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ASIET NetNews Digest Number 2 - January 19-25, 1998
Political/economic crisisRefugees to arrive in Lisbon on Tuesday Lucas da Costa found Victims of War Rebels shoot dead government malitiamen
Human rights/lawChaos deepens in Indonesia Indonesia hit by both financial crisis Spooked traders dump currency 100,000 workers loose their jobs Indonesia on edge of hyperinflation As `Dr Strangelove' rises, rupiah falls Indonesia's inaction on debt load Government critics join hands Ground Zero Social unrest in Indonesia mounts Interview with Muchtar Pakpahan IMF accord fails to halt plunge Rioters force traders to cut prices
MiscellaneousOpposition leaders held in
Gus Dur recovering fast Bomb explodes in Jakarta
| East Timor |
Lisbon -- The five East Timorese who have sought refuge last Thursday on the French embassy in Jakarta are expected to arrive in Lisbon on Tuesday, a source at the Portuguese Red Cross told Lusa on Monday.
The departure of the Timorese who stayed in the embassy for five days was organised by the International Red Cross and proceeded without any incidents, according to the news agency France Press.
The source identified the five Timorese as Rufino Bernardino, 19, Anastacio de Assuncao, 21, Crispim dos Santos, 20, Carlindo Jose Caetano, 18, and Olivio da Assuncao, 21.
In the last years, 140 Timorese have sought shelter in western embassies in Jakarta.
Indonesia invaded East Timor in 1975 and annexed it one year later but the United Nations still regards Portugal as the territory's administering power.
The East Timor Human Rights Centre (ETHRC) has received a report from a reliable source that Lucas da Costa, 49, an East Timorese professor from Surabaya, Indonesia, who disappeared on 23 December, 1997, has been released after being arbitrarily detained by the Indonesian authorities.
According to the report, which is still unconfirmed, Lucas was subjected to serious psychological pressure and torture while in detention and he appears to be extremely traumatized by his experience. The report states: "He looks so scared and does not go any-where but locks himself in his house with all curtains closed."
The ETHRC holds grave concerns for his physical and psychological well-being and believes he may have been pressured into not revealing details of his arrest and treatment in detention. The ETHRC is making further inquiries about Lucas da Costa's detention and his current state of physical and mental health.
Without doubt it is the women of East Timor who have suffered the most. While they have undergone what can only be described as martyrdom, the international community has chosen to turn a blind eye to their pleas for help.
The suffering of East Timorese women falls into many categories including the killing of pregnant women, rape, comfort women, forced motherhood, child stealing and public executions.
Becoming mistresses or "local wives" of Indonesian soldiers offers some protection from certain East Timorese women from continous raping by other soldiers. The soldiers keep the young women with them while they stay in East Timor, and when they go they abandon or pass the women on to the soldiers who replace them.
Recently, 23-year-old Alianca dos Santos was arrested by members of the Indonesian armed forces. She was beated, threatened with death and raped on three occasions. She was forced to work for the soldiers until Bishop Carlos Belo forced the military to release her.
From the outset the Indonesian military has singled out women for particularly harsh treatment. The killing of wives, sisters and other female relatives of East Timorese independence fighters began on day one of the invasion.
On that day, Isabela Lobato, the wife of the East Timorese President Nicolau, was taken from the place where she was hiding with three of her sisters. Without hesitation she was raped by her executioners and then shot dead. Also on that day, 159 other women wwere executed after their childern had been taken from them. The childern were taken by the Indonesian military to the capital Jakarta.
In a small village outside the East Timorese capital of Dili, Jose and Fatima Gusmao witnesses told how a pregnant women was treated at the hands of the Indonesian invaders.
After a group of 20 soldiers had attacked the village and left in a big helicopter, the Gusmao couple saw the woman slowly coming out of her house. When they returned to get a better look this is what they saw:
"When we get closer we see it is the the pregnant woman outside. She is naked. She holds herself, all the stomach is cut open, the baby and everything coming out, the blood has started to dry black. She is just alive and I think she knows us. She tries to speak but no sound comes out. Tears run from all over her face. "We can do nothing for her. We cannot fix a wound like that. We try to take the baby out but she is dead, cut completely in pieces by sharp knives. It is so horrible we can hardly believe, the small childern are broken, torn apart by their legs, like you tear paper."
Only recently has the suffering of the women of East Timor been focused on. No international agency with the exception of Amnesty Internatinal, has documented the appalling atrocities inflicted on them by the Indonesian military.
Jakarta -- Anti-Indonesian rebels shot dead two militiamen in the former Portuguese colony of East Timor in an ambush on a car carrying a village leader, the official Antara news agency reported on Friday.
It quoted East Timor military commander Colonel Slamat Sidabutar as saying the attack on Wednesday near Venilale in the Baucau regency took place as the village chief and two other men were traveling to a development project in a nearby village.
Rebels fired on the vehicle as it rounded a corner, Sidabutar said, adding that all three men in the car were members of the People's Resistance. The village chief survived.
The People's Resistance is believed to be one of a number of militia groups given military training to provide security in heavily-militarised East Timor.
The attack marks the latest incident in an upswing of violence in East Timor after four people were found dead in a river earlier this week and soldiers shot dead two rebels last week.
A small group of armed guerrillas and an urban-based clandestine movement still oppose Indonesia's rule in East Timor more than 22 years after Jakarta invaded the territory in the wake of a civil war.
| Political/economic crisis |
Darren Mcdermott -- Indonesia's financial system is teetering on the edge of paralysis.
As companies make a mad grab for scarce dollars, the country's currency is plunging -- down as far as 32% on Thursday alone. Amid such stomach-wrenching drops, some Indonesian banks are failing to hold up their end of transactions and some international bankers are cutting off all funding to Indonesian borrowers and bracing for a debt moratorium. In sum, the gears of the country's financial system are jamming.
"Everybody's avoiding the word 'standstill,' everybody's avoiding the words 'major rescheduling summit,' but everyone knows that it's just days away," says the regional head of a U.S. bank in Singapore.
Indonesia faces financial breakdown on two fronts. First, there's the matter of some $65 billion or more that Indonesian companies owe foreign banks. Many Indonesian companies ceased repaying foreign loans weeks ago, and fears of a government- imposed moratorium are once again on the rise. But more urgently now, the daily transactions of commerce that make up the lifeblood of an economy are in danger of grinding to a halt, bankers say. "Every day you wonder, is this going to be the last day?" says the bank executive, who, like other senior bankers interviewed for this article, spoke on condition of anonymity.
Deepening Worries
At the outset of trading Thursday, the rupiah went into free fall. This was rooted in jitters over the financial system combined with deepening worry over how Indonesia will deal with what has turned into a huge political crisis. A growing number of bankers, investors and fund managers say last week's revised International Monetary Fund program for Indonesia has failed to boost markets mainly because 76-year-old President Suharto himself is a big part of Indonesia's problems.
Worry about Mr. Suharto intensified -- and the flight from the rupiah has been fueled - - by strong speculation he may choose controversial Research and Technology Minister B.J. Habibie for his vice president for a new five-year term expected to begin in March. So abrupt was Thursday's rupiah slide that market participants were unable to agree just how low the rupiah fell, though at least one bank reported a trade at 17,100 rupiah to the dollar, a 32% fall from Wednesday's closing level of 11,575 rupiah. Indonesia's central bank eventually stepped into the market twice to buy rupiah, bringing the currency back to around 11,850 late in the Asian day.
But the damage was done. The rupiah's dive sent the Jakarta stock exchange down 4.8% and was blamed for a regionwide retreat; stocks fell in every other Asian market save Shenzhen, China, while currencies around much of Asia also weakened.
