Bali cheaper as Rupiah drops, but where are the tourists?

In the last 12 months, the Indonesian Rupiah has lost 15% of its value against our dollar, making Bali cheaper but fewer tourists coming. Duncan Graham reports.

Indonesia’s economy is in trouble; the rupiah’s decline is symptomatic of rising debt, less investment, and a decline in foreign income from tourists kept away by the Iran war; Some nepotism also comes into play, muddying the waters of governance.

More than a year ago, it was easy for countless travelers to deal with Indonesia’s hefty six-figure small change. The Australian dollar was exchanged for approximately 10,000 rupiah, so that local prices could be understood by dropping the last three zeros and printing a decimal point.

A R25,000 coffee from a Bali warung roadside stall will do $2.50 damage to your wallet, no need for a mobile phone calculator. But with the rupiah rolling faster than a re-entering spacecraft and warming up to 12,300, that cuppa becomes $2.03. This is a severe devaluation reminiscent of the currency crisis of 1998 that toppled the 32-year autocracy of the second President Soeharto and ushered in the Revolution.

Former Prime Minister Paul Keating remembered:

“Developments in Indonesia also indirectly affect Australia, because what happens there will determine – not just shape or form – how quickly and peacefully the rest of Southeast Asia can develop.”

Indonesia has the largest economy in the region and ranks seventh in the world in terms of GDP. The annual growth rate is generally over five percent. Negotiated Covid financially Alrightthough not the current conflict, which is multifactorial.

The current Rupiah crash is terrible for locals, but great for tourists if they can be found.

Where is the crowd?

When the Persian War began, the large long-haul jets bringing European holidaymakers to Bali did not connect their aerobridges; 64 flights were made. canceled in the first week of the conflict.

More than 8,000 people had to postpone their travels. Most had booked routes with stopovers in Doha, Abu Dhabi and Dubai before heading to the US and Europe.

European tourist arrivals to an island where the economy relies on foreign tourism have fallen by around 800 passengers per day.

What went bad? Forbes business barometer ranks the rupiah fifth among the world’s ten weakest currencies. Angry partisan politicians and local economists have mobilized with excuses and claims of utility debt, but their reasons are complex.

IPB Uni in Bogor, West Java is considered one of the best campuses in Indonesia. German-educated economist Dr Deniey Adi Purwanto has more sense than most.

HE accuses “investor concerns about the government’s fiscal policy,” particularly the $24.5 billion free school meals project currently included. MWM earlier this month.

Indonesia under Prabowo – an unstable neighbor

“Indonesia’s dependence on imported goods and services weakens the rupiah. This causes a current account deficit, which increases the demand for foreign currency to finance imports.”

Capital inflows are expected to close the deficit. Investors are a timid bunch and flee turbulent economies. This drives down exchange rates; A sort of self-fulfilling prophecy.

The US reciprocal tariff policy also affected:

This move triggered global trade tensions and put pressure on Indonesian exports.

But these are template causes, are largely universal and affect many other countries. There must be something extra and special for Indonesia to recover from the big blow.

triple fuck curse

There is the ancient triple curse of the Republic, which every adult knows as KKN and which needs no translation:

Korupsi, Kolusi, Nepotism.

This is where things get heated.

The undergraduate sentence that “a thousand economists lined up end to end and never came to a conclusion” is not just a joke, so consumers affected by financial problems need to do thorough research.

The largest in the sector is Morgan Stanley Capital International. based in NY investment research company “It provides stock indices, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.”

This is the barometer big money uses to control the financial climate. Do they need brollies or sunnies?

MSCI reacted to the news that Indonesia’s foreign debt had risen to just under $438 billion by mulling out loud about downgrading the country from emerging market to frontier market status.

The stock market heard the murmur and fell almost seven percent. requested $80 billion loss.

