So far BUMNs had hesitated to carry out hedging because they were afraid of being viewed as causing losses to the state.
Jakarta (ANTARA News) - State-Owned Enterprises Minister Dahlan Iskan said he had instructed all state companies (BUMNs) to hedge their dollar borrowings to avoid losses as a result of possible currency turmoil.

"I have called on all state-owned companies to not hesitate in hedging their dollar borrowings, as the issues that have stopped these companies from carrying out hedging has been overcome," the minister said after a leadership meeting here on Thursday.

He said that so far BUMNs had hesitated to carry out hedging because they were afraid of being viewed as causing losses to the state.

"Now, regulations on hedging have been made clear, but it should be done with prudent principles and with regulations in force. There were instances when the state had suffered losses and also other instances when benefits were enjoyed," Minister Dahlan noted.

He explained that many state companies had used core hedging instruments, such as Garuda Indonesia and port operator Pelindo II, including major state companies, such as electricity firm PLN and state oil and gas company Pertamina, which apply a lot of foreign currency instruments in their operations.

"We will ask the others. I have asked all the deputies of BUMNs to check out which of the companies have not yet hedged their dollar currency and why have they not carried out hedging," Dahlan said.

He said that in carrying out hedging, state firms should not necessarily involve financial firms.

"Those with risks should carry out hedging, except when they can act responsibly with certain reasons," Dahlan said.

Earlier, Tresna W Supryono of Bank Indonesia (BI/the central bank) said that hedging will be beneficial for companies amidst the volatility of foreign exchange, where the value of rupiah tended to weaken.

Now, the volatility of the rupiahs exchange rate is highest among countries in the region that have reached 10.5 percent, so that it will cause relatively high risks to the company.

There are a number of hedging measures, such as swap transactions, forward transactions, and option. The latest three hedging models are allowed by the regulations in Indonesia.(*)

Editor: Heru Purwanto
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