Valuable Dollars
As the Indonesian rupiah has plunged, companies have hoarded increasingly valuable dollars. With a shortage of dollars in the system and their price rising daily, Indonesian banks are struggling to make good on day-to-day transactions with international parties such as honoring checks and trade-related credits, as well as foreign-exchange deals. In the past two weeks, most large Indonesian banks have had to plead for extra time in settling transactions with foreign banks, according to senior bankers in Singapore, where the bulk of daily trading in the rupiah takes place.
Applying pressure could push the system into gridlock, in which the complex flow of banking-system payments freezes as each bank refuses to make a payment until it receives one from another party. As a result, Singapore bankers say that so far they have allowed Indonesian banks time to scrounge up the needed cash. But it makes them very nervous; they're growing reluctant to deal with Indonesian parties. And fewer players in a market makes it more volatile, the last thing the beleaguered rupiah needs.
"The system is close to collapse unless there is some stability returned," says a prominent Indonesian businessman. "It can't endure the rupiah at this level."
But bankers now expect that the government will be forced to block foreign-debt repayments, shut the gates on capital flows or otherwise restrict the rupiah's trading. The government said two weeks ago that there would be no moratorium on debt payments, a move that would be tough to get past the IMF.
Financial-System Freeze
But that was before the latest IMF package, a tougher version of a November agreement that Jakarta strayed from, was formulated -- and flopped. The IMF is expected to push Indonesia to keep its capital account open, and to refrain from bailing out the companies that have accumulated heavy debts. But if the falling currency and mounting debts trigger a financial-system freeze, the government may have no choice but to take some of these measures.
"It's got to the point where some foreign bankers are saying, 'Why don't we just trigger it ourselves and get it over with,' " says one banker. "At least then we'd know where we stand."
A moratorium might also prove ineffective or destructive, some economists say. "It seems like an easy thing to do," says Tim Condon, economist at Morgan Stanley Dean Witter. "But experience shows that it's unlikely to stabilize the currency unless it's accompanied by far-reaching economic reforms."
Government officials and bankers who have met with them hint that a major announcement carrying out the reforms agreed to last week with the IMF is on the way, possibly within days. The past week has seen positive steps as three large bank mergers materialized, and another was formally announced. Indonesia's bloated banking sector could shrink from more than 200 banks to fewer than twenty. But while that would have wowed the market three months ago, it's no longer enough. "Just because you merge 10 insolvent banks into one insolvent bank doesn't mean your work is done," says Christa Marti, an economist at UBS Securities in Singapore.
'Very Confused'
But it's unclear what else the government has to offer, if anything. "They seem very confused," says a banker who met with top economic-policy officials this week. Similarly, executives who have met Indonesian central-bank officials in recent days report inaction -- "like a rabbit caught in the headlights," says one.
On Thursday, debt problems arose when Mr. Suharto met a senior Japanese official. After the meeting, Tokyo said it was ready quickly to disburse as much as 50 billion yen ($393.4 million) in additional aid to Jakarta. The official Antara News Agency quoted State Secretary Murdiono as saying afterward that the president "is thinking hard how to help ease the private sector's debt problem without harming creditors."
Jakarta bankers say they believe the government is trying to find a way to have a moratorium -- without formally declaring one. "They are striving to find a way to not use the 'M' word," one banker said, noting that declaration of a moratorium could shut off new capital for years. But it isn't clear how to begin a government-directed debt restructuring that's acceptable to creditors.
And as time passes without talks beginning on how international banks and their hundreds of Indonesian borrowers will work out agreements to restructure the country's foreign debt, confidence in Indonesia's ability to cope dwindles. A visit to Singapore- based creditors by Indonesia's point men on a debt workout two weeks ago resulted in just one agreement: that the officials should return with an exact count of the country's outstanding foreign debt, which they still lack, according to bankers who attended.
Going Nowhere
Creditors themselves remain splintered. A handful of international banks have been meeting in Singapore as recently as Thursday in an attempt to fashion a framework for the day when negotiations do begin, but so far with little progress. "It's going nowhere," says one banker familiar with the talks. "We are nowhere near even an intellectual starting point."
With no talks on how to handle the debt, economists say the rupiah will continue to fall. With imported food costs soaring as a result, observers now worry about next week's nationwide religious celebrations. The rupiah's fall two weeks ago to levels even stronger than Thursday's set off widespread panic buying and hoarding of basic goods. And the Lebaran holiday, which marks the end of the Islamic fasting month, entails large feasts and gift- giving that will further stretch already tight household budgets. Social strains may prove greater in February when layoffs are expected and a price freeze on basic goods is lifted.
And so, the thinking among some bankers goes, Jakarta may then reach for a blunt instrument, such as a moratorium, to stop the rupiah's fall and bring prices back under control.
"I think they are trying to make it through Hari Raya and I don't think they stand a chance," says one regional head of credit who says he has already shut down virtually all lending to Indonesian borrowers, including trade finance. "We're strapped down for heavy weather."
[Staff reporters Richard Borsuk and Norihiko Shirouzu, and Jay Solomon and Kate Linebaugh of Dow Jones Newswires contributed to this article.]
Dirk Beveridge, London -- The Asian financial crisis and falling oil prices have left Indonesia in a double bind.
Recent stock market plunges combined with the wildly tumbling rupiah has devastated the Indonesian economy, stirring unrest and food-buying panics, and spreading concerns that millions of people will suffer hard times for years to come.
But Indonesia's economic slide is exacerbated by developments beyond its control on a wholly different front.
The country is an OPEC member that relies on oil sales for hard currency -- U.S. dollars. However, with oil prices at a nearly four-year low and analysts dubious about whether the Organization of the Petroleum Countries can talk prices back up, Indonesia won't be able to turn to either the oilfields or the cartel for economic salvation.
And while some OPEC ministers are meeting in emergency session next week in Vienna, Indonesia is too marginal a player to hold much sway over the cartel's policy.
Getting more cash by stepping up production also is not an option. The southeast Asian island nation has been pumping all the crude it can for some time.
So unless the other OPEC members find a way to cut production in a meaningful way to drive up world oil prices, Indonesia will be stuck with fewer dollars per barrel.
Indonesia produced about 1.39 million barrels a day last year, according to Leo Drollas, chief economist at the Center for Global Energy Studies in London. After consuming about 981,000 barrels daily, the country had more than one-third of the oil to sell on the open market, he said.
But oil prices have fallen $4 a barrel since OPEC decided to boost output in November. That means for every 400,000 barrels Indonesia exports each day, it is getting $1.6 million less than it would have received late last year.
And those lost earnings are especially painful since each dollar Indonesia receives for oil is worth much more than it used to be when converted into rupiahs. Indonesia's currency has plummeted about 80 percent against the dollar since last summer.
Unlike some of the big Persian Gulf oil producers with small populations and more manageable needs, Indonesia is the world's fourth most-populous country with 202 million people.
The economic collapse will no doubt cut into domestic oil consumption, which will give Indonesia more oil to sell. But that will not be enough to make a big difference in the overall gloomy picture.
"They'll free a few barrels for export, but the decline in price will overwhelm that," Drollas said in a telephone interview.
According to the latest IMF statistics, oil exports accounted for $7.2 billion of Indonesia's exports in 1996, just 14.5 percent of the $49.8 billion in goods sold by Indonesia, he said.
"It's not as vitally important for them as it is for Saudi Arabia and the others" in OPEC, Drollas said.
Still, Indonesia is seeking to maximize the profits it makes from the oil sector, and it has started at home, saying it will abolish subsidies that consumers have enjoyed on oil products.
Geoff Spencer, Jakarta -- Spooked by Indonesia's uncertain political future and worried about a mountain of debt, panicky traders dumped the rupiah Thursday, pushing the battered economy into a new phase of desperation.
The currency plunged to an astonishing record low of 16,500 rupiahs against the U.S. dollar -- a drop of 85 percent compared with its value of seven months ago when Asia's financial crisis first erupted.
