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Prabowo’s capital control no different from today

Prabowo’s capital control no different from today

Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Mon, June 23 2014, 11:07 AM

Presidential candidate Prabowo Subianto may have said he intended to impose stricter control over the country’s monetary system during a discussion last week, but his campaign team said the rupiah would continue to be a floating currency.
Speaking at a discussion with the business community on Friday, Prabowo said a more rational method to manage the exchange rate of the rupiah, which is under pressure, was necessary.
However, Drajad H. Wibowo, a member of Prabowo’s campaign team, said the floating exchange rate regime would be kept intact and there was no plan to change it into a pegged system.
“We will seek an interval. We have to maintain the rupiah’s exchange rate at the most optimal interval for the interest of all, including exporters and importers,” said Drajad, deputy chairman of the National Mandate Party (PAN).
He said that if Prabowo was elected president, the government would manage the trade deficit and allow Bank Indonesia (BI) to help maintain the rupiah’s exchange rate.
“We will increase synergy with BI and be proactive in maintaining the gap. It [exchange rate regime] is neither 100 percent free nor fully controlled,” Drajad said.
Prabowo’s running mate, Hatta Rajasa, is the chairman of PAN and a former coordinating economic minister.
During Friday’s discussion, Prabowo said the country still needed a free-floating exchange rate system. However, he said, the government also needed to consider “more rational methods to secure national interests”.
Bank Mandiri chief economist Destry Damayanti considered Prabowo’s statement vague.
“It’s likely to be similar with the current method, which is free floating as BI has said. However, the message is the same that in the end we cannot leave it to the market 100 percent. The important thing is to maintain the independency of BI and at the same time maintain coordination,” Destry said.
She said BI intervention remained necessary to keep the rupiah’s volatility within an acceptable range.
The rupiah exchange rate against the US dollar hit 12,000 last week, the lowest level in four months, as investors dumped assets amid concerns that tension in Iraq would raise oil prices and, in turn, further hurt the trade balance of Indonesia, an oil importing country.
The nation’s currency has lost 2.7 percent of its value this month, making it the worst performing currency in Asia. Analysts have argued that Indonesia’s trade deficit, which reached a nine-month high of $1.96 billion in April, was the main catalyst of the currency’s poor performance.
Rising imports of oil and its products have become a big burden for the country’s state budget as it continues to channel a huge amount to cover the fuel subsidies.
Both presidential candidates, Prabowo and Joko Widodo, have vowed to cut the subsidies if they win the election. Cuts in subsidies have been a hot issue in the country of over 240 million people. However, the subsidies have been said to miss their target as well-paid people also enjoy them.
Prabowo, a former Army’s Special Forces (Kopassus) commander, said he planned to reduce the subsidies by half or two-thirds within three years by redirecting the subsidies to benefit only the poorest.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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