During the time I lived in Indonesia, it traded in a band of between 8,500 and 10,000 rupiah, hovering around the 9,000 rupiah mark for much of the time. It was broadly stable during these years from 2005 to 2012, meaning that your Indonesian salary held its value reasonably well. The main threat was inflation, which was much higher than it was in Western countries. However, it only reached double digits a couple of times. Mostly it averaged around 7 to 8%, which meant that as long as schools upped your salary by 10% a year, you weren’t going backwards.
Since late 2011, that picture has changed rapidly. From that time onward, the value of the rupiah has almost constantly been going in one direction and one direction only: down. During 2012 and 2013 it gradually trended downwards, finally reaching the psychological 10,000 rupiah to the dollar barrier. From there it rapidly slumped, losing a full fifth of its value and reaching the 12,000 rupiah to the dollar mark. Since then it has continued to fall but more gradually. Still, as of last week it has now breached the 13,000 rupiah mark and rumors are that Bank Indonesia has spent quite a lot of its foreign exchange reserves defending it at that level. It is now over 50% weaker than it was 4 years ago. What’s gone wrong?
The most commonly given explanation is that commodity prices first slumped in 2011 and have been trending lower since. Indonesia’s exports are dominated by commodities such as mineral ores, hydrocarbons, palm and other vegetable oils, rubber and so on. As soon as prices for commodities started to trend lower in 2011, the rupiah followed them, indicating Indonesia’s dependence on commodities for export dollars. In 2013 to 2014, Indonesia experienced some of its largest ever trade deficits, indicating that it was no longer selling enough palm oil and coal to cover the cost of all the smart-phones and cars it was importing.
TBI has complained to WordPress and their own staff that this blog is preventing them from gaining the teachers they need. (On an aside, this is a covert admission that people largely believe this blog.) However, we maintain that any impact a blog such as this could have is dwarfed by the slump in the rupiah. People don’t want to work at TBI because the salary is 50% less in US dollar terms than it was in early 2011. This has made TBI a much less attractive employer in the international marketplace. For example, a salary of Rp12 million at TBI Bandung used to be equal to $1411 in early 2011. But it is now worth a measly $923. This is less than a newbie would get on their first contract anywhere in Thailand. Clearly, the falling rupiah has played a huge role in the sinking fortunes of TBI recruitment, but it is easy to seek a scapegoat in this blog. Nonetheless, look at the graph below and a major unacknowledged factor becomes obvious.