The rush to sell rupiahs started as soon as trading began in Jakarta.
"It was like a bomb," said Chia Woon Khien, an analyst with SE Banken in Singapore.
A big currency fall two weeks ago resulted in a wave of panic- buying in supermarkets and stores.
There was no sign of that Thursday. Even so, commercial banks reported long lines of customers withdrawing rupiah funds and exchanging currencies.
"I just don't believe in the rupiah anymore," said one man who, like hundreds of others, opened a U.S. dollar bank account to protect his savings.
Suharto made no public comment about the latest currency crash.
In contrast to anxious scenes in Jakarta's currency dealing rooms throughout the day, the 76-year-old leader spent a jovial evening, entertained by traditional music and dance at a trade bazaar held to promote a new business venture by one of his grandsons.
The rupiah recovered to around 12,000 to the dollar later in the day, but only after Indonesia's central bank reportedly intervened by selling dollars.
It was the rupiah's third all-time low in as many days and far below its close of 11,550 on Wednesday.
The rupiah's fall dragged down other Asian currencies and was blamed for 4.8 percent drop on the Jakarta Stock Exchange's main index.
Dealers said they were worried about a lack of government action to tackle an estimated $65 billion foreign currency debt owed by hundreds of companies facing bankruptcy. They're also concerned about who might one day succeed Suharto. Suharto decided Tuesday to stand for a seventh consecutive five-year term. A 1,000-member assembly dominated by his supporters will hold a March presidential election that he is almost certain to win.
Nevertheless, dealers fear the future following reports that Suharto's old friend Bacharuddin Jusuf Habibie, 61, might be elected vice president.
Habibie, the controversial research and technology minister, favors costly national projects that have been criticized as extravagant.
Because of Suharto's age and concerns about his health, some analysts believe the next vice president might one day become the leader of the world's fourth-most populous nation.
Also Thursday, a newspaper reported an Indonesian court sentenced a student to seven months in jail after convicting him of defaming Suharto.
Joni Fadli, 21, a university student from Bandarlampung on southern Sumatra island, was found guilty of handing out anti- Suharto leaflets in Jakarta during parliamentary elections in May.
He was sentenced in central Jakarta's district court, the daily Kompas newspaper reported. On Tuesday, two other young men who handed out the same leaflets were sentenced to one year in prison by another court.
The leaflets urged Suharto's family to publicly reveal their assets and business interests and demanded that the government stamp out corruption.
Jakarta -- More than 100,000 workers in Central Java and East Kalimantan have joined the rising number of jobless in the country.
The Indonesian Observer reported on Tuesday that at least 100,000 construction workers in Central Java had lost their jobs as the prolonged currency turmoil brought construction projects to an abrupt halt.
Meanwhile, thousands employed in plywood factories were threatened by mass layoffs in East Kalimantan as firms struggled to continue with exports, Antara reported.
Construction projects in Central Java stood half-finished, brought to a halt as companies found themselves unable to secure funds to continue building.
The newspaper quoted the chairman of Central Java's Indonesian Construction Companies Association (Gapensi), Mr Soendoro, as saying many construction companies had been forced to lay off workers.
He said: "Actually we feel sorry knowing they have no jobs, but what can we do? The monetary crisis has hampered us and we have been forced into postponing many of our projects."
Many Gapensi members -- Central Java has 3,649 -- have cancelled or postponed projects. Prices of imported raw materials, such as iron ore, have increased sharply following the fall in the value of the rupiah.
Louise Willliams, Jakarta -- Indonesia is facing the threat of hyperinflation after the rupiah plunged for a third day amid warnings of more price increases and rising social tension.
A senior Indonesian economist, Ms Marie Pangestu, said the currency's collapse was one of the most dramatic of any post-war economy.
The rupiah today plunged to 16,000 against the US dollar, down from about 10,000 yesterday, meaning its value has fallen more than 80 per cent since mid-1997.
"We have to address what is causing the rupiah to behave in this way," Ms Pangestu said. "We have a very comprehensive IMF package so we must conclude that the market does not believe in the full implementation of the package and is very nervous about the (political) leadership."
An internal document prepared by a major American investment bank, which was circulating in the financial community, said: "The rupiah is now a gaping black hole, there is no alternative other than the probably violent overthrow of the Government."
Last week the International Monetary Fund arranged a second bailout package, which delivered significant economic reform, including curbs on the business ambitions of President Suharto's family.
But it was unable to restore confidence in the economy, which suggests that investors believe the only option left for economic salvation is political reform, including the departure of Mr Suharto.
About 100 protesters waving anti-Suharto banners marched on the parliament this morning and a group of government-employed researchers called for him to step down.
Foreign companies are discussing the crisis with expatriate workers, against the backdrop of social tension and resentment against foreigners paid in valuable US dollars.
The rupiah's latest fall began after Mr Suharto confirmed he would stand for a seventh five-year term and fuelled rumors that his friend, the Technology Minister, Dr Jusuf Habibe, would become vice-president. Dr Habibe is unpopular with the armed forces and is not considered a good economic manager. Mr Bruce Rolph, head of equities at Bahana Securities, said of the rupiah: "At around 15,000 to the dollar, many commentators are concerned about the potential for this slide to tip over into a hyperinflationary period, which would clearly have significant implications for the economy and society."
He said the currency could still buy essential food supplies. But the level of confusion in business means some companies may choose to shut down rather than deal with rapidly rising import costs.
There were no reports of panic buying in major cities today - after the rush on shops two weeks ago.
But Ms Pangestu forecast further turmoil. "You will see a variety of responses. You may see another round of panic buying. Small shopkeepers don't know how to set prices. There might be hoarding or very high prices. The likely social impact is increased social tension."
Hamish Mcdonald -- He is short, speaks shrilly and gesticulates wildly, has a decidedly Teutonic manner from his German education, has the ear of his president, and wants to build aircraft, rockets, ships and nuclear power plants. He is also the man who bought the East German Navy.
Not surprisingly, he has long been known as the "Dr Strangelove" of Indonesian politics, after the crazed German rocket scientist of Stanley Kubrick's eponymous film.
And his penchant for big-buck, high-technology projects has been exactly the kind of tendency the International Monetary Fund has been trying to weed out of Indonesian economic policy-making as the price of its $US38 billion ($57.6 billion) bailout package.
So when President Soeharto, 76, dropped heavy hints this week that he would make Dr B.J. Habibie his vice-president - and, on an actuarial basis, his evermore likely successor -when he runs for a seventh five-year term in March, it was taken as a slap in the face for the IMF and like-minded economic "technocrats" in his own Government.
Yesterday, the prospect of Dr Habibie, 61, the Research and Technology Minister, becoming Mr Soeharto's heir-apparent pushed the already sick rupiah down even further, from Tuesday's 10,500 to as low as 12,000 to the US dollar, about 20 per cent of what it was worth last July when the Asian crisis started.
As one senior Australian National University specialist put it, this is the kind of currency death-dive more usually seen in Burma, Vietnam and "tinpot African economies".
There are some other factors involved - the unresolved question of who repays Indonesia's $US65 billion private-sector foreign debt, the thinness of the market - but clearly Burhanuddin Jusuf Habibie is a big negative for investors. Take some of yesterday's comments:
If Dr Habibie is appointed vice-president "you can turn out the lights. You won't want to see what's going on." - Eugene Galbraith, Hong Kong-based global research director for the Dutch-owned stockbrokers ABN Amro Hoare Govett.
"[Mr Habibie] is an excellent person in all sorts of ways. He has done splendid things for Indonesia, but simply is regarded as a bit idiosyncratic and a bit old-fashioned in his commitment to economic projects of dubious economic credibility." - the former Australian foreign minister and deputy Opposition leader Mr Gareth Evans.
