Erick Thohir Asks SOEs To Anticipate The Economic And Geopolitical Impacts Of Global Politics

SOE Minister Erick Thohir. (Photo: Theresia Agatha/VOI)

JAKARTA - Minister of State-Owned Enterprises (BUMN) Erick Thohir asked state-owned companies to anticipate the impact of the current world economic and geopolitical turmoil.

He said the United States (US) inflation of 3.5 percent made the Fed's move to lower the benchmark interest rate (Fed Fund Rate) not going to happen in the near future.

"The geopolitical situation is also increasingly volatile with the heated conflict between Israel and Iran a few days ago," said Erick, in Jakarta, Thursday, April 18.

According to Erick, this condition triggered the strengthening of the US dollar against the rupiah and of course the increase in WTI and Brent oil prices, which each had penetrated 85.7 US dollars and 90.5 US dollars per barrel.

"This oil price is even predicted by some economists to reach 100 US dollars per barrel if the conflict expands and involves the United States," he said.

Erick said these two things had weakened the rupiah to Rp. 16,000 to Rp. 16,300 per US dollar in the past few days. This exchange rate could even reach more than Rp. 16,500 if geopolitical tension did not decrease.

According to Erick, this economic and geopolitical situation has already and will have an impact on Indonesia through Foreign Outflow investment funds which will trigger a weakening of the rupiah and rising bond yields. Then also the higher the cost of importing raw materials and food due to supply chain disruptions.

"And it will erode Indonesia's trade balance," explained Erick.

Therefore, Erick asked SOEs to take quick steps in minimizing global impacts through a review of capital expenditure operating costs, due debts, corporate action plans, and conducting stress tests in seeing BUMN conditions in the current situation.

Erick also asked banking SOEs to proportionally maintain the portion of credit affected by rupiah volatility, interest rates, and oil prices.

Including SOEs affected by imported raw materials and SOEs with large amounts of foreign debt (in US dollars) such as Pertamina, PLN, BUMN Pharmacy, MIND ID, in order to optimize large purchases of US dollars in a short time.

"As well as conducting a sensitivity study on principal payments and or interest on debt in dollars that will mature in the near future," he said.

In addition, continued Erick, export market-oriented SOEs such as Mining

MIND ID, PTPN plantations can take advantage of this price increase trend to mitigate the erosion of the trade balance.

Erick said SOEs that have foreign debt or plan to issue instruments in US dollars should review the hedging option to minimize the impact of exchange fluctuations.

"All SOEs are expected to be vigilant and alert by monitoring the current situation, given the possibility of an increase in interest rates in the near future," said Erick.

Meanwhile, President Director of PT Pertamina Nicke Widyawati said Pertamina was intensely monitoring the latest developments and the impact of geopolitical heating on the global energy supply chain.

Nicke said the world's oil fluctuations would become more dynamic after the increasing tensions that occurred in the middle east.

"From the start, we have prepared efforts to control costs, starting from optimal crude selection, inventory management, efficiency of transportation costs and maximization of high variable product production," said Nicke.

President Director of PT Bank Rakyat Indonesia (BRI) Sunarso ensured that BRI would implement strict steps in its future corporate action plan. BRI, continued Sunarso, is also fully committed to maintaining the portion of credit affected by rupiah volatility, interest rates, and oil prices proportionally.

"Of course, as directed by the Minister, we will carry out stress tests and also monitor with careful global economic and geopolitical impacts on conditions in the country," said Sunarso.