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ASIET NetNews Number 12 - April 5-12, 1998
East TimorIndonesia says student protests infiltrated Prohibition of student politics slammed
Political/economic crisisEast Timorese bomb carrier gets 20 years
Environment/land disputesChronology of Indonesia's financial crisis Jakarta and the IMF reach for a new deal
Human rights/lawWildfires, haze threaten Southeast Asia
Arms/armed forcesMalaysia gets tough on illegal immigrants Migrants storm Malaysia embassies Lustrilanang and Mahesa back home Political activists' arrest legal: judge Student on trial for insulting government US lawmakers seek crackdown
Economy and investmentUS risking ties to Indonesian military
PoliticsIndonesia to announce new measures Indonesia currency board sidelined Risks for Jakarta in bank cleanup Soeharto Inc Crony moves from cartel to cabinet Bank closures spark cash rush How to make friends, & money, in Jakarta
MiscellaneousSuharto son offers corn to masses
Town under curfew
| Democratic struggle |
Jakarta -- A top military commander has accused East Timorese separatists of infiltrating student protests to stir up anti- government sentiment, the official Antara news agency reported Tuesday.
Student protesters have rallied for months to demand economic reform and political change, including the ouster of President Suharto, Asia's longest- serving leader. Indonesia is battling its worst economic downturn in three decades.
Last week, protests at the University of Gadjah Mada in the Java city of Yogyakarta turned violent as police fired tear gas at rock-throwing students. At least 60 students and several security officials were injured.
Maj. Gen. Mardiyanto, the military commander in Central Java province, showed local reporters a videotape of one rally in which some demonstrators waved a flag belonging to an East Timorese rebel group.
Some East Timorese students are enrolled at the university in Yogyakarta, 420 kilometers east of Jakarta.
The rebel group, FRETILIN, has been fighting for independence from Indonesia since it invaded the former Portuguese colony in 1975 and annexed it a year later. The United Nations does not recognize Indonesian authority in the half- island territory.
The official Antara news agency quoted Mardiyanto as saying the student protests in Yogyakarta had been contaminated because 'external interests entered the campus.'
At least three Gadjah Mada students have been arrested.
Jakarta -- Minister of Education and Culture Wiranto Arismunandar banned Saturday students from being involved in practical political activities, a move that immediately drew harsh criticism from an observer.
Amien Rais, leader of the 28 million-strong Muhammadiyah Moslem organization, warned the ban might force students to let off steam through channels that might lead to anarchy.
"If they cannot rally on their own campuses, they would find another channel and go unsupervised," Amien said yesterday. "If students got out of control and security personnel neglected legal procedures and gave free rein to their emotions we would all lose."
On Saturday, Wiranto met with rectors of state-run colleges and the heads of the provincial education and culture offices. Afterward, he said stern sanctions, including expulsion awaited those who violated the ban.
"Students are banned from being involved in politics because campuses are not places for political activities. And I have asked rectors to impose sanctions against students infringing the ruling," he said. "One of the sanctions which can be taken is dismissing the student."
Wiranto's statement came at a time of heightened on-campus student protests demanding political and economic reform. Over 100 student activists have been injured in the last three weeks on campuses in Bandar Lampung, Bandung, Semarang, Purwokerto, Yogyakarta, Surakarta and Surabaya.
Violence usually erupted when students tried to move their demonstrations off the campus grounds and onto the streets.
"Students should carry out only scientific activities," Wiranto said Saturday.
Installed as minister last month, Wiranto was known never to shy away from severe action against his own students.
As rector of the Bandung Institute of Technology (ITB), he expelled 66 students for various activities, including organizing a protest against the visit of a cabinet minister to the campus. Eleven were subsequently jailed.
In their protests over the past few weeks, students have also clamored for dialog with President Soeharto who has indicated a general willingness to engage in such a forum.
Amien suggested that the dialog be held immediately in order to bridge the communication gap between students and the government. "Don't (offer) a dialog merely as 'political cosmetics'... but establish a serious discussion on the real situation in our country," Amien said during a meeting with Jakarta Military Command's Chief of Staff Brig. Gen. Sudi Silalahi who represented Commander Maj. Gen. Sjaflie Sjamsoeddin.
Sudi said the security personnel would not attack students holding protests on their campuses.
Meanwhile rectors offered differing opinions as to whether security personnel should be allowed to enter campuses.
Alhusniduki Hamim, rector of the Lampung University in Bandarlampung, said the university had allowed security personnel to enter the campus during protests following last month's clash between protesters and police.
"Security personnel have been allowed to enter our campus to prevent such future clashes."
He said the 11 students injured in the clash had been released from hospital and the 60 students arrested had been freed.
Haris Mudjiman, rector of the Sebelas Maret University in Surakarta, Central Java, said so far there was no need for security officials to enter his campus since protests were still at a tolerable level.
"Security personnel are barred from entering the campus during the rallies, except in emergencies," he said. "Students are allowed to expressed their deep concern about what is happening in the country."
| East Timor |
Jakarta -- An Indonesian court has sentenced an East Timorese man to 20 years in prison for allegedly smuggling homemade bombs into the disputed territory last year, the official Antara news agency reported today.
Antara said Constancio Costa Dos Santos, 21, was convicted by the Dili District Court on Tuesday on charges of undermining the Indonesian government.
Mathius Maramba, head of East Timor's prosecutors office, said Santos, also known as Akuita, was arrested last September after he arrived by ship in the territory's capital, Dili, from Java Island.
Police said he was in possession of 20 bombs as well as M-16 rifle cartridges.
Prosecutors said the gasoline bombs had been intended for use against state facilities in Dili, including military stations.
Police have said they uncovered a bomb-making operation last year after a blast damaged a house, thought to be a makeshift bomb factory, in Demak on the island of Java.
Rebel leader Jose Alexandre Xanana Gusmao, who is serving a 20- year sentence in Jakarta, has claimed responsibility for the operation, but denied accusations that the bombs were intended to blow up civilian targets.
| Political/economic crisis |
Jakarta -- The following is a chronology of Indonesia's financial crisis and political developments in the country the last eight months.
1997
July 8 - The rupiah starts to crumble. Jakarta widens its rupiah trading band to 12 from eight percent.
July 24 - Asian currency meltdown. The rupiah, baht, ringgit and peso all slump as confidence in the region fades.
August 14 - Jakarta abolishes managed exchange rate system. The rupiah sinks further.
October 6 - Rupiah hits a low of 3,845.
October 8 - Indonesia says it will ask the International Monetary Fund for financial assistance.
October 31 - Indonesia's IMF package unveiled. It provides more than $40 billion in aid, although front-line defence is $23 billion.
November 5 - IMF approves a $10-billion loan for Indonesia as part of the international package.
1998
January 6 - Indonesia unveils its 1998/99 budget projecting 32.1 percent growth in revenue and expenditure over current budget and four-percent economic growth. The rupiah loses half its value against the dollar over five days, breaking through the 10,000 level before a slight recovery, on perceptions the budget would not meet IMF-mandated austerity measures and rumours Jakarta might declare a debt moratorium.
January 10 - Indonesia's President Suharto, under increasing international pressure to adhere to IMF conditions, announces the delay or review of 15 infrastructure projects.
January 11 - IMF first Deputy Managing Director Stanley Fischer in Jakarta for talks on the IMF's programme and how to proceed with it.
January 14 - IMF Managing Director Michel Camdessus says in Jakarta the IMF is asking Indonesia to sign a new letter of intent committing itself to implementing further reforms.
January 15 - Camdessus and Suharto sign an agreement strengthening economic reforms.
January 16 - Camdessus says he expects Indonesian and Thai economies to recover within two years.
January 21 - The rupiah falls to a record low of 12,000 to the dollar as reports surface that corporates now paying dollar debts in rupiah.
January 22 - The rupiah collapses a week after the IMF package shows no signs of easing Indonesia's debt and confidence crisis, hitting a record low of 17,000 amid economic pessimism and hints Research and Technology Minister Jusuf Habibie may be the preferred vice-presidential candidate. Bank Indonesia intervenes and currency recovers to 11,800.
January 23 - Indonesia presents a revised budget sticking to IMF-agreed figures. The budget expects zero growth in fiscal 1998 and 20 percent inflation, but assumes the rupiah will be at 5,000 to the dollar. It ends the day at 12,000.
January 27 - Indonesia announces a temporary freeze on debt servicing but says it is not a moratorium as companies with dollars can pay creditors. It also announces banking reforms in which the government will guarantee the security of both depositors and creditors.
January 28 - Indonesia again stresses it has not sought a debt moratorium, saying a temporary freeze suggested on servicing corporate debts is voluntary. Mobs attack shops owned by ethnic Chinese in Central Java over rising food prices.
February 3 - Singapore proposes a multilateral system of guarantees for Indonesian letters of credit.
February 4 - Indonesian government gives a lukewarm response to a proposal by U.S. economist Steve Hanke to set up a currency board, where the rupiah is pegged to another currency. Suharto refuses to name a running mate in March election, saying this was the right of parliamentary groups.
February 6 - Thousands of troops and police in show of strength in practice sessions in Jakarta before the indirect presidential elections. Chief debt negotiator Radius Prawiro says Indonesia's total foreign debt is $137.424 billion.
February 9 - Growing unhappiness over Suharto's handling of the economic crisis leads to a signature campaign to replace him. Suharto says he will announce new steps on the rupiah exchange rate, the first hint a fixed currency system might be implemented. Curfew is imposed in an eastern Indonesian town after more riots.
February 10 - Bank Indonesia Governor Soedradjad Djiwandono tells parliament the government is weighing the merits of a currency board system.
February 11 - Finance Minister Mar'ie Muhammad says the government is preparing for a currency board system. The rupiah rises to 7,200 to the dollar. Suharto accuses unnamed parties of seeking to undermine the economy by driving the rupiah down. Police detain 140 people after protests in Jakarta over rising food prices.