Whomever Mr Soeharto chooses as his running mate will be important in whether investors regain confidence in Indonesia's economy as it "could say a lot about the direction Indonesia will follow". - the IMF first deputy managing director, Mr Stanley Fischer.
So who is Dr Habibie, why has Mr Soeharto apparently chosen him, and what have so many respected economists and others got against him?
The story starts in Makassar in 1950. Colonel Soeharto, a young hotshot in the new Indonesian republic's army, is sent to quell a local rebellion. He misses li nasi gudeg, a popular dish, so takes to dropping by the Habibies, where Mrs Habibie, a Javanese, cooks this and other Javanese favourites.
Later, after Mr Habibie, Jusuf's father, dies, Soeharto helps put the youngster through school. The boy is bright and makes it to university in Germany, where he studies aeronautical engineering and joins the aircraft maker Messerschmitt-Bolkow- Blohm GmbH. On returning home in 1974, Dr Habibie joins the president's staff as a scientific adviser, and from 1978 as Research and Technology Minister.
Since then he has promoted, and won billions of dollars in State funding for, high- tech import-substitution projects which go against the ideas of Mr Soeharto's "technocrat" economic ministers, the so-called Berkeley Mafia, and the IMF that Indonesia's best strategy lies in exploiting its low-cost labour and materials.
Dr Habibie argues that Indonesia must export a lot of running shoes to earn as much as exporting one ship or aircraft.
Starting with Messerschmitt helicopters assembled in a hangar at Bandung, he expanded it into an operation employing 20,000, making small and medium-sized turboprops initially designed with the Spanish firm Casa, behind a protective tariff wall.
The problem is, it is not clear whether Dr Habibie has sold a single aircraft or ship to anyone for cash, except at exorbitant prices to captive clients like Indonesia's own armed forces and airlines or as part of official barter deals.
The cost to the transport sector and the national treasury was enormous. As one former finance minister, Dr Radius Prawiro, was heard to remark: "First Habibie comes to the government for the money to make the airplanes. Then he comes back for us to buy them."
The armed forces took another slug when Dr Habibie snapped up the entire navy of the former East Germany for what seemed a bargain $US12 million. Some of the 39 ships nearly foundered on their voyage out.
Then it was discovered it would take $US1.2 billion out of the defence budget to fix them. Dr Habibie said it was a good way to start an indigenous warship industry. Until a year or so ago he wanted to build a string of nuclear plants around densely populated, highly volcanic Java.
That the president is now floating Dr Habibie's candidacy, even before the lastest IMF medicine shows signs of working, suggests either that he has lost his grip, or that he still hopes to backtrack on his commitments once the currency pressure is off.
Analysts and business executives suggest Mr Soeharto may favour him as a subtle protest against the new IMF program. One analyst said Mr Soeharto might effectively be saying to the IMF that after having to accept the program the technocrats wanted, he would deliberately take a foe of the technocrats as vice- president.
By Darren Mcdermott and Jay Solomon
Indonesia's failure to present a plan for repaying a crushing load of corporate debt is helping sink the rupiah to new depths.
The currency slumped to a record low of 11,900 rupiah to the dollar Wednesday before strengthening slightly in late Asian trading to around 11,575 rupiah, down 15% from Tuesday. Battered by growing reports that international hedge-fund managers are considering taking bets against the Indonesian currency after sitting out in recent weeks, the rupiah dragged neighboring Southeast Asian currencies down with it.
Viewing news coverage of South Korean financial officials visiting the New York headquarters of Korea's creditors, international bankers are turning from flabbergasted to infuriated at their lack of access to the decision-making process in Jakarta. Talk of a government-imposed debt moratorium is quiet for now but could resurface, executives fear.
"The biggest problem is the private debt and there is no one in Indonesia standing up and doing anything about it," says the chief executive for Asia at a major European bank. "There is no one in the government who is in a position to work this out."
Recent Recruits
In fact, President Suharto has recruited several individuals, including a former government official and a private businessman, to take charge of working out a solution to the debt crisis.
But a meeting two weeks ago in Singapore between creditors and two Indonesian representatives -- former longtime minister Radius Prawiro and Salim Group President Anthony Salim -- failed to sketch out even the framework under which talks would progress. Since then, there has been little contact, say bankers involved with the negotiations.
Senior government officials said Wednesday they are working on the problem, but they acknowledged that it's a thorny one.
At a news conference, Finance Minister Mar'ie Muhammad said Korea's debt problem is "more manageable" and simpler administratively. Widjojo Nitisastro, Mr. Suharto's top economic adviser, said the government is working on the "important challenge" posed by foreign debt. "We are aware of this problem and working on it," Dr. Widjojo said, adding that the government has to be "very careful, very systematic, but we will come to effective answers."
A bailout of the private sector, however, which is being advised by business interests in Jakarta, isn't an option, Mr. Mar'ie added.
Some observers find it difficult to muster much pity for bankers who, in search of high yields not available elsewhere, pumped more money into Indonesia than companies there could spend productively. But for now, as long as bankers refuse to extend the maturities on $65 billion in debt estimated to be due this year, the rupiah will continue to fall.
Lack of 'Clarity'
"The market doesn't like the fact that there are thousands of borrowers and no clarity about the resolution of their debts," says Don Hanna, an economist at Goldman Sachs (Asia) LLC in Hong Kong.
The details of what has been known generally for weeks -- that hundreds of Indonesian firms can't meet payments on their foreign-currency debt -- now are starting to emerge as more companies run out of cash. One of the latest is paper maker PT Surabaya Agung Industri Pulp & Kertas, which has entered a "standstill" agreement with creditors pending a debt restructuring, according to Sindu, a director at the company. Surabaya Agung, which mounted an aggressive expansion campaign in a vain attempt to catch up with Indonesia's pulp and paper giants, owes more than $250 million to banks including Sumitomo Bank, Bank of Tokyo-Mitsubishi and HSBC Investment Bank, according to people familiar with the arrangements.
While other such firms have simply stopped paying debts for now, they know someday they will have to resume. Each time the rupiah strengthens to 8,000 rupiah or 9,000 rupiah per dollar, there's "massive demand" for dollars from such companies, pushing the rupiah back down, explains Neil Saker, economist at SocGen Crosby in Singapore. "Until the corporate sector's future is assured, everything else is secondary" in addressing Indonesia's economic problems, Mr. Saker says.
Unclear Path
Just how that will happen is no clearer now than before the parade of officials from the U.S. and the International Monetary Fund marched through Jakarta last week. The revised agreement that Mr. Suharto and IMF Managing Director Michel Camdessus signed has won scattered applause, and has cheered the stock market, where the composite index rose 4%, or 17.96 points, to 466 on Wednesday. But "the currency market is telling you nothing is happening," to clear away the debt burden, says Rajeev Malik, senior economist at Jardine Fleming International Securities in Singapore. One possible solution already presented to the Indonesian government comes from Dutch giant ABN Amro Bank NV, which suggests that the government set up a "debt clearing" service, according to a Jakarta-based executive at the bank. The plan would install a neutral party, perhaps an accounting firm, to manage negotiations and handle payments between some 100 international lenders and thousands of borrowers.
Other bankers and economists suggest a Latin America-style Brady Bond program, in which the government would take the private- sector debt onto its books and reschedule it at longer maturities with lenders, issuing bonds in the process to finance the transaction. But who would agree to guarantee such bonds remains unclear. The U.S. guarantee carried by the Latin American Brady Bonds was key to their success.
Lack of Government Action
And such efforts would require concerted government action of a sort that some bankers feel is currently beyond the capacity of the Suharto government. The government, never open about much of its business in the best of times, is just six weeks away from the presidential selection. While Mr. Suharto's re-election to a seventh five-year term is all but assured, many observers believe that several key officials -- including the central-bank governor and finance minister -- won't be returning to office.
