it and, for example, we have to tell shipping companies to make invoices in rupiah," she explained. "This policy confuses the business world," she said in a discussion on Thursday.
According to Anne, the central bank's ruling had also put pressure on the business sectors for it was issued at a time when the rupiah had already depreciated sharply against US dollar.
Anne added that being nationalistic was not a problem at all if it was channeled through proper ways. She said the government could showcase their sense of nationalism by improving the skills and the competitiveness of Indonesian employees so that they can compete within the ASEAN Economic Community (AEC).
"It is incorrect to display nationalism by using the rupiah. However, we can do that through developing our labor [resources]," she said.
She also criticized the government's move as not tackling the real problem if stabilizing the rupiah was their main goal. "What has the new policy done to help the rupiah so far?" she asked.
Early in July, Bank Indonesia issued a regulation on the mandatory use of the rupiah in all business transactions carried out in Indonesia. The ruling was expected to reduce the high demand for US dollars among local banks. The strong demand for the greenback has partly contributed the fall of the rupiah, which has lost about 14 percent this year amid the fall in regional financial markets.
Eric Sugandi, former economist of British lender Standard Chartered, held similar concerns regarding the new policy. Besides labeling the policy as being too nationalistic, he also said the timing of the policy was not right because it was introduced when the Indonesian currency was under pressure.
He further criticized President Joko "Jokowi" Widodo for not being consistent in his action. On the one hand Jokowi wants foreign investors to come to Indonesia but, on the other hand, he issued a policy that would make investors retreat, he said.
"This regulation is just another contradiction. It seems that Jokowi wants to embrace free trade but what he did was contradictory," he added.
Meanwhile, David Rimbo, managing partner of EY Indonesia's Transaction Advisory Services, said that the policy would not only put barriers on private businesses, but it would also affect state-owned enterprises (BUMN) because many of them were among the big users of the US dollar.
He said that the government's aim in issuing the regulation was to give confidence to the market. He warned, however, that making big promises to the market in the hope of boosting confidence would just make the problem worse. He cited infrastructure projects the government had promised as examples of how the government had only given lip-service so far.
"What has been done so far was just pencitraan [image-building]," he said. "The habit of boosting the market by rhetoric will be counterproductive," he added. (saf)