INDONESIA DEVALUES

Press, Volume XCVIII, Issue 28983, 26 August 1959, Page 13

INDONESIA DEVALUES

Drastic Moves To Repair Economy

(N.Z Press Association—Copy ng nt)

(Rec. 9.45 p.m.) DJAKARTA, August 25. Armed police today mounted guard over shuttered foreign and Indonesian banks in Djakarta as the Indonesian Republic began a drastic overhaul of its economic system amid uncertainty and confusion in business circles.

Djakarta businessmen, especially Chinese, lost fortunes overnight when the Government devalued 500 and 1000-rupiah notes—the highest denominations—to one-tenth of their face value.

Big queues formed outside all banks which were closed to the public. Many persons clutched cheques to be cashed. No incidents were reported. Traders opened for business but the atmosphere was nervous and there were no buyers. Quotations were difficult to get for rubber, pepper and other produce textiles where markets appeared paralysed early in the day. The Cabinet yesterday published five far-reaching decisions to check the spiralling inflation and to absorb "hot money” from circulation. The decisions, all taking effect from 6 a.m. Java time today, Tuesday, are:

(1) Banknotes of 1000 and 500 rupiah denominations will be reduced to 10 per cent of face value, being worth respectively 100 and 50 rupiahs.

(2) Savings accounts of more than 25.000 rupiahs will be frozen and the money is to be regarded as a long-term loan to the Government. (3) The export certificates system established in July, 1957, to finance imports from abroad will be abolished. (4) To replace the certificate system a 20 per cent, duty will be levied on exports and vary-

ing taxes will be levied on imports classified in six categories. <5) The rupiah rate for foreign trade will be fixed at 45 to one United States dollar. The regulations which stunned the Indonesian business world, came after a meeting of the Indonesian Cabinet at President Soekamo’s summer palace at Bogor. West Java. The first details were broadcast to the nation by Mr Maladi. the Information Minister and Cabinet spokesman. Later last night came a series of decrees implementing the new policy. Shops Closed Traders throughout the Republic closed shop almost immediately after they heard the decision to devalue the currency. Shopping centres in Djakarta were deserted Traders refused to accept 500 and 1000 rupiah notes. Excited crowds rushed telegraph offices throughout Indonesia to send messages to friends, families and business contacts In Djakarta, armed police squads were called out to check the crowds outside thesPost Office but no incidents were reported. Fortunes were lost by the devaluation, the second of its kind by Indonesia. Printed currency was cut in value by half in 1950 A wave of uncertainty and confusion spread through Indonesia but there were no reports of real panic. The Cabinet decisions, relayed by Radio Indonesia in a dramatic interruption of its programme, were carefully timed. AH banks were closed when Mr Maladi announced the Presi-

dential decrees. Devaluation came just before the end of the month so wage-earners would not suffer by getting devalued pay. Most hurt by the sweeping decisions appeared to be get-rich-quick speculators, black market operators and those whose savings were put “under the mattress” instead of being invested or put in banks.

Throughout Indonesia today, banks, post offices and Government offices, cash books were being officially closed before appointed witnesses record the printed currency on hand.

Lieutenant-General Abdul Haris Nasution, Army Chief of Staff. Defence Minister, and Administrator of the current martial law in Indonesia, ordered all military commanders in the outer islands, to keep watch on the process.

The Government moved to halt the near-perilous economic situation recently described by President Soekarno as "hair-raising” and General Nasution as “deplorable.” “Revolutionary Answer” The decisions came exactly one week after President Soekarnos policy speech on August 17, the Republic’s independence anniversary in which he called for a “revolutionary” answer to the nation’s staggering problems. In a speech, he then gave no hint of the reforms announced late yesterday, but attacked liberalism and capitalist! and called for the creation of a just and prosperous society in Indonesia with major resources controlled by the State.

Djakarta Radio announced orders that all Dutch firms taken over by Indonesia and under State supervision should have their premises sealed during the night until today when company books will be closed. President Soekarno in a general decree devaluing the currency warned that there would be heavy penalties for economic violators.

Those flouting the latest regulations would be liable to a nineyear jail term or a maximum fine of 1,000.000 rupiahs. About 80 rupiahs are equivalent to £l. The Government in a footnote to the decisions attacked illegal barter and export, import and home trade deviations from the official regulations which “caused a decline in the state of financial resources.”

Unstable political conditions and difficulties of communications between Djakarta and outer regions had given another opportunity to irresponsible people to draw excessive profits which were impossible to obtain under normal circumstances, the footnote said. The Government believed new drastic monetary regulations could not be postponed any longer in the interests of the country and people.