In addition, Mr. Suharto's advancing years -- he's 76 -- raise serious questions about who will run Indonesia after him. Concern has been exacerbated this week by speculation that controversial Research and Technology Minister B.J. Habibie is Mr. Suharto's choice for vice president. Such political worries, say some bankers and economists, is as much a barrier to the rupiah's recovery as anything else.
Bankers who met with U.S. Deputy Treasury Secretary Lawrence Summers in Singapore told him that the rupiah had almost no chance of appreciating back to 5,000 to the dollar, no matter how market-friendly the terms of the IMF package then still being negotiated, according to executives who attended the meeting.
[Richard Borsuk and Raphael Pura in Jakarta and Erik Guyot in Hong Kong contributed to this article.]
Jakarta -- Some twenty prominent government critics, including Megawati Soekarnoputri, Amien Rais, Ali Sadikin and Supeni, urged the government to make urgent economic and political reforms at a meeting here yesterday.
The group, calling itself the Group of Oct. 28, issued a statement saying fundamental reforms were the only answer to the ongoing monetary crisis which has gripped the country since July last year.
"What we (the nation) need now is a commitment to seriously implement the principles contained in the 1945 Constitution and the state ideology Pancasila," Supeni, at whose residence the meeting was held, said.
"Those principles have been neglected by the ruling government," she said.
Supeni is a former leader of the now defunct Indonesian Nationalist Party which was one of four organizations merged to form the Indonesian Democratic Party (PDI) in 1973.
She cited the recruitment of members to the People's Consultative Assembly (MPR) as one example of the neglect of Pancasila principles.
"MPR members were appointed, not elected by the people. "
Yesterday's gathering brought together a mix of public figures and critics of the government.
Amien Rais is chairman of the 28-million Muhammadiyah Moslem organization and Megawati Soekarnoputri was ousted as leader of the PDI in 1996.
Also present were prominent members of the Petisi 50 oppositional group, Ali Sadikin, Chris Siner Key Timu and Usep Ranawijaya.
Conspicuously absent was Abdurrahman Wahid, chaimman of the 30- million strong Nahdlatul Ulama (NU) Moslem organization, who had been invited.
"I will go to such meetings only if there is a common platform for all members of the group," he said yesterday afternoon after installing the new officials of the Indonesian Islamic Students Movement in a ceremony at the state Pawnshop Service office. He said that an important meeting to form a political coalition needed a lot of planning and a common understanding of the movement.
He said it was important to involve government officials in such a movement.
Secretary-general of the National Commission on Human Rights Baharuddin Lopa turned up at the meeting but left before it started.
"I have a lot of things to do al the office," he said.
After addressing the medic yesterday, the group held a closed door discussion.
Supeni said the group, which took its name from the date of it< first meeting last year, was deeply concerned about the economic crisis and stagnant democratization in the country.
"However, we are positive that the crisis will be settled with the government's seriousness about political and economic reforms."
Supeni said the country was now facing a serious and critical situation and that broad public cooperation was needed to solve the problems.
"We would never have voiced such a call if the country, in this case the government, had truly implemented the principles stipulated in the five-principle Pancasila and the 1945 Constitution," she said.
Amien Rais also urged officials to be more open minded during times of crisis and willing to get together with non-government and public figures to discuss possible solutions.
"They (government officials) should remember that there are non- government Indonesians, who are clever and have the same 24 carat love and commitment to the country as they have, " he said.
"I hope that the 1,000 MPR members will also listen to the people's aspirations and side with their political interests."
The group also hailed and gave their support to calls for Amien Rais and Megawati to be nominated as presidential candidates.
John McBeth, Jakarta -- Supremely accomplished in the art of political survival, President Suharto had little trouble stifling opposition at home as long as the economy -- flawed as it may have been by nepotism and corruption -- stayed on track. But he cannot control market forces. With Indonesia now drifting towards a crippling, years-long recession, his political future is in doubt. As the rupiah crumbles and the Indonesian corporate landscape lies in ruins, the end of one of the world's most enduring regimes is in sight.
"It's the beginning of the end," says a well-known Indonesian political scientist, who did not wish to be named. "The president doesn't know what to do, and his ministers don't know what to do either."
Yet even as world leaders line up with advice, urging Suharto to adhere to the conditions of a $33 billion rescue from the International Monetary Fund, outside investors and analysts say that nothing short of a leadership change will bring Indonesia out of its crisis. "Politics is on everyone's tongue," says Credit Lyonnais chief economist Jim Walker. "The succession has been a problem all along, but when investors ask questions about it now, they're really listening to the answer."
Perhaps the strongest suggestion that change is really under way -- even if it won't happen overnight -- is that many prominent Indonesians are also asking the same question. Opposition leader Megawati, daughter of the country's first president, Sukarno, is one of those who have openly called for the 76-year-old Suharto to step down. "I want to remind people that while Bung Karno was still president, it was widely believed he was indispensable and irreplaceable," she told cheering supporters at her south-Jakarta residence. "But history has shown that was not the case."
Similar calls have come from more conservative quarters, such as former Mines and Energy Minister Mohammad Sadli and retired Lt.- Gen. Bambang Triantoro, head of an organization which groups former military, political and religious leaders. Former presidential adviser Sumitro Djojohadikusumo, father of Special Forces chief and Suharto son-in-law Maj.-Gen. Prabowo Subianto, called the crisis an "institutional disease." He added: "If we were just talking about the economy, then an aspirin is enough. An institutional disease needs antibiotics."
Yet in the absence of any political force that could galvanize popular sentiment, analysts believe that if and when Suharto does go, it will be on his own terms. Given the fact that key figures such as the army commander, Gen. Wiranto, and the chief of the Army Strategic Reserve, Lt.-Gen. Sugiono, are personally loyal to the president, it would take another sudden deterioration in Suharto's health or a wild slide into bloody riots and disorder to persuade the military to intervene in a more decisive manner.
Still, there are signs that recent events have advanced the succession agenda. One retired general with close links to the power centre claims it is "confirmed information" that the president and his family have decided it's now time for him to step down. But the same source insists there is "strong pressure" from the armed forces for Suharto to stay put until there is an "obvious candidate" to step into his shoes.
"We don't expect President Suharto to simply withdraw from the presidency because -- due to our vague mechanism for leadership selection -- we haven't got a strong candidate to replace him," the retired general points out. "If Suharto retreated from the candidacy, what we might see is chaos, because there'd be a violent political struggle. It wouldn't be as bad as it was in the mid-1960s, but it would be bad."
For this reason, the general expects a scenario in which Suharto is re-elected by the People's Consultative Assembly on March 10 but relinquishes his post in mid-term. That could possibly be as early as the ruling Golkar Party congress next August, when a new chairman has to be elected. (Suharto's eldest daughter, Siti Hardijanti Rukmana, or Tutut, is a prime candidate.) This would also allow time for the incoming vice-president to develop confidence in his role as Suharto's apparent successor.
But to many Indonesians, all this sounds too much like ancient history, with Suharto maintaining a stoic silence and Golkar nominating him for yet another term on the grounds there is no one else for the job. Haemorrhaging under mountains of U.S.- dollar debt and pressed to repatriate overseas funds, even the president's own corporate associates are growing impatient.
"The problem is he doesn't seem to listen to anyone any more," one businessman complained. "A feeling of helplessness prevails. You can't do anything any more. Some mid-level businessmen with a few million dollars have left the country because they think social unrest is unavoidable."
The first signs of that unrest came on January 8, when the dollar breached the 10,000-rupiah mark, triggering panic buying and a wave of coup and riot rumours. Officials fear that with the number of new unemployed already rising above 6 million, the real trouble could come at the end of the Muslim holy month in late January. That's when some firms will find themselves unable to pay bonuses, as required by law, and militant industrial workers face the prospect of wholesale lay-offs.