Prabowo’s businessman younger brother, Hashim Djojohadikusumo, reported He told the ASEAN Climate Forum at the Jakarta Stock Exchange that the government “received four letters from MSCI highlighting concerns in Indonesia’s capital markets”, adding:

“The President was extremely angry at what had happened, especially because the nation’s honor was at stake and many retail investors had suffered losses.

“For Mr. Prabowo, the honor of the republic is paramount. That is why he will monitor the capital market very closely.”

That reassurance left no one happy, even after the exchange’s CEO “resigned” (or was escorted off the elevator) along with two top officials at the Financial Services Authority. The police were called.

Police said they “frozen bank and securities accounts worth approximately $40 million belonging to various stock brokerage firms as part of an investigation into allegations of insider trading and market manipulation.”

Fitch lowers Indonesia’s credit rating outlook to negative

Another factor that affects Bali real estate investment increased (and delayed) enforcement of particularly confusing building regulations. According to one source, this means new projects will slow down significantly MWM Trading volume decreased by 40% compared to a year ago.

Prabowo Inc.

The president’s brother, Hashim, is not in the Cabinet but is considered his brother’s spokesman. Room known as “He is the primary financial supporter of Prabowo’s political ambitions and business ventures.”

Family ties don’t end with siblings. Last year Prabowo appointed his nephew Thomas Djiwandono as Deputy Finance Minister and this year nominated him as Deputy Governor of the Bank of Indonesia.

The market vendors put their hands in their pockets, jingled their keys and looked At the ceiling, I wonder “what signal this move might send about the use of political influence on monetary policy.”

Given to Budisastro Djiwandono, Thomas’ chosen younger brother foreign affairs controlHe accompanies Prabowo on his foreign trips. Two other nephews, a niece and an ex-wife are also in positions of power.

Comment made Asia Sentinel business magazine: “The speed and scale of this expansion… has led civil society groups to warn that Indonesia may be entering an era dominated by political power and commercial influence.

They become dangerously intertwined with the president’s own family.

Suharto’s playbook

This was the management model used by Prabowo’s former father-in-law, second President Soeharto. Time magazine in 1999 reported A four-month study covering 11 countries concluded:

“Nine billion dollars of Soeharto money was transferred from Switzerland to a private bank account in Vienna. Not bad for a man whose presidential salary was $1,764 a month when he left office.”

Now it has become a national hero by his former son-in-law.

All these problems constitute additional factors in the decline of the rupiah, as it cannot create a comforting atmosphere of confidence and make foreign investors feel comfortable.

It was reported that police investigations regarding the stock market scandal continue and 70 people were interviewed. Prabowo’s anger at his country’s honor and reputation did not help the police in their investigations.

Before taking office, Prabowo opposed corruption and promised reform. Last year he gave one table-thump from the throne:

“On behalf of the Indonesian people, I warn all elements in all institutions: Correct yourself immediately, transform immediately, because the state will take action.

“We will eliminate those who are not loyal to their country without hesitation, without favoritism, regardless of family affiliation, political party, ethnicity… The elimination of corruption will be the priority agenda of my administration.”

Although it is in the hands of the government critics It becomes narrower and does not reach the academic throats. Yet.

Comment made Dr. from Muhammadiyah University in Yogyakarta. Phil Ridho Al-Hamdi:

“Prabowo’s speech was not much different from his predecessor’s speech.

The truth is that corruption still occurs everywhere, from the central government to the villages.

“A leader’s speech must be supported not only by rhetoric, but by concrete actions (and accompanying) exemplary behavior by state officials, from the president and vice president to ministers… ….fighting corruption demonstrated by everyday behavior.”

If the world expects change in the way Indonesia does business, it will need more than a packed lunch.

Carney vs Albanese. We are redefining Australia’s place in the world. What about Indonesia?

Duncan Graham has a Walkley Award, two Human Rights Commission awards and other awards for his radio, TV and print journalism in Australia. He currently lives in Indonesia.