February 12 - The ruling Golkar party names Habibie and parliamentary speaker Harmoko as its vice presidential candidates.
February 13 - Suharto tells President Clinton the IMF is failing to stem Indonesia's financial crisis. Clinton objects to Jakarta's plans to fix the rupiah to the U.S. dollar through a currency board system. The rupiah surges as high as 8,100 on signs the plan will proceed.
February 14 - The IMF threatens to halt the bail-out fund over Indonesia's plans to peg the rupiah. ASEAN central bankers discuss a proposal to use regional currencies for intra-regional trade. Police detain 154 people in riots over rising prices that leave at least three dead, and Jakarta bans mass rallies during voting in March. Rioters torch shops owned by ethnic Chinese, churches and cars in three west Java towns. Two rioters are shot dead in Praya town on Lombok island.
February 16 - Indonesian police warn they would shoot rioters on sight even as new military commander Wiranto played down the impact of the violence.
February 17 - President Suharto fires central bank governor Soedradjad Djiwandono for opposing the currency board proposal. Djiwandono is replaced by U.S.-trained economist Sjahril Sabirin. The sacking draws immediate attacks from global lenders as it is seen as a direct affront to their demands that Jakarta reform its economy.
February 18 - Habibie assured of the vice presidency after winning the backing of the powerful armed forces. German Finance Minister Theo Waigel signs agreements to provide Indonesia with 375 million marks ($205.3 million) in financial aid to fight the economic crisis. Thousands of students and labourers, angered by rising prices, stone dozens of shops and offices in the southeast Sulawesi capital.
February 19 - U.S. Commerce Secretary William Daley and German Finance Minister Waigel insist Indonesia must follow IMF- prescribed economic reforms to get economy on track. Chinese shopowners open a public relations drive in Java selling commodities at discounts to Javanese poor. Singapore says it would make US$2 billion available if its plan for international guarantees for Indonesian letters of credit is implemented. The IMF and United States, while stressing that the currency board scheme was premature, show flexibility by saying that the currency plan could be considered once banking reform, corporate debt and other economic issues had been addressed by Jakarta.
February 20 - Finance Minister Mar'ie Muhammad says Indonesia so far faced no problem in meeting state foreign debts, while telling parliament that the government wants to maintain good ties with the IMF. Mar'ie says Suharto had instructed the finance ministry and the Central Bank to prepare for the introduction of a currency board by taking into consideration all views and development, locally and abroad.
February 26 - Indonesian companies hold their first formal meeting with a steering committee of lenders to find ways to resolve the country's $74 billion in private debt.
March 3 - U.S. special envoy Walter Mondale meets with Suharto, said by U.S. officials to be carrying a "blunt" message from President Clinton.
March 6 - IMF delays disbursement of second $3 billion tranche to Indonesia due on March 15, saying they will not discuss Indonesia's reform programme before April.
March 10 - Suharto re-elected President for a seventh five-year term by the 1,000 member People's Consultative Assembly (MPR), as thousands of students held protest rallies against the election.
March 11 - Suharto is sworn in. Habibie is elected vice- president. Markets are unmoved.
March 14 - Japanese prime minister Ryutaro Hashimoto arrives in Jakarta for talks with Suharto, the first G7 leader to do so.
March 16 - Suharto swears in 36 new cabinet ministers, including his daughter Siti Hardiyanti Rukmana and an old golfing buddy, as students and riot police clash at the National University in Jakarta.
March 18 - Indonesia's new top economic minister Ginandjar Kartasasmita meets with IMF Asia-Pacific head Hubert Neiss in a bid to review the country's reform process and get the delayed disbursement of $3 billion in aid back on track.
March 20 - Indonesia says decision has been made to drop for the time being the idea of implementing a currency board system. The government will however still look for a means to stabilise the battered rupiah. Government proposes a five percent tax on foreign currency purchases. This idea was subsequently shelved.
March 24 - Indonesia consults Mexican officials on the "Ficorca" plan Mexico used to ease its debt crisis in 1983, sources said.
March 26 - The Jakarta post reports that unemployment has risen to about 8.7 million people, or 10 percent of the workforce.
March 27 - Indonesia proposes to the IMF a formula to resolve its huge private debt, drawing on the Ficorca model.
March 30 - Indonesia agrees to privatise 12 state-owned firms under the new reform agenda under discussion with the IMF.
March 31 - Indonesia's decision to freeze the minimum wage at 1997 levels is seen as effectively halving the real income of Indonesia's urban poor, due to 50 percent inflation expected in 1998.
April 2 - The IMF and Indonesia agree on new figures for the fiscal 1998/99 budget, including a decline of 5 percent in GDP, inflation rate of 45 percent and a budget deficit of 3.5 percent. The IMF warns Suharto to show his commitment on tough reforms or lose IMF support. IMF agrees to a gradual phasing-out of commodity subsidies in consideration of the increasingly troubled plight of poorer Indonesians.
April 3 - Singapore announces it will provide $3 billion in a bilateral trade finance scheme to enable Jakarta to pay for imports from Singapore.
April 4 - The government suspends the licences of seven banks under a bank reform scheme widely applauded by the IMF and the international financial community. Seven other banks were placed under the supervision of the Indonesian Bank Restructuring Agency. A few of Suharto's relatives and friends are known to control, or hold large equity stakes in, some of the banks.
April 6 - Finance Minster Faud Bawazier says the government will set up two state companies to handle the assets of liquidated banks and insure depositors. April 7 - A committee of international bankers plan a meeting in New York later in April to discuss details of Indonesia's private debt restructuring. The meeting is to be attended by officials from the Indonesian central bank and the IMF. The Export-Import Bank of Japan will extend $1 billion of an expected $3 billion loan to Jakarta. The loan will go to a trade-linked finance guarantee system, to aid in facilitating trade.
April 8 - Talks between Indonesia and the IMF are concluded. The IMF says a new agreement on economic reforms will be closely monitored and frequently reviewed to ensure Indonesia complies with its terms. Further loan disbursements are conditional on Indonesia's "substantive action" on reforms. Indonesia revises its fiscal 1998/99 (April 1) economic growth expectation to minus four percent and its expected budget deficit to 3.2 percent of GDP. it also forecasts inflation for the fiscal year of 17 percent. Indonesia also announces a gradual easing of subsidies on most commodities and the floating of seven state- owned companies. The government will also assist private firms in paying debt, and abolish the granting of monopoly privileges in basic commodities. Japan says it will extend $2 billion in loans to Jakarta, out of $5 billion promised as part of the original IMF rescue package.
No memorandums have been signed, no handshakes photographed. But after a bitter face-off over what prescription is right for Indonesia's beleaguered economy, Jakarta and the International Monetary Fund seem to have stopped colliding and started cooperating. As five committees hammer out the details of a new (and third) deal between the two, hostility on both sides has dissipated since the Fund last month withheld a second, $3 billion tranche of the $43 billion bailout it arranged for Indonesia. The scheduled arrival of IMF Deputy Managing Director Stanley Fischer in Jakarta on April 2 has spurred talk that a new deal is imminent. So which side blinked?
Make that both sides. The IMF signaled it will tolerate delays on some suggested reforms -- Indonesia is likely to be allowed to keep subsidies on fuel for the time being, for example. Jakarta for its part sped up its privatization program and backed away from radical, market-shocking measures to lasso the rupiah. What led to the compromises? Maybe a dose of reality. The IMF and the international community do not want to risk social turmoil and political uncertainty in Indonesia by demanding overly stringent reforms. And President Suharto knows Indonesia cannot dig its way out of its economic hole without the financial credibility the IMF can give. Economist Steve Hanke, whose plan to peg the rupiah to the dollar got the IMF's dander up, says he thinks Suharto still favors the idea. "But if something came up that was better he'd go with that -- better from a political point of view," he told Asiaweek.
The most important result so far of the new cooperation is an emerging consensus on how to deal with Indonesia's $74 billion in private-sector foreign debt. Jakarta's proposal, which the IMF agrees has merit, is modeled on a program adopted by Mexico in the 1980s to get over its debt crisis. Under the plan, an indebted company pays its obligations in rupiah into a state fund, which then pays the company's creditors in foreign currency. Payments go toward interest in the first few years and capital later. The companies pay off their own debts -- no bailout for the profligate -- and the government shoulders only the foreign exchange risk.
But setting up the mechanism is not easy. First, the facility needs an estimated $10 billion to $15 billion of capital to work. Finding the money will be tough. Second is an even touchier subject: who should benefit. "You have to sort out who you want to help," says M. Sadli, an economist and former mines and energy minister. That is, should the facility be open to everybody, even companies that squandered money building golf courses or are stonewalling creditors? Or should it be limited to struggling exporters and salvagable firms working to restructure their debts?
Despite the uncertainty still surrounding the debt plan, news of progress in the IMF-Indonesia relationship refreshed the rupiah, which rose above 9,000 to the dollar for the first time since January. (The climb was also helped by higher interest rates which make rupiah bank deposits pay up to 47.5% annually.) A deal may now emerge in days. IMF Asia-Pacific Director Hubert Neiss, leading the Fund's team in Jakarta, said the committee on monetary policy has reached a reasonable conclusion. The other four committees -- on banks, the budget, structural reforms and private sector debt -- are also said to have made progress. Enough progress? "We want to have no loose ends," says Neiss. "We want to be sure all areas under discussion are completely covered and only then will we say we are finished."
But a new deal with the IMF only bandages Indonesia's financial injuries -- it will not by itself heal the wounds from years of poor planning and bad investments. Economic consultant Hartojo Wignjowijoto points out that many apartments and office towers remain half-empty and modern factories lie idle. "The rate of utilization is low, and that's called waste," he says. Whatever debt relief package is implemented, local corporations may have to struggle for years to meet payments on white elephant investments. "What Indonesia is really going to have to do is raise interest rates, cut government spending, and have one to two years of suffering," says an economist who lived in Mexico during its devaluation crisis. Rates have gone up, but suffering is something Suharto, for his own political survival, does not wish to inflict on his people. Finding agreement with the IMF may turn out to be easy -- compared to steering Indonesia through the coming year.
