Antara News, Wednesday, November 24, 2010 22:39 WIB
Jakarta (ANTARA News) - Finance Minister Agus Martowardoyo said he hoped the flow of foreign capital into the housing development and property sectors would not create a "moral hazard."
"Foreign capital will flow into the capital market, the share market and usually also into sectors where they would be easily accepted and where they could easily be invested including the property sector. Therefore, I advise those in the financial system to be alert so that no moral hazard will arise," he said here on Wednesday.
He said if the foreign capital was used for financing, people must be alert towards three possible mismatches of a kind that had caused the economic crisis in the US in 2008.
"The three mismatches are short-term funds being used for long-term purposes, funds with floating rates being used as loans with fixed rates and loans in foreign currencies especially strengthening currencies being invested in weakening currencies," he said.
He said if banks received the cheap and possible short-term funds and used them for financing in the housing sector they must also anticipate a possible reversal.
"Be careful towards a possible moral hazard which usually occurs in financing which is not done prudently. So if the funds should leave they cannot be withdrawn because they have already gone into the property or riskier activities," he said.
He said to make the foreign capital inflows remain in Indonesia the government had taken steps such as advising state-owned companies to conduct a stock offering or a right issue to attact investment and make the funds go into more productive sectors.
"So it would maintain the trade balance, the balance of payments, fiscal conditions, financial industry`s healthy, position competitive and encourage state-owned companies to go public, to conduct a right issue, investment which has already been done and they are all aimed at directing the funds to more productive use," he said.
Minister Agus predicted foreign capital would continue to come to Indonesia until 2011 and the government and the central bank continued coordinating and preparing a protocol for dealing with a financial crisis.
"We believe the current conditions would continue until in the middle of 2011. We (the government and BI) have already taken a lot of measures and also have already implemented the financial crisis protocol and would keep coordinating and so we keep alert," he said.
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