JAKARTA, June 25 (Xinhua) -- Indonesian industries that depend on imported raw materials are grappling with the depreciation of the Indonesian rupiah against the U.S. dollar.
The strengthening of the dollar drives up the cost of raw materials and logistics tariffs, raising manufacturing expenses. While adjusting prices is challenging due to low domestic purchasing power, worker efficiency may be the last option.
In line with a downward trend in recent months, the value of the rupiah in relation to the dollar on Tuesday is 16,513.15 for the purchasing rate and 16,348.84 for the selling rate. The exchange rate was around 15,000 in April last year but has consistently exceeded 15,000 since the U.S. Federal Reserve raised interest rates to 5.25 to 5.50 percent.
The pharmaceutical industry, which imports 90 percent of its raw materials, is significantly affected. "This makes the pharmaceutical industry very vulnerable to fluctuations in the rupiah exchange rate," Executive Director of the Indonesian Pharmaceutical Association Elfiano Rizaldi told Xinhua on Friday.
Since the pharmaceutical industry typically stocks raw materials for four months, production has not yet halted, nor have product prices changed.
"But given that the rupiah has declined since April, if this situation persists, say until August, perhaps a price adjustment is unavoidable," Rizaldi added.
Similarly, the medical equipment industry relies 70 percent on imported raw materials, with only 30 percent sourced domestically, according to Febie Yuriza Poetri, vice chairwoman of the Indonesian Medical Equipment Manufacturers Association.
Should price adjustments be implemented, the government, as the primary purchaser of medical equipment products for state hospitals, will be the most impacted party.
They signed into long-term contracts at fixed rate prices with international suppliers, expecting this crisis situation from the beginning.
"Additionally, we are attempting to open up new markets abroad, particularly in nations where the native currency is more stable. Despite the challenges, the government and industry representatives have promoted our products in Germany, Dubai, and Southeast Asia," she said.
The food and beverage industry continues to import key raw materials like wheat, soybeans, milk, sugar, and maize.
"In addition to the rising cost of raw materials, logistics expenses have also gone up three or four times," according to Chairman of the Indonesian Food and Beverage Producers Association Adhi Lukman.
Lukman said that the industry is currently searching for substitute raw materials from both domestic and foreign sources because expanding exports is not an easy option in an environment where competition is growing.
Arsjad Rasjid, chairman of the Indonesian Chamber of Commerce and Industry, urged industries to hedge foreign exchange, restructure debt if necessary, and convert dollar debt to rupiah in response to the weakening currency.
Meanwhile, other strategies include searching for substitute raw resources, postponing expansion, and increasing efficiency.
"We also urge all sides to cooperate in order to preserve stability and support the government's efforts to meet this challenge," Rasjid added.
Chairwoman of the Indonesian Employers Association Shinta Kamdani stated that financial market intervention policies alone are insufficient to stabilize the rupiah.
"The government must focus on developing stimuli to enhance productivity, thereby generating higher foreign exchange receipts through increased exports or foreign direct investment," she added.
Nailul Huda, a researcher at the Center for Economic and Law Studies, said, "Another way is to encourage the use of local currency settlement (LCS) to create alternative foreign trade currencies and reduce dependence on the dollar."
Indonesia has already engaged in LCS projects with China, Malaysia, Thailand, and Japan. ■