[By Jonathan Sprague and Jose Manuel Tesoro/Jakarta]
Give and take
The IMF:
Jakarta:Backed Jakarta's proposal to solve Indonesia's private debt problems May tolerate continued subsidies for food and fuel May allow food distribution monopoly to remain
Canceled a 5% tax on foreign ex-change purchases Backed away from currency board proposal to peg the rupiah Proposed to sell off 12 state-owned companies
| Environment/land disputes |
Jakarta -- Indonesia's wildfires are being blamed for endangering wildlife, forcing airports to close and costing already struggling Southeastern Asian industries millions of dollars.
Fires raging out of control on the island of Borneo have scorched an estimated 61,500 acres of timber-rich forests in the drought- striken region. The official Antara News Agency said the fires have already caused a total loss of about $400 million.
The fires destroyed the island's rehabilitation center for orangutans and threatens, to the point of extinction, wildlife such as birds, crocodiles and a rare type of butterfly found only on Borneo.
Choking smog has caused airports on Borneo and neighboring Brunei to close due to low visibility. Soot and debris kicked up into the atmosphere also has driven pollution levels into the danger zone.
In eastern Malaysia, schools have been shut since March 30 when the Air Pollution Index shot to a "hazardous" 620 level.
An API above 100 is considered "unhealthy," above 200 "very unhealthy," and above 300 "hazardous" to health.
The API in the town of Miri has hovered around 500 to 600 for the past three days, prompting the government to advise some 200,000 residents to wear masks when venturing outside.
Weather experts have predicted the haze will worsen when wind directions shift from monsoon rains. They say it could take months to douse the fires.
As fear intensifies, hundreds of haze-related websites have sprouted on the Internet, giving the public direct access to API's around the region.
News of the lingering haze mixed with the region's ongoing financial turmoil is expected to further hurt retail sales in Singapore, the Singapore Retailers Association said Thursday.
The group says retail sector, one of Singapore's largest industries, is expected to drop 30 percent over the next six months, compared to the same period last year.
Retailers can expect to have "enduring difficulties as the haze is likely to return and the regional markets have not yet recovered," said Teh Ban Lian, president of the association.
Tourism is also expected to fall by more than 10 percent this year because of the haze, Lian said. Last year, similar fires, many of them purposely set to clear land, produced a massive blanket of smoke over and threatened the health of millions in the region. Officials fear the problem could be worse this year if left unchecked.
| Human rights/law |
Cindy Shiner, Nunukan Timur Island -- Kris Enakobun left behind a life of crime working for a Jakarta gangster eight years ago for a better living in neighboring Malaysia, a journey taken by more than a million other Indonesians. His left arm is a travelogue of green tattoos charting his interests and misadventures: "gadis," a slang word for young virgins; "Ida," a girlfriend; "Swastika- 57R," his former gang, and a message to "love your enemies."
Enakobun, 25, was caught in Malaysia's recent crackdown on illegal foreign workers, deported and now lives just over the border in a three-room house with 20 other people, including three generations of Indonesian migrant workers, on this island off the northeast coast of Borneo, which Indonesia and Malaysia share.
"Legal is fine, illegal is fine. I just know I'll get back there soon," said Enakobun, who had worked as a driver and a mechanic.
As many as 10,000 people pass through Nunukan Timur every month on their way to Malaysia, according to one study, and ships arrive here daily with hopeful migrants from more impoverished Indonesian islands such as Sulawesi and Flores. Malaysian President Mahathir Mohamad has called the Indonesians "the new boat people."
A regional economic crisis that began last July has hit Indonesia particularly hard. More than 8 million people, or 10 percent of the work force, have lost their jobs and the currency's value has fallen 70 percent.
Malaysia has been hurt by the Asian financial crisis to a lesser extent and is cracking down hard on illegal migrants. A clash last month at a detention camp left as many as 30 people dead. Malaysia plans to deport tens of thousands of Indonesians by September to help provide jobs for Malaysians and to keep its currency from being sent out of the country by foreign workers. Elsewhere in Southeast Asia, Thailand has started to send Burmese workers home, and Singapore is planning to deport Indonesians.
But Malaysia's deportations are unlikely to stick. Migration from Indonesia to Malaysia is less a trend than an industry, creating an entrenched subculture of migrants, labor brokers, prostitutes and corrupt immigration authorities who have created a massive cross-border network.
Most of the deportations are carried out from Malaysia's mainland, where illegal immigrants are detained in camps and sent across the Strait of Malacca back to Indonesia. Similar efforts have been underway on Borneo, but sources say that for every 100 Indonesians deported each night to Nunukan Timur, a short speedboat ride away, at least 50 return to Malaysia as soon as the following day. Most of the rest eventually trickle back over the border.
"They will try as hard as they can to get back," said Tajudin Umar, also known as the "King of Nunukan," the local leader for ethnic groups coming from the impoverished southeastern islands of Indonesia. "When they come here, back to the Nunukan port, they just talk with some people here to give them some money and they go back" to Malaysia.
The port is one of the major entry points to Malaysia for migrant workers, particularly from eastern Indonesia, which is the most underdeveloped part of that country. Freelance labor brokers hang around the port to offer their services, but many arrivals already have local contacts -- a friend, a relative or someone from their ethnic group. They then go to one of more than a dozen licensed broker companies here, which will arrange their immigration documents for a fee that is generally shared among the broker, government labor workers and immigration officials.
An estimated 90 percent of Indonesians who work in Malaysia do so illegally. The most common form of entry is with a red one-month over-border pass, known as a Pas Lintas-Batas, which costs about $18. Few people, however, leave Malaysia after their pass expires. They work on the palm oil plantations and send some cash home, where prices have skyrocketed and a drought has cut into recent harvests.
The biggest moneymakers are often the brokers who secure work for them and the pimps known as "chicken daddies." They sometimes show up at the two local banks in Nunukan Timur with arm loads of cash to deposit.
Some of the labor broker companies have counterparts in Malaysia, which put in orders for a certain number of workers. The offices here arrange their documents, pay for their transportation and send them on. But once their permits expire they're on their own.
The increasing desperation of Indonesians has helped foster corruption and exploitation. Aida, 21, a farmer's daughter with little more than a sixth- grade education, met a man named Ramli last year who promised her a job as a grocery clerk in Malaysia earning good wages, nearly $100 per month. On her first night across the border, a man came to visit her in her hotel room. "He said, 'I have bought you through Ramli for one million rupiah [$500 at the time] tonight so you are mine,'" Aida said.
Then he raped her. Aida is now back in Nunukan Timur working as a prostitute. She pays about 75 cents a day to rent a little room where she receives an average of three customers a day for about $2 per visit. She is both hopeless and content.
"I'm dirty. Who will marry me? Who will take me as a wife or a girlfriend? I'm not a virgin anymore," she said. "Nobody will want me." Then, she adds, "It's quite good here. I can take care of myself."
Health workers estimate that up to half the women in Nunukan Timur earn their living through prostitution after having been deported from Malaysia or failing to find lasting work there. Three people a day, on average, visit one clinic in Nunukan Timur seeking treatment for gonorrhea. There is no testing available locally for the virus that causes AIDS.
Despite the risks, young men and women still want to come here. Yantri, 18, his brother, Sulaeman, and their three cousins arrived last month from Ende, Flores. The five farm boys have bought over-border passes and are now waiting for their uncle in Malaysia to send them more money so they can show it to immigration authorities at the border as a guarantee that they won't resort to robbery.
Yantri dropped out of school when he was 12, after his father died, to help his mother work on a plantation. Like so many migrants, his dreams are simple but unattainable. "I'd like to be a fisherman or a sailor," he said. "I'm used to the air of the sea." For now, though, he says he will take what he can get as a migrant worker.
Mujhedin Ado can do nothing but watch them. Ado, 59, is among the first generation of Indonesian migrants this century, having worked in Malaysia in the 1950s. In 1963 he fought in Indonesia's war against Malaysia on Borneo.
He says he doesn't understand why the Malaysian government now wants to expel Indonesian workers. "This puzzles me. In the past the Malaysian government was very, very kind to Indonesians," he said. "They allowed us to work and to have good salaries. I don't know why the situation has become so bad."
Despite the risks he knows the young men face, he says he won't try to dissuade them from crossing the border. "I can't say anything because I realize that many people in Flores need good jobs and there are no jobs," he said. "All I can do is bless them."
Nelson Graves, Kuala Lumpur -- Indonesian immigrants seeking political asylum forced their way into four foreign embassy compounds in the Malaysian capital on Friday, diplomats and police said.
Malaysian police quickly removed the immigrants from the French and Swiss embassies and Brunei's diplomatic office in Kuala Lumpur, diplomats and police told Reuters.
But eight Indonesians who said they were from restive Aceh province in the north of Sumatra island, were still inside the U.S. embassy compound four hours after they had scaled a wall to get inside, U.S. officials said.
Several dozen Malaysian police stood outside two entrances to the U.S. embassy.
U.S. officials said they were talking to the U.N. refugee agency to decide what to do with the Acehnese, who entered the embassy at about 7:30 a.m.
The dramatic move came amid a Malaysian campaign to repatriate tens of thousands of Indonesians which has provoked expressions of concern from the United Nations and human rights groups.
"This is an international issue," Elizabeth Wong, co-ordinator of the Kuala Lumpur-based human rights group Suara Rakyat Malaysia (SUARAM), told Reuters.
An Acehnese leader told Reuters that the immigrants who entered the diplomatic missions on Friday were among more than 100 illegal entrants who escaped from the Lenggeng detention camp last month. He said they had co-ordinated their entry on Friday into the compounds and were seeking political asylum.
