Indonesia's Government May Issue Decree to Boost Confidence

By Aloysius Unditu and Naila Firdausi

Oct. 11 (Bloomberg) -- The Indonesian government may soon issue a government decree to help boost investor confidence in local assets amid the crisis in global financial markets.

The regulation in lieu of law, known as a ``perppu,'' ``is being finalized to be submitted to parliament within days for consultation, and to be then issued,'' Miranda Goeltom, senior deputy governor at Bank Indonesia, said last night, adding that the regulations will help the central bank provide liquidity support. The government may also issue similar rules to relax criteria on collateral used in bank loans, she said.

The Indonesian government is trying to boost investor confidence after the local stock benchmark index had its biggest three-day loss in 20 years before trading was suspended on Oct. 8, and the rupiah touched the lowest since November 2005 against the dollar yesterday on concern the global financial crisis will worsen and damp growth in Southeast Asia's largest economy.

``The government must move fast to restore confidence; it can't afford to hesitate,'' said Prayoga Triyono, a fund manager at PT Henan Putihrai Asset Management. ``It would be better if they could issue the regulations as soon as Monday,'' as trading is expected to resume Oct. 13.

The government and Bank Indonesia need the regulations to take actions to bolster confidence and prevent worsening perceptions of domestic assets and of the economy, Finance Minister Sri Mulyani Indrawati said yesterday, after consulting with parliamentary leaders. The government may also issue a regulation in lieu of law for the deposit guarantee agency, the minister said.

``It's a bit too late, but it needs to be done,'' Drajad Wibowo, a member of a parliamentary commission on financial affairs, said today in a text message. ``We will deliberate over the regulations to become laws in a few months.''

To contact the reporter on this story: Naila Firdausi in Jakarta at nfirdausi@bloomberg.net; Aloysius Unditu in Jakarta at aunditu@bloomberg.net.