SINGAPORE — A resurgence of the currency crisis in Southeast Asia sparked by street violence in Indonesia is prolonging the sufferings endured by the region's plastics and petrochemical companies.
Last week, university students and blue collar workers in several Indonesian towns took to the streets in violent protests against the abrupt lifting of price subsidies for fuel and basic necessities, as mandated by the International Monetary Fund.
The growing violence spooked the erstwhile stable currency markets, as jittery investors sold down Southeast Asian currencies across the board.
Within a week, the Indonesian rupiah has plunged close to its record lows of around 10,000 against the U.S. dollar, forcing the Suharto government to raise short-term interest rates from 25 percent to 70 percent.
At such levels, most Indonesian companies on the Jakarta Stock Exchange are technically bankrupt, analysts said.
More and more plastics molders and processors across Indonesia are choked by limp demand, high prices of imported raw materials and limited export opportunities due to difficulty in securing letters of credit, industry sources said.
To cope, firms are slashing output, laying off employees and operating on wafer-thin inventory levels. At least 180 plastics firms in the country have gone belly up in past months, industry sources say.
``Now, nobody can finance us,'' said a source at an Indonesian molding firm.
``We just try to keep constant business. Who knows? Things might change tomorrow,'' he said.
At a recent industry exhibition held in Bangkok, most participants attributed some of their losses to the turmoil in Indonesia.
``Our business in Indonesia has all but dried up,'' said Jerry Tan, a marketing assistant manager at Facell Foam Sdn. Bhd., a Malaysian plastic foam maker near Kuala Lumpur. Facell's clients in Indonesia include athletic shoe makers, some of whom already have gone bust.
For Chi Chang Machinery Enterprise Co. Ltd., an extruder maker in T'ai-nan, Taiwan, Indonesia's deepening woes have cost it US$4 million in lost orders since the beginning of the year, said Managing Director Johnny Wei.
``We have no choice but to find other markets,'' Wei said. ``Fortunately, the bulk of our business is in Europe.''
To back out of contractual agreements, some unscrupulous Indonesian bosses try to find minute faults with their suppliers' product or delivery schedule, industry sources said.
Sometimes, Indonesian banks are to blame for lost business with financially sound companies.
``The banks there are not entirely reliable,'' said an engineer with a European maker of plastics recycling machines. ``We will agree with a customer on a deal backed by a letter of credit, but it then turns out that our bank cannot get money from his bank.''