Last week, 14 Acehnese drove a truck through the gate of the U.N. High Commissioner for Refugees' (UNHCR) office in Kuala Lumpur to seek asylum. The UNHCR has been interviewing the immigrants to determine whether they deserve political asylum. The Acehnese say they will be persecuted if sent back to Aceh, where a separatist revolt peaked in the early 1990s.
Malaysian authorities removed eight immigrants from the French embassy on Friday after the mission allowed riot police to enter the compound, diplomats and police said.
A guard at the Swiss embassy said 14 Indonesians were taken away by Malaysian police after the immigrants climbed over a wall at the building and scuffled with guards.
Police Chief Bakri Zinin said seven Indonesians were also taken away from Brunei's diplomatic building.
"They are in the lock-up and we are treating them as illegal immigrants believed to be Indonesians," Bakri said.
The U.S. embassy said it would not allow police onto the U.S. compound until it had reached an understanding with the UNHCR.
"We are contacting the UNHCR office to see if we can resolve the situation," he said. "Until we reach a joint decision with the UNHCR, there will be no effort to make the immigrants leave the embassy."
Some Western diplomats said they were perplexed by the speed with which the French and Swiss allowed authorities to remove the Indonesians.
"We are glad the U.S. embassy is in contact with the U.N. refugee agency," SUARAM'S Wong said. "The French and Swiss have signed the international convention against forced repatriation, and should have done the same as the U.S."
French officials declined to comment and directed questions to the Foreign Ministry in Paris. Swiss and Bruneian officials could not be reached for comment.
The Acehnese leader, who was in contact with the immigrants, had appealed to the French earlier on Friday not to allow the police to enter the compound.
"They are being hunted and are seeking political asylum. We hope the French embassy and the international community will give support to their appeal," he said.
Malaysian officials could not be reached for comment. Kuala Lumpur has said it would allow the UNHCR time to assess whether the Indonesians on its compound deserved political asylum, but that it considered them to be illegal immigrants to be deported.
Indonesia's economic crisis has led to a wave of refugees heading towards Malaysia. Malaysia last month deported more than 1,000 Indonesian immigrants in an exercise that triggered deadly riots at the Semenyih detention centre outside Kuala Lumpur.
Authorities say eight Indonesians and one Malaysian policeman were killed in the Semenyih deportation.
It has been confirmed that Desmond Mahesa, Director of the Nusantara Legal Aid Institute, Jakarta, and Pius Lustrilanag, Secretary-general of Aldera, who have been missing since 3 February, are now back home with their families. Desmond has returned to Banjarmasin and Pius has returned to Palembang, South Sumatra.
This has been confirmed by Munir, chief of the operational department of the YLBHI, the Indonesian Legal Aid Foundation, on 6 April. 'I spoke with Desmond's parents who confirmed that he has been back with them since 3 April,' said Munir. He did not know where Desmond had been for the past two months.
Pius's aunt, Mrs Sunarti Hardiwan confirmed that he nephew had returned to Palembang. 'He arrived back safely and is now in Palembang,' she said. He returned five days ago, she said, speaking from Yogyakarta. 'I don't know where he was for the two months he was absent,' she said. 'All he said was that he had disappeared. That's all.'
She said he was in reasonably good health, but he did not want to say much about where he had been.
With the return home of Desmond and Pius, the seven other activists whose whereabouts are still unknown are: Andi Arief (politics student at Gadjah Mada University and PRD activist), Haryanto Taslam (deputy secretary-general of the pro-Megawati PDI), Herman Hendrawan (student at Airlangga Universtiy, Surabaya), Rahardjo Waluyo Djati, Nezar Patria (student at the Literature Faculty of Gadjah Mada University) Faisal Riza (student at the philosophy faculty of UGM) and Mugianto (student).
Jenny Grant, Jakarta -- An Indonesian court ruled yesterday that activists who tried to hold a meeting to "elect" a new president were legally arrested and detained by police earlier this month.
The North Jakarta District Court was guarded by 60 riot police carrying semi-automatic weapons, and scores of plainclothes intelligence agents.
"The police arrest has fulfilled the legal criteria," Chief Judge Soeparto told the packed court, which erupted into jeers against the verdict.
Actress Ratna Sarumpaet and five colleagues were suing the North Jakarta chief and the city police chief for detaining them for more than 24 hours without an arrest warrant.
The activists held a People's Summit at a park in North Jakarta on March 10, the day President Suharto was appointed to a seventh term in office. The group planned to elect their own "people's president", but the meeting was broken up by police before it began.
"By deciding such a verdict you have created your own law," plaintiff lawyer Petrus Balapatyona yelled at the judge after he read the verdict, ordering the defendants to pay symbolic damages of 3,000 rupiah (HK$30) each.
Lawyers said the verdict now opened the way for the full trial of the six activists, who have been charged under a 1963 law for holding a political meeting without a police permit. The charge carries a maximum five years in jail.
An emotional Sarumpaet was escorted out of the court by armed police. Dozens of her supporters cheered "long live Ratna!" An American diplomat at the hearing said Washington was monitoring the trial.
"We are very concerned about the course of justice in Indonesia and this case illustrates that," said Ed McWilliams, political counsellor at the US Embassy.
A student went on trial in Bandung on 31 March charged with insulting the government. If found guilty, he faces a sentence of up to seven years under Article 154 of the Criminal Code.
Juandi was arrested when police stopped the car he was travelling in for a routine check up about licences, but then searched the vehicle and found stickers, banners and other material critical of the government. The stickers read: "Suharto must go, it's time for Megawati, Succession now, reform now, Megawati, the new president, I love the rupiah but I keep my savings in dollars".
Following the presentation of the indictment, the defendant will present his demurrer to court on 6 April.
While the session was in progress, seventy friends of the accused held a forum outside the court, reading poetry and saying prayers.
The head of his team of lawyers, Haneda, said that although he would do his best, this was a political trial and he did not expect much. He said the presiding judge had said he was under orders to get the trial over quickly. "It's just a formality, the verdict has already been fixed," the lawyer said.
He also complained that the arrest warrant had expired on 23 March while failure to renew it had been shrugged off as "an administrative error".
When the court session ended, supporters of the defendant sang songs and shouted: "Free Juandi, Long live Juandi". Many students with head-bands saying "Juandi is not guilty", held a protest rally outside, also demanding the release of other pro-democracy activists.
Adam Entous, Washington -- Top Democrats in Congress demanded on Thursday that the Clinton administration get tough with Indonesian President Suharto, warning that U.S. financial support for Jakarta and the International Monetary Fund was at stake.
The second-ranking Democrat in the House of Representatives, David Bonior, and 26 other lawmakers said the United States was too tolerant of human rights abuses in Indonesia.
They called on President Bill Clinton to overhaul Washington's policies.
Bonior was joined by an unlikely ally, Republican Rep. Christopher Smith, a leading abortion foe in Congress threatening to derail funding for the IMF.
"This failure by the United States government to hold Indonesia to minimum standards of decent behavior both is wrong in itself and increasingly poses a threat to your efforts to mobilize support in America for continued cooperation with international efforts to alleviate the financial crisis besetting much of Asia," they said in a letter to Clinton.
"Allowing the Suharto regime this freedom will make it difficult for many of us to justify support for an increased American contribution for the IMF," the letter said.
Clinton wants Congress to approve $18 billion in additional funding for the IMF to replenish resources drained by last year's multibillion-dollar bailouts for Indonesia, South Korea and Thailand.
Weeks of lobbying on Capitol Hill by top administration officials have paid off with bipartisan support in the Senate.
But the IMF package is in trouble in the House, where both Republicans and Democrats have sharply criticized the IMF's policies, particularly in Indonesia.
Critics say the IMF's bailout for Jakarta has benefited Suharto and his family. They have accused the international lending agency of ignoring Indonesia's record of human rights abuses and history of corruption.
In the letter, the lawmakers threatened to oppose U.S. financial support for Indonesia and the IMF unless Suharto agreed to improve political, religious and worker rights, and conditions in East Timor.
"We strongly urge an immediate reevaluation of American policy toward Indonesia and a clear statement that the United States will hold the Indonesian government to minimum standards of decent treatment of its own people and the people of East Timor before allowing it to become the beneficiary of billions of dollars in international assistance," the letter said.
The letter was signed by House Minority Whip Bonior, Rep. Nancy Pelosi, a high-ranking Democrat on the Appropriations Committee, and Rep. Barney Frank, a senior Democrat on the Banking Committee. The three lawmakers previously agreed to support Clinton's package for the IMF.
The letter was also signed by several prominent Republicans, including Smith and Rep. John Porter, co-chair of the Congressional Human Rights Caucus.
Smith has threatened to link anti-abortion provisions to the IMF package. The attachment killed funding for the IMF last November and could derail the package again this year because it would drive away Democrats and invite a presidential veto.
| Arms/armed forces |
Jim Mann, Washington -- The current crisis in Indonesia isn't all about money. It's also about guns, armies and political power.
The process of globalization -- the flow of capital across international borders -- inevitably affects a country's economy. But in the end, globalization offers no answers for some of the key questions that determine a country's political future: who commands the troops and how will they be used?
The Clinton administration knows these time-honored truths. That's why it has been fighting quietly but determinedly in recent days to preserve the ties between the Pentagon and the Indonesian armed forces -- links that members of Congress mistakenly believed they had cut off several years ago.
In 1991, Indonesian troops massacred more than 270 civilian protesters at Dili in East Timor. Congress responded by terminating money for Indonesia under a program called International Military Education and Training, through which the United States paid for instruction and travel for other nations' military leaders.
That cutoff, although troublesome to the Pentagon, didn't matter as much as Congress expected. For the Defense Department soon turned to another program to keep up its contacts with the Indonesian army. This other, separate endeavor is called Joint Combined Exchange and Training.
U.S. military units such as the Green Berets have been training the Indonesian special forces known as Kopassus in such activities as urban warfare, advanced sniper techniques, air-drop operations, close-quarters combat and psychological operations.
