Singapore, Feb 25: The currency crisis afflicting south- east Asia and South Korea has severely eroded the region's dollar purchasing power.The dollar is the medium of international trade for most goods, and from oil to wheat, metals to gold, Asia's import costs have gone through the roof.
Indonesia's dollar purchasing power, for example, has slumped more than 400 per cent since the financial crisis began last July.
It means that Indonesia now has to use four times as many rupiah for one dollar, compared with pre-crisis days.
Indonesia imports some metals, wheat, sugar and lately rice. Luckily, however, it is a big exporter of dollar-based commodities, and this helps to reduce the impact on its import-export balance.
The dollar value of copper has slumped more than 25 per cent since the crisis began but even so, the cost for Indonesian importers has surged 389 per cent, or almost four times.
Copper was valued in London sometime ago at $1,739 per tonne. So one tonne of copper would cost anIndonesian importer 22.6 million rupiah.
On July 1, 1997, just before the financial crisis struck, copper was priced much higher at $2,393 per tonne. At Indonesia's dollar exchange rate of the time -- 2,432 rupiah per dollar -- the import cost was 5.8 million rupiah.
The dollar price of another import -- sugar -- has fallen five per cent since the crisis began. But for Indonesia, the price has rocketed more than 500 per cent.
White sugar in London -- a benchmark price -- costs $301 per tonne, or 3.9 rupiah. Before the crisis, it was valued at $317, or 771,000 rupiah at the Indonesian/dollar exchange rate of the time.
Other countries in Asia are also suffering because of the slump in dollar buying power, which underscores the loss of competitiveness of Asian currencies.
The cost of importing US dollar-based commodities has risen dramatically and this, in turn, will lead to sharply higher domestic prices if importers are able to pass costs on to customers.
However, the wider economic problems andrising costs are expected to lead to reduced demand for many dollar-based commodity imports.
South Korea -- the biggest recipient of IMF funds to the tune of nearly $60 billion -- was the 11th biggest economy in the world before it was hit by the currency crisis.
Its currency, the won, has plunged 97 per cent in dollar purchasing terms.South Korea imports all of its 2.5 million barrels of crude oil. Using benchmark Brent as the gauge, the same amount of oil in dollar terms now costs Korean importers 26,250 won per barrel. On July 1, it cost 15,830 won, despite a 20 per cent fall in the dollar-value of crude.
In dollar purchasing terms, Thailand's baht has dropped 119 per cent, the Philippine peso has fallen 69 per cent and the Malaysian ringgit 80 per cent.
A journey around Asia -- using petrol as the measure -- shows how the region's dollar purchasing power has collapsed since the crisis began in July. Assuming a petrol tank holding eight gallons (about 36.5 litres) and not taking account of changesin petrol domestic prices.
In Thailand's capital Bangkok, a litre of regular special grade petrol would cost 12.60 baht per litre and the eight-gallon tank would be 458 baht, or $8.51. In July last year the same tank of petrol would have been worth $17.68.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