Worried about the ramifications of a political earthquake in Indonesia, world leaders have put pressure on Suharto to adhere to the IMF's austerity programme. U.S. President Bill Clinton spent half an hour on the phone with Suharto. Later, Singaporean Prime Minister Goh Chok Tong paid a one-day visit to Jakarta to talk to Asia's elder statesman.
Sources close to Indonesia's negotiations with the IMF say that while Jakarta has finally met seven of the conditions agreed on last October, differences remain over management of the money supply. The sources say the government violated an understanding on that point by injecting liquidity into the system -- underlining a disagreement between the IMF and the Indonesian leadership over whether to allow more companies and banks to go to the wall.
As much as 80% of corporate Indonesia is technically bankrupt, if judged under international accounting principles, and it takes barely $1 million in foreign-currency trading to give the rupiah a 5% shunt that adds to companies' debt burdens. Yet UBS senior economist Christa Marti points out there's still no strategy in place to deal with the most troubling aspect of the crisis: the estimated $65 billion in private-sector debt. "I think it can only be dealt with by sky-high interest rates," she says. "It's become critical, and I simply don't see a way out apart from nationalizing some of the debt."
Asked whether he thinks Suharto is now ready to bite the bullet and implement the IMF programme, a senior Western diplomat says: "He's capable of doing that." The problem is, the economy may have spun beyond his reach. Indeed, the crisis has gone beyond delaying megaprojects or dismantling monopolies. Adds an Indonesian participant involved in the recent IMF negotiations: "I feel sure the message has finally got through, but more reforms are not the answer. It's too late in the day."
Critics blame the now-desperate situation on a two-month period at the end of last year when the government did nothing to respond to the crisis. Worse, the leadership was seen to be thumbing its nose at the World Bank and IMF by approving the hugely controversial Tanjung Jati C power station, in which Tutut has an interest.
The final straw was the 1997-98 budget, based on what analysts describe as "laughable" assumptions. These are an exchange rate of 4,000 rupiah to the dollar (the currency was already at 7,500 when the budget was issued), a 4% growth rate (analysts predict a 3%-5% contraction) and a 9% inflation rate (Pacific Asset Management strategist David Carbon, a veteran of the Mexican crisis, says inflation could average 55% over the next two years). As the rupiah went into a free fall, panicky housewives and office workers stormed supermarkets and discount stores, convinced price hikes and street violence were on the way. Jonathan Harris, head of research for HSBC Securities, says he watched two businessmen in suits and ties trading punches over a container of cooking oil in an upmarket bulk-purchase store.
"We are in a dark period because anything can happen," says Akmal, a small-scale businessman. "We've lost confidence in the government. They have kept assuring us the currency crisis is under control and that food stocks will be enough, but why have prices gone up and why have stocks of rice, cooking oil and sugar disappeared?" Notes Aling, an accountant: "If people trusted the government they wouldn't be panicking like this."
Until the rupiah hit 10,000 to the dollar, a strange mood of self-denial had permeated Indonesian society, with the government insulating much of populous rural Java from the currency's wild ride by holding down rice and transport costs. Suharto's main concern may be to ward off social unrest, at least through the critical Muslim holiday period and the March election. But it will be increasingly tricky to do so when the IMF is demanding actions to match what up to now have been empty words.
The officials close to the negotiations say the IMF's demands for a 1% budget surplus can still be achieved by removing petroleum subsidies. The 1997-98 allocations currently allow for subsidies worth 10 trillion rupiah, but that is only a third of what will be required for the year, and Suharto made it clear in his budget speech that their removal is "unavoidable." Most analysts feel that will happen in April, with all the attendant inflationary pressures.
Even as IMF chief Michel Camdessus is laying down the law in terms of bank restructuring and other reforms, Western diplomats warn that the political reality of a nationalistic backlash against foreign intervention -- and resistance from vested interests -- calls for extreme delicacy in dealing with Suharto.
"The system operates in terms of networks of influence, and it's crazy to ask people to commit suicide," says one diplomat. "You just have to whittle away at it. Suharto is going to pull in benefits and give up monopolies here and there." Suharto's children, whose business interests have so far been protected, "have to be ready to take hits," says the diplomat.
An autocratic leader accustomed to getting his own way, Suharto must now be surveying the wreckage of his considerable achievements: Annual per-capita income now down from $1,200 to $300; stockmarket capitalization down from $118 billion to $17 billion; only 22 of Indonesia's 286 publicly listed companies considered solvent; and only four firms remaining with market capitalization of $500 million or more, out of 49 before the crisis.
"If we have to start from the beginning again, then so be it," sighed an executive in Jakarta's central business district as Indonesians awaited the outcome of this week's tough negotiations with the IMF. "But this time I hope we build our economy on better foundations."
Jay Solomon and Kate Linebaugh, Tangerang -- On a lazy Saturday afternoon in this industrialized zone 40 kilometers west of Jakarta, a group of workers lounge near the gates of the Korean- owned shoe factory where they work, bemoaning their worsening plight. During the past six months, they note, 75% of their colleagues have been laid off, while living expenses have jumped.
"The worsening situation could lead people to run amok," says Agus, one of the workers. "Rioting is sometimes the only means to make sure there aren't price increases. Sometimes it's the only way to be noticed."
In fact, social unrest is already mounting as the diving rupiah translates to higher prices. Tension remained high in the East Java town of Jember over the weekend as Indonesian security personnel patrolled streets after townspeople attacked stores whose owners, they charged, were selling staple products -- such as rice -- at inflated prices. And though East Java's violence has subsided, fear remains high in Indonesia that this type of unrest could soon spread.
Revised Agreement
Much hope had been placed on the signing of a revised agreement last week between Indonesian President Suharto and the International Monetary Fund as a means for stabilizing the rupiah and diminishing social pressure. But two trading days after the package's announcement, the rupiah has actually weakened on concerns it doesn't address political concerns or devise ways Indonesians can repay some $133 billion in foreign debt.
The rupiah closed Friday in Asia at 8,450 rupiah to the U.S. dollar, 14% below its value before the revised IMF terms were unveiled. Further slides would bode ill for stability in the world's fourth-most-populous nation. Few areas in Indonesia could prove a more-likely lightning rod than the Tangerang "factory belt." For years this industrialized zone has been an engine for Indonesia's 7% annual economic growth and employed hundreds of thousands of migrant laborers. Korean, Taiwanese, Japanese and American companies sought out the area's cheap labor to spin out textiles, shoes, zippers and scores of other low-end products.
But in Tangerang now, tens of thousands have been laid off. Those who haven't grumble that their salaries can't keep up with living expenses. Mr. Agus, who like many Indonesians goes by just one name, says that the cost of 50 kilograms of rice has jumped 36% since the currency crisis hit Indonesia in August. Electricity prices have tripled; milk is up 50%; and cooking oil 40%.
More Unrest
The next few months promise several events that could trigger more unrest. Prices are likely to climb further when the government stops subsidizing prices of soybeans, sugar and flour on Feb. 1 and scales back subsidies on fuel and electricity on April 1, as agreed last week with the IMF.
Mr. Agus and his colleagues say that wage increases and higher bonuses -- which are due to be paid next week -- could help ease the blow of the economic crisis. But they hold out few hopes. Signals from management suggest that this year's bonus could actually shrink, Mr. Agus notes. Rather than equaling more than triple their monthly salary as it did last year, he says, the bonus is likely to contract to just over double.
And few observers expect cash-strapped companies to be able to raise wages on April 1, as the government requires. In fact, Finance Minister Mar'ie Muhammad has already said that civil servants won't be getting pay raises.
"Things were bad in 1974 and 1975, but this is the worst I can remember," said an older member of Mr. Agus's group. "It's like we're heading back to the Dutch times when we had to learn to live on just one meal a day."