These continuing Pentagon activities on behalf of the Indonesian military were recently uncovered and publicized by Rep. Lane Evans (D-Ill.). Evans says the JCET programs are "another way the Pentagon can assist [Indonesian President] Suharto and his soldiers in suppressing their opposition."
To be sure, the administration's sleight of hand over Indonesia is not an instance like Iran-Contra, where the Reagan administration went outside the law to provide aid to the Nicaraguan Contras after it had been banned by Congress. In Indonesia, Congress' prohibition applied only to the IMET programs. Evans acknowledges that the training for Indonesia under the Pentagon's other programs was legal.
Still, the main question is what these military programs represent and why the Clinton administration has gone to such lengths to keep them going in Indonesia. Why does the U.S. government seem to care so much about a bunch of training programs?
The answer is that the underlying purpose has little to do with training and a lot to do with cultivating the future military leaders of Indonesia -- making sure, in the process, that they are friendly to the United States.
"We have seen repeatedly over the years that officers who become friends as captains or majors remain friends when they become senior generals and admirals," Col. John Haseman, a former U.S. defense attache in Indonesia, wrote recently.
Those who defend the Pentagon programs often go on to argue that U.S. military training serves the causes of human rights and democracy in Indonesia.
"The Indonesian military is the only nationwide institution, and it is the institution that will be absolutely necessary for any transition to a more open and democratic society in Indonesia," says Karl Jackson, an Indonesia specialist at Johns Hopkins University and a former Pentagon official.
This is a comforting belief -- that with U.S. help, the Indonesian military will some day open the way for political change in the country. The problem is that at the moment, such claims seem out of line with the political reality inside Indonesia, where the army is being used to defend the status quo and to help Suharto stave off political opposition.
Two weeks ago, Indonesia's main opposition leader, Megawati Sukarnoputri, wrote to President Clinton to complain about the Pentagon's training programs.
"The U.S. military is providing training in lethal methods of social control at a time when the Indonesian people are trying to build a more democratic system," Megawati wrote. "Military training from the United States directly undermines the democracy movement in Indonesia." The ultimate question is how the Indonesian armed forces will react if political demonstrations challenge the Suharto regime.
The Philippines is a democracy today largely because military leaders there weren't willing to use force to suppress the 1986 "people power" demonstrations against President Ferdinand E. Marcos. By contrast, China and Myanmar remain authoritarian countries because, in similar situations in 1989, their army leaders were willing to resort to force.
No one can predict what might happen in Indonesia. U.S. officials and outside scholars warn regularly these days that Indonesia shouldn't be equated with the Philippines because it is a different culture, far less subject to American influence.
But if that's true, if we can't say whether the leaders of the Indonesian armed forces will eventually support the cause of democracy or continue to repress dissent, then the Pentagon's training programs amount to a gamble.
We may be cultivating a future democratic leader of Indonesia. But then again, we may be befriending and training Indonesia's next dictator.
| Economy and investment |
Christine T. Tjandraningsih, Jakarta -- As part of its efforts to implement a new package of economic reforms recommended by the International Monetary Fund (IMF), the Indonesian government will announce several new measures in the next few weeks, according to a draft Indonesia-IMF memorandum.
In the "Supplementary Memorandum of Economic and Financial Policies" agreed with the IMF this week, the government expressed a commitment to eliminate restrictions on foreign investment in wholesale trade by April 22.
"The government remains fully committed to the structural reforms set out in the January Memorandum of Economic Policies," according to the memorandum obtained by Kyodo News on Thursday and expected to be released in the next few days.
On Jan. 15, the Indonesian government agreed on an economic reform package sponsored by the IMF, which is a condition of a 43 billion dollar IMF rescue fund.
Relations between both sides plunged to a nadir in February because the country was suspected of reneging on its commitment to the bailout program.
That caused the delay of a second bailout package installment of 3 billion dollars, which was scheduled to be disbursed in mid- March.
"However, implementation has lagged in some areas and difficulties with implementation encountered in others, notably the elimination of certain restrictive marketing arrangements...," the memorandum says.
To rectify the problems, according to the memorandum, the government has set out several steps.
"In particular, the government will by April 22, 1998 eliminate all restrictions on foreign investment in wholesale trade and establish a level playing field in the import and distribution of essential food items between the National Logistics Agency and private-sector participants," it says.
To monitor and guarantee the implementation of the structural reforms, a so-called Executive Committee of the Resilience Council, consisting of government officials, the Asian Development Bank, the World Bank, the IMF and several independent auditors, will be established.
The government is also recommended to draft a law on competition policy "to establish guidelines for fair business practices and to avoid anti-competitive behavior" and the draft law "will be completed by December 1998."
In order to increase budgetary transfer receipts in fiscal 1998 which will end March 31, 1999, sales are planned of shares in three state enterprises, namely the state telecommunication companies, PT Telkom and PT Indosat, and the state cement company PT Semen Gresik.
"This divestment plan will be announced before April 24, 1998," the memorandum says.
In addition to that, it says, seven state enterprises are to be identified for privatization in fiscal 1998 and the list will be announced before April 24.
"This could include enterprises in plantations, infrastructure, mining and manufacturing, including PT Pelindo II (ports infrastructure and management), PT Perkebunan Nusantara IV (palm oil plantation) and PT Jasa Marga (toll roads)," the memorandum says.
"A list of five additional enterprises is to be identified and prepared for listing by June 30, 1998," it adds.
According to the memorandum, transparent procedures will be established by June 30 for divestiture and privatization in collaboration with the World Bank and a blueprint for the privatization over the medium term is to be completed by the end of September this year.
Highlights of Indonesia-IMF Supplementary Memorandum
Macroeconomic outlook:
Fiscal issues:Expect that the exchange rate will eventually stabilize below 6,000 rupiahs per U.S. dollar. Expect that inflation will decelerate quickly but will probably still amount to more than 45% during 1998 as a whole. Predict the real gross domestic product at 4% for fiscal 1998, which started April 1 and will end March 31, 1999. Intend to limit the deficit to about 3.5% of gross domestic product.
Monetary and banking issues:Eliminate subsidies on sugar, wheat flour, corn, soybean meal and fish meal by October 1, 1998. Ensure that reforestation funds are used exclusively for financing reforestation programs in fiscal 1998.
Bank restructuring:Provide autonomy to Bank Indonesia, the central bank, in formulation of monetary and interest rate policy. Publish key monetary data on a weekly basis from April 24, 1998. Submit to the Parliament a draft law, being prepared with the cooperation of Bundesbank experts, to institutionalize Bank Indonesia's autonomy by December 1998. Appoint high-level foreign advisers to Bank Indonesia to assist in the conduct of monetary policy by June 30, 1998. Conduct thorough review of central bank and banking laws in preparation for revising legal framework for banking operations by Sept. 30, 1998. Submit to the parliament a draft law to eliminate existing restrictions on foreign investments in listed state banks and amend bank secrecy with regard to nonperforming loans by June 30, 1998.
Foreign trade:Merge two state-owned banks, Bank Bumi Daya and Bank Pembangunan Indonesia, and conduct portfolio reviews of the two banks by June 30, 1998. Draft legislation enabling state bank privatization by June 30, 1998. Privatize state-owned banks by 2001. Introduce legislation to amend the banking law in order to remove the limit on private ownership of banks by June 30, 1998.
Social safety Net:Eliminate all export restrictions. Establish a clear framework for management and privatization of government assets, including criteria for determining whether enterprises are privatized, restructured or closed and a transparent sales process by September 30, 1998. Announce seven enterprises, including PT Pelindo II (ports infrastructure and management), PT Perkebunan Nusantara IV (palm oil plantation) and PT Jasa Marge (toll roads), to be privatized in fiscal 1998 by April 24, 1998 and divest them by March 31, 1999. Identify an additional five enterprises to be listed in fiscal 1998 by June 30, 1998. Prepare action plans for all 164 state enterprises by Sept. 30, 1998, including the transfer of management responsibilities from various ministries. Offer for sale additional tranches of government-controlled shares in public enterprises already listed in fiscal 1998. Audit nonviable public enterprises by December 31, 1998. Develop a plan for closing nonviable public enterprises by September 30, 1998.
[On April 9, Kyodo also reported that according to a ranking IMF official, the fund also plans to monitor, on a monthly basis, whether Indonesia is fulfilling its reform commitments. Usually, the IMF checks the progress every three months. The official said that the more frequent monitoring reflects the IMF's concern that Suharto may backtrack on economic reform programs - James Balowski.]Introduce community-based work programs to sustain the purchasing power of the poor in both rural and urban areas in fiscal 1998.
Amy Chew, Jakarta -- Indonesia's flirtation with a currency board system to prop up its ailing rupiah failed to carry through to reforms agreed by the government and the International Monetary Fund to tackle the country's economic crisis.
In sweeping measures unveiled on Friday, the government said: "Bank Indonesia intends to adjust interest rates as necessary to strengthen the rupiah."
No mention was made of the controversial currency board which was opposed by the IMF, the United States and leading European countries after it was first put forward in January.
Under the proposal, the rupiah was expected to be pegged at between 5,000 and 6,000 to the dollar, and supposedly backed by foreign exchange reserves fully matching funds in circulation.
The scheme was viewed by critics as unrealistic given the fragile state of Indonesia's banking sector and its paucity of foreign reserves.
In the meantime, other options were also looked at.
Indonesia's central bank governor Sjahril Sabirin said he had briefly considered the idea of a return to pre-set trading bands for the rupiah.
On Thursday, Sabirin said the trading band option was not discussed during negotiations with the IMF.
"We did not discuss this (trading band) or whether the rupiah would continue on a free float," he said in reply to questions following the inauguration of two new central bank directors.
He said the central bank had no plans to raise interest rates for the moment as the rupiah had strengthened.
"But if it (rupiah) were to weaken, we may raise rates," he said.
