Indonesia struggles as dollar strengthens

JAKARTA — Indonesian industries that depend on imported raw materials are grappling with the depreciation of the Indonesian rupiah against the US 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 about 15,000 in April last year but has consistently exceeded 15,000 since the US Federal Reserve raised interest rates to 5.25 to 5.50 percent.

Hardest-hit industry

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 said 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 hardest hit.

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 Adhi Lukman, the chairman of the Indonesian Food and Beverage Producers Association.

Xinhua