Severance Pay
Across town at the tire factories of PT Gajah Tunggal, an employee named Nursalim doesn't give quite as dire a picture as Mr. Agus and his friends. A soft-spoken man in his late 20s, Mr. Nursalim gives Gajah Tunggal credit for sticking by the guidelines agreed with the union. In particular, those who have been fired received severance pay, while the company is trying to maintain its present labor force by staggering workers through shorter shifts.
Despite his optimism, Mr. Nursalim says that pressure is building among his fellow workers, however, as their 300,000-rupiah-a- month ($37.50) salaries have lost much of their value. Unlike his married friends who sit nearby, Mr. Nursalim notes he can withstand the worsening living situation. Many, he fears, can't.
"It [unrest] might just come about spontaneously, or maybe someone will organize it," Mr. Nursalim says. "But people are complaining more and more."
The government, heeding the growing tension, has launched a drive to create public- works jobs and soften price increases. IMF Managing Director Michel Camdessus also announced last week that tariffs on imported food would be cut to help the poor in a country hit by drought last year. He also said the Asian Development Bank was preparing to provide microfinancing to small-scale businesses.
City Projects
These plans are already being thrown into action, says Harry Mulya Zein, the spokesman for Tangerang Mayor Djakaria Machmud. He says the city is seeking to put people to work with projects like sewer cleaning, street painting, gardening and village improvement.
Mr. Zein also says that efforts have taken on a religious tone. Muslim clerics are preaching calm to Tangerang's populace in daily prayers, he says, and Mayor Djakaria is making rounds from mosque to mosque to impart this message every morning.
So far, military officers in the area say their operations focus on monitoring food prices and mediating between workers and employers. But one officer notes that military action can't be ruled out. "We have been placed on alert in anticipation of possible unrest," he says.
Eliminating Monopolies
Whether this unrest explodes or not depends on whether Mr. Suharto's government persuades the people that the rich are sacrificing as much as the poor, says Marzuki Darusman, a member of Indonesia's National Human Rights Commission. The president's announcement last week that he is eliminating the monopolies enjoyed by many of his family members and friends may go some way to achieving this aim, Jakarta analysts say. Most surprising to people was that the 76-year-old leader would cut perks for what were once seen as "sacred cows," particularly his son Hutomo Mandala Putra's national-car program and his friend Mohamad "Bob" Hasan's plywood cartel.
But by declaring his intention to personally take charge of implementing the reform plans, Mr. Suharto also signaled that he intends to remain in the driver's seat. That comes as Indonesia's workers start to echo many of the complaints issued by foreign- exchange dealers and investors during the past week: Economic reform isn't enough. Many workers, as in the past, blame the dominance of a few large conglomerates for choking off the economy. But some people are now blaming the government for their troubles.
"The U.S. government should put pressure on Suharto now rather than helping him," said one of Mr. Agus's colleagues. "They should realize that most Indonesians no longer like the government."
Indonesia's best-known labor leader, Muchtar Pakpahan, has long been a vocal opponent of President Suharto. Detained since mid- 1996, the 44-year-old head of the outlawed Indonesian Prosperity Trade Union (known as SBSI), is currently on trial for the crime of insulting President Suharto. If convicted, he faces the death penalty. Singapore Bureau Manager Michael Shari met him for an unprecedented interview on Jan. 8. in his Jakarta hospital room, where he is undergoing respiratory tests.
Q: Are you concerned about the possibility of violence?
A: People's anger at Suharto's family will rise, and they might try to kill him. It is very possible, but I don't want it to happen. If there is any unrest here, we will kill each other, and the ethnic Chinese will be the first target.
Q: What do you think would be the trigger for unrest?
A: A company fires laborers and gives them compensation so they go home. But after that, what happens? There is no work, and this is the problem. And if Suharto continues as president, it can trigger the worst social unrest. My goal is to keep Suharto from ruling any longer. I would nominate Tutut [Siti Hardi-yanti Rukmana, Suharto's eldest daughter]. As long as Suharto is alive, she can use her charisma to influence the military. I do not like her, but that is the solution.
Q: What do you think would be the best solution for Indonesia's problems?
A: Stop the businesses of Suharto's sons and daughters. And I would appeal to all Indonesians who are investing their money abroad to bring back their money to help the situation here. According to the experts, $80 billion has been transferred abroad. And [we must] support the ministers who are working hard such as [Finance Minister] Mar'ie Muhammad.
Q: Is this the right time to organize strikes or protests?
A: Possibly. But it depends on the situation and what the reason is.
Q: Could the disintegration of Indonesia's economy lead to social disintegration?
A: Very possibly. Jealousy is increasing now, jealousy between ethnic groups, between religious groups, between [Indonesia's 17,000] islands, and between regions. 60% of the money is in Jakarta; only 40% is in the other 26 provinces.
Q: What can your organization do to help?
A: Prevent the killing of whatever ethnic group, like the Chinese. We continue training and educating our members [in nonviolence].
Q: Can you continue to organize the labor movement from the hospital or from prison?
A: Yes. I am the leader of the SBSI. Even though I am in jail or here, the program and functions are going on.
Q: Is there pressure now from the army or police?
A: Yes. Whenever we organize a meeting, the military is there and stops us. Every month, my friends are detained, but only for one or two nights. Some of them are beaten. The military confiscated all [our] documents in September, 1997.
Q: Do you think you'll be convicted?
A: I can't predict it, even though I am an expert in the law. It's not a legal case but a power case. There is no rule of law [in Indonesia], but rather a power game.
Q: Are you worried?
A: No, because the truth is on my side.
Seth Mydans, Jakarta -- The International Monetary Fund got virtually everything it wanted from President Suharto. Yet on Friday, one day after he reluctantly agreed to a major restructuring of Indonesia's economy, its weakened currency resumed sliding.
The international marketplace, which has become the de facto arbiter of Indonesia's economic policies, still seemed dissatisfied. The risks and uncertainties, several financial analysts said, remained too great.
The currency ended the day at 8,450 rupiah to the dollar -- 6.5 percent lower than when the economic package was announced Thursday. Earlier Friday it dipped as low as 9,000 to the dollar, close to the level of 10,000 that had set off a wave of panic buying last week.
That panic has eased, but confidence in the long-term future does not yet appear restored.
There is still no solution to the crippling private debt dragging down its economy. There are still no signals about its tenuous and potentially chaotic political future.
"I'm sure the IMF and the World Bank stood up from the table rubbing their hands with glee: This was their wish list," said Daragh Maher, an Indonesia specialist with ING Barings in Singapore. "But at the end of the day, Indonesia has a chronic foreign-debt problem, and there was nothing offered in the package that would suggest that that would be any easier to manage."
Indonesia's stock market rose by 6.9 percent Friday, but analysts said it was a poorer indicator of confidence than the currency market. It is now so thinly traded that small movements, such as apparent betting Friday on the futures of certain banks, can have a disproportionate effect.
If the rupiah's value erodes further, the country's burden of about $65 billion in dollar-denominated foreign debt would keep swelling, pushing more companies toward default and slowing the economy still more.
It's as if the formerly fast-growing nation of 200 million people, one of Southeast Asia's original "tiger economies," was sitting under "a billion pounds of weight," said Rajeev Malik, a regional economist for Jardine Fleming in Singapore. "It will certainly have a difficult time behaving like a tiger."
Worries were compounded by an impending fuel-price rise caused by Suharto's agreement to end subsidies, and by new predictions contained in the Thursday agreement of zero growth and 20 percent inflation.
Suharto received encouragement from the United States, which along with other nations had pressed him to agree to the IMF's terms.
President Clinton telephoned him a second time, and Deputy Treasury Secretary Lawrence Summers, who was in Jakarta earlier this week, said the announcement had increased Indonesia's stability.
Success in restoring the country's economic health is crucial now to Suharto's political future.