Spot rupiah ended at 8,050 against the dollar in late trading in Jakarta on Thursday, but strengthened overnight to about 7,750 in New York after details of the reform agreement leaked.
The governor also made no mention of the currency board system, which had been pushed by Steve Hanke, a professor of economics at John Hopkins University in Baltimore and an adviser to President Suharto. The memorandum on reforms, however, stressed a commitment to choke off easy access of funds to banks.
This will be done through the introduction of lending facilities by Bank Indonesia with interest rates set at levels designed to discourage banks from turning to the central bank for funds.
The IMF's director for Asia-Pacific Hubert Neiss had said on Thursday that liquidity needed to be tightened, including to banks.
He said this was a necessary "anti-inflationary shock" in the face of hyperinflation.
"This is what people call `stopping the printing presses'`
The memorandum said the wide-ranging reforms were aimed at bringing the rupiah to about a level of 6,000 over time.
The IMF's deputy chief Stanley Fischer has said this was a feasible target.
"We don't think the rupiah is going to reach a new level on the day we sign the programme...the markets will take time to be persuaded," he told Reuters in an interview on Sunday at the end of a three-day visit to Indonesia.
"That 6,000 (level) is possible with a tight monetary policy, with a steady implementation of the programme, with the beginnings of a return of confidence, yes that is feasible.
"But it won't happen in the beginning. It will take time, just as it has in other countries," he said.
Michael Richardson, Singapore -- By taking control of 14 troubled banks, the Indonesian government is walking a fine line between backing a reform of the banking system that won't undermine public confidence and causing a damaging run on financial institutions, analysts said Sunday.
The move by the government to freeze the operations of seven shaky banks and take over the management of seven others is seen as crucial to reaching a new agreement with the International Monetary fund. The agreement, expected this week, will restore urgently needed loans to Indonesia in exchange for extensive economic reforms, including a cleanup of the banking sector. Since it put together a package of loans valued at $43 billion in October to shore up Indonesia's dwindling foreign-exchange reserves and help halt the precipitous fall in its currency, the IMF has been insisting that Indonesian authorities take tough measures to restore investor confidence even if they hurt companies with close connections to the government of President Suharto.
Two of the seven banks that had their licenses frozen Saturday were partly controlled by one of Indonesia's richest businessmen, Sudwikatmono, who is Mr. Suharto's cousin. Two other banks were controlled by another influential businessman, Hashim Djojohadikusumo, whose brother is a key military commander married to one of Mr. Suharto's daughters.
In addition, Mohamad (Bob) Hasan, a timber tycoon and close associate of the president who became industry and trade minister in the cabinet chosen by Mr. Suharto last month, has a substantial stake in one of the seven banks placed under the management of the Indonesian Bank Restructuring Agency.
Ginandjar Kartasasmita, the coordinating minister for economics and finance, said there should be no doubt about the government's commitment to the IMF reform package. "We need economic reform, and we will implement all the reform program seriously," he said.
The IMF withheld a $3 billion installment of the loans last month, saying Indonesia was not carrying out some important reforms it had pledged to apply.
The Fund's deputy managing director, Stanley Fischer, emerged from talks with Mr. Suharto in Jakarta on Friday expressing confidence that a letter of intent covering renegotiated terms of the loans-for-reforms deal would be signed soon.
In an interview with Reuters on Sunday, Mr. Fischer said negotiations with Jakarta were going well, but he declined to gauge the commitment of Mr. Suharto, who usually has the last word on important decisions in Indonesia. Mr. Fischer said that an IMF review team had been impressed by the "seriousness and professionalism" of the government team.
"The big question in Indonesia always is the commitment of the president," he said. "I don't think, given their record, we could make a judgment now as to how committed everybody is. The only way we can tell is as the program is implemented."
Indonesian officials said clear criteria had been used to select the 14 banks. The seven slated for closure required liquidity injections from the central bank in excess of five times their total equity and 75 percent of their total assets.
Iwan Prawiranata, chairman of the restructuring agency, said the government could not "continue to allow unsound banks to affect the normal operations of the rest of the banking system."
When the previous cabinet closed 16 ailing banks in November, the effectiveness of the move was undermined by several of Mr. Suharto's relatives whose interests were affected.
Analysts said that any such challenge this time would be a severe blow to the government's credibility.
They also said that further measures were needed to reduce the number of banks through closures and mergers, ease the burden of bad loans and strengthen official regulation.
"I think it's a good move but incomplete," said Pande Silalahi, an economist at the Center for Strategic and International Studies in Jakarta. "The government has neglected to explain what is going to happen with the remaining troubled banks."
Indicating that further moves would follow, Finance Minister Fuad Bawazier said 54 banks had come under the surveillance of the restructuring agency, which was set up by presidential decree in January.
Reaffirming the government's commitment to protect all legitimate depositors and creditors of the 14 banks under its official guarantee system, officials said deposit accounts with the seven suspended banks would be transferred to a state-owned bank and that depositors should have access to them by Monday.
The other seven banks will continue to open for business as usual, with their managements replaced by agency staff and by managers from several state banks, they said.
While analysts generally welcomed the move as a useful initial step in putting the banking sector on a sounder footing, they expressed concern over the possible impact on public confidence. They also raised the possibility of repercussions on other listed companies belonging to the conglomerates whose banking arms were suspended or taken over by the government.
Seven of the banks targeted for reform Saturday were listed on the Jakarta Stock Exchange, including major institutions such as Bank Dagang Nasional Indonesia, belonging to the Gajah Tunggal group, and Bank Danamon of the Danamon group.
The global business empire of Indonesia's first family and friends represent an intricate web of connections and concessions. George J. Aditjondro looks at how being in with President Soeharto can pay off.
Former Prime Minister Paul Keating, in a speech delivered at the University of NSW a few weeks ago, rightfully criticized the inaccurate view that had taken hold in some quarters in Europe and America that the Soeharto regime in Indonesia should be mentioned in the same breath as the late dictators Ferdinand Marcos of the Philippines and Mobutu Sese Seko of Zaire.
The family of President Soeharto has not kepts its billions of dollars in Swiss bank accounts. Or at least, not that anyone knows. Nor have the Soehartos bought luxurious properties abroad -- except perhaps Tommy Soeharto's multi-million-dollar hunting resort and lodge in New Zealand's Southern Alps.
Utilizing the expertise of many Western and Asian bankers and business consultants, the Soehartos have instead built global business empires from the wealth generated from their business ventures at home, ventures often assisted by government contracts and concessions.
One of their most important business investments is in the First Pacific Group, set up in Hong Kong 12 years ago. The Soeharto family are represented in this giant conglomerate through Predsident Soeharto's cousin, Sudwikatmono, who grew up with Soeharto in the village of Wuryantoro in Central Java.
While Sudwikatmono is only a minor shareholder in the group's main company, its huge profits topping US$ 152 million, before the crash at least, meant it was still worth a lot of money.
First Pacific's main shareholder is Liem Sioe Liong, the Soeharto family's oldest business partner, whose friendship with the President goest back to Soeharto's early army days in the 1950s. Liem heads the Salim Group, the largest private conglomerate in Indonesia and Soeharto's cousin, Sudwikatmono, is also heavily involved. One of Salim's most important arms is Bank Central Asia, the largest private bank in the country, which is one-third owned by Soeharto's eldest daughter, Tutut or Siti Hardiyanti Rukmana, and her younger brother Sigit Harjojudanto. The Liem family has just under one quarter.
Back to First Pacific. Thanks to its Filipino managing director, Manuel Pangilinan, the group aggressively invested into the Philippines, buying among others a local icon, Tanduy Distillery. As well, First Pacific also opened a string of companies in the Philippines, while a First Pacific-led consortium of 20 regional business giants is transforming Fort Bonifacio, an old Spanish monument in the heart of Manila, into a US$ 2.4 billion ($ 3.6 billion) shopping, office, and residential block.
First Pacific employs more than 45,000 people in 40 countries, including Australia. Here FPD, First Pacific Davis, the real estate and property consultancy firm, has signs sprouting on top of high rise buildings.
After accumulating their wealth from shares in Salim and other businesses, Tutut, Bambang, and Tommy, three of Soeharto's six children, began to set up their foreign business beach heads.
Benefitting from her father's profile on the world stage, especially in other developing countries, Tutut has taken a big stake in companies building and operating toll roads in Malaysia, the Philippines, Burma, and China. These roads will often not be transferred to the host countries for up to 25 years.
Meanwhile, Bambang has linked up with companies in Manila and Sydney to build water supply projects and power plants in the Philippines, Indonesia and China. More adventurously, he has also joined up with the Sydney-based Canadian mining magnate Robert Friedland in gold mining in Vietnam, Burma and Khazakstan.
Bambang and his younger brother Tommy are also expanding their Singapore-based oil and gas tanker fleets, serving the South Korean, Taiwanese and Arabic markets.
Oil is not a new business field for the Soehartos. Since the mid 1980s, the President's cousin, Sudwikatmono, along with Bambang, Tommy, and one of their cronies, the Bakrie brothers, have sold crude oil and natural gas from their Hong Kong based companies. They were the only Indonesians excempted from Indonesian law, which designated the state's oil mining company, Pertamina, as the monopoly exporter of oil and gas.
Another important business ally to the Soeharto sons, Tommy, Sigit, and Bambang, is Bob Hasan, the man just appointed Indonesia's minister for trade and industry. Hasan is a long-time friend of the President. His chief business, the Nusamba group, is 80 per cent owned by three foundations chaired by the President. The other shares are owned by Hasan and Sigit. Hasan's fortune revolves around his monopoly on the country's plywood business and he holds some five million hectares of forest concessions from the Indonesian Government.
When the IMF moved into Indonesia during the crisis, one of its demands was an end to the plywood monopoly. While Soeharto initially agreed, since Bob Hasan has been appointed to the Cabinet he has publicly defended Indonesia's monopoly of trade and so far his own plywood interests remain intract.
