Business Actors Hope Reference Interest Rates Can Drop So They Can Compete

Chairman of Apindo, Shinta W Kamdani. (Photo: Doc. Antara)

JAKARTA - The Indonesian Employers' Association (APINDO) revealed that business actors are looking forward to a further reduction in interest rates to a competitive level with neighboring countries.

However, the General Chairperson of APINDO, Shinta W. Kamdani, revealed that his party always respects interest rate policies and believes that Bank Indonesia (BI) has solid and prudent considerations in determining interest rates in accordance with the national and international economic context.

"BI interest rates also determine the true lending rate on the side of business actors. The higher the benchmark interest rate, of course, it is difficult for the banking sector to provide business loans with more competitive interest rates," he said in a written statement, Thursday, February 20.

According to him, currently Indonesia's lending rate and financing costs are still one of the highest in the region, making national business actors more difficult to compete and not aggressive in carrying out business expansion.

In addition, he conveyed that this also had an impact on export performance expansion which also affected the level of sufficient national foreign exchange reserves.

"We believe that at this time Indonesia needs a lower interest rate level to help boost the performance of national real sector economic growth," he explained.

Shinta said that with lower interest rates, the banking sector can provide loans with more competitive interest rates and provide wider access to financing for business actors who have been categorized as high risk categories (such as MSMEs) to expand business performance, including to improve export and investment performance.

According to him, if exports and investments in the real sector increase, the effect on fiscal adequacy will also be positive, such as foreign exchange reserves increasing, fiscal space and government policy space to intervene in exchange rate stability will also be greater.

"We hope that the government can seek to reduce the interest rate on business loans as quickly as possible, although it must prioritize the macro-pridential/not create too large a burden on national macro-stability," he said.

On the other hand, related to the Fed, if the Fed's interest rate moves down, Indonesia will actually benefit because it has greater movement space to lower interest rates.

According to him, so far the central bank has maintained a relatively high benchmark interest rate because the Fed's interest rate is currently still very high.

"If Indonesia does not force itself to set the benchmark interest rate above the Fed interest rate, it is difficult for Indonesia to obtain foreign funding to finance the fiscal/APBN deficit every year," he added.

Therefore, Shinta hopes that the Fed interest rate can go down so that BI can more freely create a more competitive and lighter benchmark interest rate for the country's fiscal financing burden.

In the future, Shinta also hopes that BI and the government can work closely and streamline in creating a more conducive and facilitative monetary policy climate for the growth of business activities in Indonesia.

"We understand that sometimes the benchmark interest rate is used as an instrument to help maintain exchange rate stability. However, we need to emphasize that exchange rate stability should be created with moreverse/different policy interventions, especially in terms of stimulated increase in export revenues and FDI," he said.

Furthermore, Shinta said that if the exchange rate is only maintained by interest rate instruments, the government will only create stagnation in growth, even a decrease in growth potential due to things that cause stagnation or decrease in terms of acceptance of national foreign resources, especially export revenues and FDI.