The crisis has intensified simmering dissatisfaction with his 32-year rule, and the political tension is rising in advance of his expected reanointment as president at a nominating convention in March.
Even as public demands for his resignation have increased over the past week, Suharto has made no provision for an orderly transfer of power. Even if he stays on, investors are likely to remain nervous.
At the same time, the country is bracing for social unrest as the economic slowdown, along with the newly announced austerity measures, leads to rising prices and joblessness.
Attacks on food shops that had raised prices or limited their sales were reported Friday for the second day in several towns in eastern Java.
Jenny Grant, Jakarta -- Tension over soaring prices once again spilled over into rioting yesterday in East Java.
Rioters smashed windows, burned goods and forced shopkeepers to slash prices on basic foodstuffs.
Dozens of young men riding motorbikes attacked food and textile shops, just a day after riots in three other towns on the main Indonesian island, officials said.
The Kompas newspaper said the rioters swept through the Balung district, 24 kilometres south of Jember, attacking textile, food and car spares shops.
"Right now all the shops in Jember are closed because of the attack yesterday," said Ayu, a telephone operator in Jember. She said Jember was tense and residents were afraid of further attacks on shops or homes.
Balung police said the situation was calm yesterday and had returned to normal.
During the riots, the mob destroyed four shops and forced owners to drop prices on nine main food items, which include rice, sugar, cooking oil and salted fish.
One textile shop had about 100 rolls of cloth burned by the mob. Police arrested three people.
Prices at the local Kalisat market in Balung fell after the riots, with shopkeepers afraid to sell at high prices in case shops were attacked.
Shopkeepers sold cooking oil for 2,000 rupiah (HK$2) a litre, half the price of the day before, while the price of sugar fell to 1,500 rupiah from 2,000 rupiah a kilo.
"I don't want to talk about the situation, it's too dangerous," said one goldsmith.
Hundreds of youths on motorbikes attacked shops in Jember on Wednesday, following similar attacks in nearby towns.
Food prices have jumped 100 per cent on some basic food items as inflation takes its toll. The Government was forced to upgrade its inflation target from nine per cent to 20 per cent after pressure from the International Monetary Fund.
The price rises have come during the sensitive fasting month of Ramadan when demand for food rises for feasting after sunset.
The Government aims to import two million tonnes of rice from Thailand and Vietnam after a failed harvest last year caused by an unusually long drought.
"The Government does not want to risk food shortages, that's why we are importing," said State Minister of Food Affairs Ibrahim Hasan.
He said the fasting month and Lunar New Year, which coincide this year, would put pressure on government rice stocks. He also said rice crops due this month would be late.
The military claims two million people have already lost their jobs since the financial crisis began in August.
President Suharto unveiled a tough reform package on Thursday that includes slashing a costly government fuel subsidy.
Electricity and fuel prices are expected to rise when the subsidy is lifted, which could spark widespread protests from poor Indonesians.
A timetable has not yet been announced, but analysts said the subsidy would be lifted after the presidential elections in March.
Although facing widespread opposition, Mr Suharto is expected to stand for a seventh term.
| Human rights/law |
Jakarta -- Two provincial leaders of the opposition Indonesian United Democracy Party (PUDI) were arrested when Indonesian security forces raided a branch of the small party in Malang, East Java, a report said yesterday.
Malang police and the military raided Pudi's Malang branch on Monday, arresting the chairman, Mr Mochamad Faik, the secretary, Mr Nurussulhi Nawawi, and three other members, the Jawa Pos daily said.
The daily said that the party leaders were detained for holding secret meetings involving representatives of several organisations and student activists.
The security team confiscated books and newspaper clippings, an air rifle, a machete and posters of Iran's Ayatollah Khomeini, Pudi chairman Sri Bintang Pamungkas, Indonesia's founding president Sukarno and opposition figure Megawati Sukarnoputri.
Pamungkas, who launched Pudi in 1994, is currently on trial accused of trying to undermine the authorities through his activities within the party.
The Pudi leader, a vocal MP who was ousted from his parliamentary seat in 1995 by his own party when he was with the Muslim- oriented United Development Party, is already serving a 34-month jail term for insulting the Head of State.
Jawa Pos said the Malang Pudi branch had invited several youth and student organisations to attend a meeting in the weekend.
Police were quoted by the daily as saying they suspected the gathering was to organise a demonstration but they did not elaborate.
Some 100 student activists in nearby Surabaya, the capital of East Java province, on Monday staged a protest to demand that prices of basic commodities be lowered.
Meanwhile, reports said yesterday that the jailed leader of the People's Democratic Party (PRD) had denied military accusations that his radical party was responsible for a crude bomb that exploded in an apartment in Jakarta.
"I will take the blame if they can prove the PRD's involvement," PRD leader, Mr Budiman Sujatmiko, was quoted by the Jakarta Post daily as saying. Sujatmiko, serving a 13-year sentence for subversion, said he had never met the suspect detained in connection with Sunday's explosion in a low-income apartment complex here.
"We are opposed to anarchy and terrorism. In our struggle, we have always used peaceful means, many of them in the form of mass mobilization," Sujatmiko said from the Salemba Penitentiary in Central Jakarta.
The daily quoted military officials as saying that publications about local riots and international terrorism were found in the apartment of Agus Priyono, the man being held.
| Miscellaneous |
Jakarta -- Although still in critical conditions and being monitored round the clock in intensive care, Gus Dur has begun a rapid recovery following a stroke several days ago. On Wednesday night, only one day following brain surgery, the leader of Nahdatul Ulama was already trying to get down from his hospital bed.
Gus Dur's wife told reporters that he is now in much better shape and thanked the public for its strong show of concern and sympathy for the Islamic cleric. Indeed, dozens of well-wishers have made their way to Cipto MahunKusumo Hospital in Jakarta. They ranged from humble citizens to high-ranking government officials. For instance, last night Kopassus commander Major- General Prabowo Subianto was seen outside Gus Dur's room. Other distinguished visitors included Muchtar Pakpahan, the trade union leader who is currently undergoing treatment at Cikini Hospital and is due to be tried for subversion in coming weeks. Minister for Home Affairs Yogie SM sent flowers last night.
Several Islamic figures are expected to hold prayers for Gus Dur this coming Friday at Al Ghoni Mosque in Central Jakarta.
Jakarta -- A bomb exploded in an apartment in a central Jakarta slum area Sunday night, local residents and police said Monday, while a top military official accused a left- wing party unrecognized by the government as being behind it.
Officials said police have found several bombs in the apartment but only one exploded, injuring three people, one seriously.
The three, police said, are believed to be members of the Democratic People's Party (PRD), a left-wing party unrecognized by the government. The seriously injured member was arrested but the others managed to escape.
"The incident occurred after Muslims broke their fast in the evening on the day," a resident told Kyodo News.
Indonesia's Muslims have been undergoing a monthlong fast from dawn to dust since the end of December.
Several police officials said the bomb exploded in an apartment room in Jakarta's Tanah Tinggi slum area. Police have found documents believed to belong to the PRD at the site, they said.
Army chief of staff Gen. Wiranto was quoted by Antara news agency as saying the PRD was behind the incident. He also said the PRD is the regeneration of the outlawed Indonesian Communist Party.
Last year, the government declared illegal the PRD and organizations associated with it as they had failed to name the state ideology Pancasila (five principles), and the 1945 Constitution as their political guidelines.
One month after the PRD's establishment July 22, 1996, nine of its leading members were arrested for allegedly sowing public hatred against the government.
The accusation stemmed from their involvement in a riot following the takeover of the headquarters of the Indonesian Democratic Party by the military and police.
The nine -- all in their 20s -- were recently sentenced to between 18 months and 13 years in prison for subversion, with party leader Budiman Sudjatmiko receiving the longest term.