President Soeharto's in-laws have also flourished under the regime, especially the in-laws of Titiek, Soeharto's middle daughter, the Djojohadikusumos. Financed by their banking empire, which grew apace in the last five years under the eyes of Titiek's brother-in-law, the former Central Bank governor Dr. Soedradjad Djiwandono, the joint Djojohadikusumo-Soeharto companies have also expanded globally. Their tentacles reach from a million-hectare timber concession in Cambodia to cotton plantations and a textile mill in Uzbekistan. The Cambodian concession was revoked by Pnom Penh last January in retaliation against the cancellation of Cambodia's entry into ASEAN.
A business partner of Titiek, the Indonesian textile magnate Marimutu Sinivasan, is planning to build five textile and polyester factories in Europe through a joint venture with the German chemical giant Hoechst.
While the Soeharto kids trot the globe, uncle Sudwikatmono and Soeharto's oldest business operator, Liem Sioe Liong, expanded their own "gold mine": PT Bogasari Flour Mills and the instant noodle factories under the umbrella of PT Indofood.
The flour mills in Jakarta and Surabaya were initially set up in the early 1970s to mill all American wheat imported under the "food for peace" arrangement with the United States. Since 1977, its majority shareholder is Christine Arifin, whose husband, Bustanil Arifin, a retired general, was the head of the national food trade regulator, BULOG. Besides, Mrs. Arifin is a relative of the late Mrs. Tien Soeharto, and the Arifins sit on the boards of several Soeharto-led foundations.
For a quarter of a century, Bogasari monopolized much of Indonesia's wheat import, flour milling, and the instant noodle marketa. Two other flour milling companies in Indonesia are owned by a Soeharto foundation and his daughter Tutut.
Under this monopoly, Indonesia's wheat imports grew from less than a half a million tons in 1974 to more than four million tons in 1996. Australia is the leading supplier of this wheat.
Having control over the bulk of the flour milled, the Liem's Salim group took over 22 instant noodle factories all over Indonesia, merging them under the umbrella of PT Indofood. This wheat cartel generates lucrative profits to Bogasari and Indofood shareholders, who include foundations linked to the first family. It operates without the transparancy demanded from public and state-owned companies. As well, Bogasari charges a high price for milling the wheat compared with the costs in other countries.
President Soeharto agreed with the IMF last January to abolish this monopoly. However, as Vice President B.J. Habibie admitted last month, this is one point in the IMF agreement which the Indonesian Government feels it will be difficult to fulfill. The other is abolishing son Tommy's clove monopoly.
With high flour prices, Indofood has pushed nearly all of its competitors out of the market. Consequently, it currently controls 90 per cent of Indonesia's domestic instant noodle market.
Indonesia's high wheat import bill has also helped increase the countryis import bill for cereals to ore than US$ 1 billion. This dependence on imported foodstuff has reached disturbing levels over the past three years as wheat noodles edge out rice as a source of carbohydrate for more and more Indonesians, draining the country's foreign exchange. Indofood has further aggravated this problem by investing in overseas companies, rather than increasing instant noodle export from Indonesia. During the last five years, Indofood bought stakes in existing flour mills and prepackaged food companies in Malaysia and the Philippines, and set up a joint venture in Arab Saudi to produce instant noodles for the Arab consumers.
John Howard's recent $ 380 million special trade credit insurance to help Australian wheat exporters to Indonesia compete with US and Canadian competitors, will certainly be very warmly welcomed by the Bulog-Bogasari-Indofood wheat cartel and certainly be very welcomed by the Liem conglomerate.
But many critical voices are now being raisxed against Indonesia's wheat cartel. They include the IMF and the World Bank, but there are also voices inside Indonesia. Dr Saleh Affif, the former head of the National Planning Board, lost his job due to his public opposition to this powerful cartel. He is only one of many Indonesian economists, who have criticized it in past decades.
The combined domestic and overseas assets of the Soehartos and their close friends make them some of the richest families in Indonesia. This certainly differentiates them from the Marcoses and the Mobutus, who were only building up their Swiss bank accounts and luxurious villas overseas.
Protected by host countries' as well as international laws, the Soeharto children and grandchildren may continue to collect their rents from overseas toll roads, tanker fleets and real estate companies and global investments long after their father has ceased ruling Indonesia.
Andrew Higgins in Jakarta on the tycoon who plays golf with Suharto and keeps a firm grip on Indonesia's timber industry
Behind frosted-glass doors on the ninth floor of a Jakarta office tower, the command centre of one of the world's most reviled and resilient cartels has been gutted. The filing cabinets have been removed, the desks carted away and the phones unplugged. Gone too are the staff who managed billions of pounds of business each year for President Suharto's golfing partner.
"When they left they were crying," said Tjipto Wignjoprajitno, a former naval officer and the current commander of the crumbling linchpin of Indonesia's huge timber industry. "Outside it is difficult to get a job now. They thought they were secure. All of a sudden there was a decree from the minister and they had to leave."
Wrenching indeed has been the assault on the Indonesia Wood Panel Association (Apkindo), the innocuous cover for one of Asia's best connected agents of crony capitalism. In a country where cartels have long controlled products ranging from cloves to cement, Apkindo reigned supreme as the model of a system the International Monetary Fund wants dismantled -- a system built on sweetheart deals for the friends and family of the president.
At the apex of Apkindo stood Mohamad "Bob" Hasan, General Suharto's closest crony and regular companion at Jakarta's Ramawamangun country club. He personifies the relationships which, according to a World Bank report last year, "significantly raise the cost of doing business in Indonesia, lower efficiency, undermine international competitiveness and contribute to inequity".
Other cartels have cornered markets but none matched Apkindo's breathtaking range of operations. It decided not only how much wood companies could export and at what price, but also which shipping company, which insurance agent and which overseas distributor they used.
Mr Hasan was well placed to benefit: he has his own timber company, the Kalimanis Group, and large stakes in a shipping line, an insurance company and various overseas agents. Other key players include two of Gen Suharto's children and the military, which runs a timber business alongside its more conventional ventures suppressing rebels in East Timor, Irian Jaya and northern Sumatra.
With Indonesia plywood exports worth more than #2.5 billion last year, it was a lucrative franchise. So important is plywood to Indonesia's economy that the government classifies a product trampled underfoot on wooden floors from Tokyo to Toronto as a "strategic commodity".
In the IMF, though, Apkindo has met a powerful foe. Forced to choose between a coterie of friends and family and an offer of #25 billion to salvage the economy, Gen Suharto decided in January to plump for the money. The government ordered Apkindo's emasculation.
The removal men arrived to empty seven offices on the floor occupied by Apkindo's joint marketing boards, the enforcer of Bob Hasan's will in the timber trade.
But as with many other reforms scripted by the IMF, it has proved far less decisive than the Washington technocrats planned. A deal reached in January quickly fell apart and is being renegotiated. The IMF's hostility to Apkindo remains -- but so too do the imperatives of greed, family and friendship that underpinned its success.
Mr Hasan has given up his post as Apkindo chairman -- and taken up a new one as minister for trade and industry. He has joined the Indonesian team negotiating with the IMF and has been put in charge of a working group on structural reforms whose task is to tackle the cartels and the restrictive trade practices he helped create.
Many suspect he will try to recreate the old cartel from his new cabinet office. The temptation is strong: like most Indonesian companies, his businesses are heavily in debt. He can ill afford to surrender the privileges that made him rich.
"Bob Hasan was leader of Apkindo and now he is a minister. Do you think he is going to give up what he has? I don't think so," said Nawir Messi, programme director at the Institute of Development of Economics and Finance.
"This is a characteristic of Indonesia -- the difference between formal and informal. Don't watch what they say but see what they do."
Mr Tjipto, the secretary-general of what remains of Apkindo, insists that "nothing has changed". He denies that Apkindo operated as a cartel and claims that the now-empty premises of the marketing boards were never part of the association.
He is unable to explain why the Apkindo logo adorns their doors. "We were just friends," he said, "but of course we worked closely together."
In Indonesia, friendship counts far more than form. Mr Hasan's own intimacy with Gen Suharto dates back to the 1950s. The son of a Chinese trader, he supplied the then army quartermaster in Yogyakarta with provisions and, if normal practice is any guide, generous kickbacks.
He later converted to Islam, cementing his ties to the ruling elite -- and consolidating a reputation for opportunism. Even critics acknowledge his brash, can-do flare and say his appointment as minister has a certain logic. "He knows every scam in the book and has done most of them himself, so if anyone understands this economy he does," said a Jakarta executive. After coming to power in the 1960s, Gen Suharto repaid Mr Hasan's favours by giving him forestry concessions and helping him to expand into steel, mining, insurance and shipping.
As well as ruling the plywood cartel, Mr Hasan secured similar privileges for paper, wooden furniture and rattan. When commercial banks declined funding for a #800 million pulp mill, state banks stepped in to help. Gen Suharto attended its opening last year in Kalimantan.
Apkindo has refused to go quietly. Plywood producers can now deal directly with their customers instead of going through the association, but they are encouraged to stick together.
"Apkindo is not compulsory, only voluntary. But everyone wants to be a member," said Mr Tjipto, "If you stay outside Apkindo maybe you will have no friends. This is an association of millionaires. Rich people like to stick together."
Old instincts die hard. Soon after the government bowed to IMF pressure to trim Apkindo's role, the association announced what was widely seen as new form of extortion. Its 111 members -- plywood producers controlled by a handful of conglomerates -- were ordered to pay a supposedly refundable charge of 50,000 rupiah (about #3.50) for every cubic metre they exported.
Apkindo said it needed the cash to keep its statistics up to date. Its members were also told to stick with Apkindo-sanctioned shippers, prominent among which is Mr Hasan's Karena Lines. The demands provoked an uproar and were dropped.
After joining the cabinet Mr Hasan voiced support for the IMF's stand against cartels and promised timber exporters a free hand, then promptly undermined the message by insisting that monopolies were sometimes necessary. Apkindo, he said, was not a cartel but a self-help association.
The problem in Indonesia, and much of Asia, is that some helped themselves far more than others.
Set up in the late 1970s to control exports, and thus prices, of plywood, Apkindo became the overlord of Indonesia's entire timber industry. It was in many ways a success: it kept prices stable and defeated the divide-and-conquer practices of Japan's cartel- like conglomerates.
But it also profited some far more than others. As well as steering business towards favoured firms, it set up Apkindo- sanctioned distributors in Japan, South Korea, China, Hong Kong and Taiwan. These, too, are linked to Mr Hasan's business empire. All still have offices in the same tower block as Apkindo.
In return for such services, members had to pay Apkindo a #6 fee for each cubic metre of plywood they exported. More importantly, most producers had no idea where their wood was going or whether the money they got from Apkindo corresponded with what had been paid. "You took what they gave you and shut up," said one timber executive. "If you didn't they could take extreme measures." Producers who disobeyed could find their share of the export quota suddenly pulled or their credit lines squeezed.
The system did more than distort the market and punish would-be rivals to Mr Hasan and other well-connected holders of forest concessions. Fattened by the cartel, timber companies built far more plywood mills than the forests could sustain.
As demand for logs outstripped supply, illegal logging burgeoned. Legal operations also spun out of control, leaving vast tracts of Kalimantan and Sumatra ablaze as timber barons rushed to clear their land for industrial forests.
Ministers for forestry and the environment periodically tried to impose some order but rarely had sufficient political clout.
Whether the IMF can change this is doubtful. Apkindo is clearly not the force it once was. Mr Tjipto's remaining staff seem to spend much of their time playing computer games or reading.
But the habits of a country that revolves around golf club outings with President Suharto and his loyalty to family and friends are still alive.
"It is like in a village," said Mr Tjipto, "If you have only one cow nobody listens. If you have 100 cows you have influence and may become the village chief."
Louise Williams, Jakarta -- Automatic-teller machines ran out of cash as thousands of Indonesians raced to withdraw their savings ahead of yesterday's announcement that seven ailing banks had been closed and seven more placed under Government management, including two of the country's largest commercial banks.
The closed banks -- which had massive liquidity problems -- included two controlled by a cousin of President Soeharto and another run by the brother of the President's powerful son-in- law, General Prabowo Subianto.
The closures are the first big banking reforms since the liquidation of 16 unsound banks last October as part of the $A70 billion International Monetary Fund bail-out package. The reforms are also the first actions taken by the Indonesian Bank Restructuring Agency which was formed in January to accelerate the costly shake-out in the banking industry. The agency is now reviewing 54 of Indonesia's 200 or so banks which an economist, Rizal Ramli, says have bad loans of up to 50 per cent of total loans.
The move comes ahead of the expected signing this week of a third agreement on conditions attached to the IMF bail-out funds, following the failure of two earlier IMF economic reform programs to restore confidence in the Indonesian economy.
Analysts say Indonesia's oversupplied and undercapitalised banking sector is one of the main roots of its economic problems and in recent months the Central Bank has been propping up ailing banks with cheap loans, essentially printing more money which has a dangerous inflationary impact on the economy.
The banking sector has been hard hit by the 70 per cent devaluation of the rupiah and sharp rises in interest rates. Rates were recently increased to close to 50 per cent to slow inflation and attract deposits, meaning business loans are almost impossible to secure and banks have frozen new housing loans.
The Indonesian Government took out newspaper advertisements at the weekend urging the public not to panic, following a run on banks and automatic-teller machines that began late on Friday, and reminding depositors the Government has guaranteed the entire banking system.
In announcing the closures and the seizure of management by the restructuring agency, the Finance Minister, Fuad Bawazier, did not reveal the cost of the measures to the cash-strapped Government which must be ready to pay out all depositors or whether punitive action would be taken against the management of banks that have run up massive bad debts.
Economist Kwik Kian Gee said: "The Government is using the taxpayers' money (to guarantee the banks) but there is no indication yet that those responsible for the debts will be prosecuted."
Marian Wilkinson and Minh Bui -- While the Indonesian economy continues to shudder and Western diplomats debate how to dismantle the country's unique style of crony capitalism, a select group of Australia's farmers and businessmen is locked into the vast financial empire of President Soeharto's family and close friends.
Over the past decade they have quietly signed up deals with his inner circle, which was, until the Asian crash, one of the wealthiest elites in the world.
Mr Soeharto's five eldest children -- popularly known as Tutut, Sigit, Bambang, Titiek and Tommy -- have all joined with Australian businessmen in a range of deals from oil fields and power stations to farm chemicals and outdoor advertising.
The Soeharto children, now approaching middle age, have become some of Asia's most successful and wealthiest entrepreneurs, controlling hundreds of companies with assets worth billions of dollars.
Their success, however, has been marred by international criticism over the favoured treatment their interests often receive from their father's Government.
Among their most vocal critics have been the World Bank, the International Monetary Fund (IMF), the World Trade Organisation, and the United States Congress, which have attacked their access to government contracts and business tax breaks which have at times frozen out competitors and cost the country dearly.
But for the Australians who decided to join Mr Soeharto's children and close friends in business, the benefits appear to have outweighed any such criticisms.
Mr Maurice Brand, who heads the big West Australian public company Energy Equity Corporation, linked with the President's eldest daughter, Siti Hardiyanti Rukmana (Tutut), nearly eight years ago.
Tutut is the new Minister for Social Welfare but in 1990 she was carving out a business empire built in part on lucrative government contracts to construct private toll roads across the country.
At the time, Mr Brand was working up an adventurous project to build a $300 million power station in South Sulawesi and supply it with gas from a massive field linked by pipeline.
The idea was hatched as Indonesia was looking at privately built power stations to meet the demands of its then booming economy. Mr Brand went to the Indonesian Chamber of Commerce asking for help to find a suitable Indonesian partner for the project. The chamber in turn introduced him to a company owned by Tutut and some of her schoolfriends.
According to Mr Brand, their relationship was "excellent" and, as he put it: "They provide you with a ring fence around your projects and keep the system moving forward."
Over the next few years, Tutut's company set up numerous meetings with the government electricity company, PLN, which eventually signed a 20-year power supply agreement with Mr Brand's consortium running the new Sengkang power station.
By then Mr Brand's company had sold a stake of the power station to the US giant El Paso Energy, while 5 per cent went to Tutut's company and his own group kept nearly 50 per cent. Sengkang was hailed by the market at the time as a great success.
While the share price of his company has since taken a bit of a hit in the crash, Mr Brand says Indonesia has closed seven insolvent banks in a move to show it is serious about reforming its crisis-ridden economy.
Another seven banks with major problems will stay open, but only under a government-appointed restructuring agency.
The announcement on the weekend came just days before the IMF and Indonesia were expected to sign new terms for a $US43 billion ($65.8 billion) economic rescue package.
Meanwhile, the Japanese Prime Minister, Mr Hashimoto, speaking at the Asia-Europe Meeting in London, said Japan's economy was in bad shape. "We will take drastic measures as necessary," he said.
These will include an additional 2 trillion yen ($A22.5 billion) in special income tax cuts from January 1999, government officials said.
His comments come after Sony's chairman, Mr Norio Ohga, last week took a rare step for a Japanese businessman and lashed out at Mr Hashimoto, warning that Japan's sliding economy could trigger a world recession.
This was followed by the US President, Mr Clinton, on Friday who said: "I think we need to be both respectful but firm in urging the Japanese to take a bold course."
| Politics |
Jenny Grant, Jakarta -- President Suharto's youngest son is putting US$60,000 into a corn growing scheme in eastern Indonesia in the first family's latest project to alleviate the monetary crisis.
Hutomo Mandala Putra, estimated to be worth about US$600 million, is sponsoring a scheme for farmers in East Nusa Tenggara to grow corn, cassava and soya beans.
He has denied suggestions he wants to monopolise the sale and distribution of the crops produced. "Farmers will be free to sell their crops to anyone... our only intention is to improve farmers' living conditions with a well-prepared plan," Mr Mandala Putra told the Jakarta Post.
Rural Indonesians are turning to corn and some root crops as an alternative to rice which is harder to grow in dry weather -- Indonesia is suffering drought.
Mr Mandala Putra's eldest sister, Social Welfare Minister Siti Hardiyanti Rukmana, has collected 6.5 billion rupiah in a national anti-poverty drive. Ms Rukmana is using the money to buy food coupons for the unemployed and low income earners in a series of high profile projects.
Most of the money has been garnered from large corporations and ethnic Chinese conglomerates. The funds are being channelled directly to the Social Welfare Ministry.
The poverty alleviation programmes spearheaded by the first family appear designed to win sympathy for the highly unpopular children whose businesses include media, banking, construction, transport and telecommunications.
But Mr Mandala Putra denied there was an ulterior motive to the charity. He said his mother, the late Ibu Tien Suharto, urged him to help eastern Indonesia, the poorest part of the country, after a tidal wave struck Flores in 1992.
Mr Mandala Putra, who palace watchers say is his father's favourite son, lost his lucrative clove monopoly in reforms demanded by an International Monetary Fund US$43 billion aid deal.
| Miscellaneous |
Jakarta -- A town in Central Java province was placed under curfew after hundreds of residents went on the rampage to protest against what they said was a rigged election of a village chief, a report said. The Indonesian Observer yesterday said 10 people were being treated in hospital after Saturday's rioting in the village of Grogol.
Following the polls on Thursday, supporters of the defeated candidate boarded cars and motorcycles and launched an attack on the homes of the victor's supporters, stoning and damaging at least five buildings, said the report.
The rioters claimed the poll had been rigged, district police chief Lieutenant-Colonel Suherlan was quoted as saying.
District authorities said, however, that the election was fair