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ASIET NetNews Number 40 - October 19-25, 1998
East TimorStudents demonstrate against parliament Protesters press for regional share in oil Farmers call for Suharto to be taken to court
Political/economic crisisUN official meets Xanana Jakarta backs away from investigation US bans use of its weapons in East Timor Killings not to do with me: minister Resistance movement criticises meeting The secret troops betraying Timor
Human rights/lawIndonesia has new worry - a firming rupiah Villagers attack palm oil plantation Political conflict behind Java murders
News & issuesJournalists receive death threats Five injured after police, workers clash
Arms/armed forcesLaw incapable of prosecuting Suharto Parliament passes bill on demonstrations Government opts for joint electoral system Habibie pledges to stay on World Bank finds irregularities in projects Poor little rich kids Communist threat is scapegoat politics
Economy and investmentIndonesia shelves arms modernization plan
Creditors unimpressed by new approach Rupiah gives window of opportunity IMF, Indonesia sign new letter of intent
| Democratic struggle |
Jakarta -- Hundreds of university students protested at the Indonesian national parliament here on Tuesday, calling on the government to scrap a planned session of the upper house, the first in the post-Suharto era.
Witnesses said around 300 students from several Jakarta universities demonstrated to demand a transitional government and the dissolution of the country's legislative body.
Indonesian President B.J. Habibie, who succeeded Suharto in May, has worked to organise a session of the nation's highest legislative body, the People's Consultative Assembly (MPR), on November 10 to clear the way for fresh elections in May 1999.
The students argued that a large part of the current MPR's membership were Suharto appointees and therefore the institution could not be fair and impartial.
"The current regime is trying to give an impression that they are in line with the constitution, when it is actually trying to maintain its status quo," the students said in a statement. The protestors said the assembly session would only turn into political "theatre." Earlier student demonstrations at the parliament have called for either a fair MPR session or for the session to be scrapped.
In Tuesday's protest, the students also demanded that the ruling Golkar party make a public apology for putting the interests of Suharto's family and cronies above the interests of the people. Meanwhile, Golkar was wrapping up its three-day leadership meeting at the Jakarta Convention Centre, some 200 meters (yards) away from parliament, without making any apology for the party's past conduct.
[On October 24 the Jakarta Post reported that Petition 50 group has lashed out at Golkar over its refusal to apologise to the nation for its past conduct. At a media conference group leader Ali Sadikin said "Golkar's refusal to apologize was not only a display of its arrogance, it also demonstrates its reluctance to carry out substantial changes" - James Balowski.]
Jakarta -- At least five students and one policeman were injured after a clash Monday during a protest in front of the military headquarters in southern Sumatra.
More than 1,000 students from an Islamic colloge took part in the protest in Palembang, 460 kilometers northwest of Jakarta, said Suharyono, a lawyer of the local legal aid foundation. They were demanding the military take responsibility for the beating of two fellow students in a protest last week. No one was arrested, Suharyono said.
In the capital, Jakarta, security personnel pushed away about 100 students protesting near the presidential palace. They were demanding that some of Indonesia's oil profits be returned to their province of Riau on Sumatra Island. "We want President B.J. Habibie to fulfill his promise to return 10% of the money taken from our oil-rich province," said a spokesman for the protesters, who identified himself only as Andi.
Dozens of security personnel pushed away the protesters as they marched from the National Monument northward toward the palace. The protesters then marched about three kilometers to the office of the Legal Aid Foundation.
The protesters, who called their group the Communication Forum of Riau Students, claimed that Habibie, who succeeded autocratic leader Suharto in May, has pledged to share earnings from natural resources between the central government and provincial governments. Many groups have complained that during past decades, natural resources in the provinces have been unfairly exploited by the central government and certain well-connected groups.
Jakarta - A group of farmers evicted from their land in 1974 to make way for a cattle ranch for former president Suharto, Monday called on the attorney general to take the veteran leader to court.
Some 100 farmers from Cibedug in the slope of the Salak mountain about 80 kilometres (50 miles) south of here, picketted the attorney general's office to call for the attorney general to take Suharto to court over their forced eviction. The farmers demanded that "the attorney general investigate the wealth of Suharto and his family which was obtained through collusion, corruption, nepotism and forced land appropriation and to drag him to the proper court through the Tapos Project."
In a statement handed to officials at the attorney general's office, they said building a case against Suharto based on the forced eviction of farmers for the Tapos ranch project was "the easiest way" to start investigating the wealth of Suharto and his family. They were referring to the 750 hectare (1,853 acre) Tapos ranch project where Suharto bred and developed superior cattle for breeding and research.
The farmers have claimed that they were not compensated for some 300 hectares (740 acres) of land appropriated and developed by PT Rejo Sari Bumi (RSB) as part of the Tapos ranch in 1974.
Shortly after the fall of Suharto in May, hundreds of farmers reoccupied their land taken for the Tapos project and began replanting it with various crops. But on Saturday, 100 people in the payroll of RSB attacked farmers working on the reclaimed land, damaged the crops and burned their shacks.
The farmers in their statement also demanded that besides returning their land titles, the attorney general should also bring the attackers who had terrorised and intimidated the farmers to court. The farmers left after handing over the statement and headed to the National Land Agency to stage a similar protest.
In their statement, the farmers who claimed to represent some 500 families evicted from their land to make way for the ranch, demanded that the National Land Agency cancel land titles accorded to Suharto concerning the disputed lands or at least deny an extension of the land title when it expires in December 2000. No incidents were reported in the demonstration at the attorney general's office.
| East Timor |
Dili -- An assistant to the UN secretary general said here Wednesday he has met jailed East Timorese resistance leader Xanana Gusmao at his Jakarta jail.
"I went to jakarta to hear the comments of Xanana (Gusmao) on the results of the Senior official meeting," said Tamrat Samuel, the UN secretary general's assistant on political affairs for Asia and the Pacific.
Samuel, who was speaking to journalists here, was referring to a meeting between senior officials from Indonesia and Portugal in New York on October 6-8, to discuss Jakarta's proposal for wide- ranging autonomy for East Timor. "We had a good discusion... Xanana (Gusmao) also gave a positive reception to the senior official meeting," he added. He said he met Gusmao on Tuesday at Jakarta's Cipinang jail where he is serving a 20 year sentence for plotting against the state and illegal possession of weapons. Tamrat, who arrived in this main town in East Timor, earlier Wednesday, said he planned to meet another key East Timorese leader, Roman Catholic bishop Carlos Ximenes Felipe Belo here on Thursday.
He said his consultations with Gusmao and Belo will provide inputs for the next meeting of the senior officials, scheduled for November 19-21. He declined to elaborate.
In a letter published Wednesday by The Washington Post, Gusmao said although Indonesia' offer of autonomy for East Timor was progress, "it is not a serious proposal as long as it does not ultimately allow the East Timorese to decide their own political fate by means of a referendum." Gusmao also called on the United Nations to monitor the pledged withdrawal of Indonesian troops from his homeland, which he said "is empty unless the United Nations regularly verifies that reductions are actually taking place." He said East Timorese resistance groups were reporting exactly the contrary, that thousands of new Indonesian troops had arrived in the former Portuguese colony over the past few weeks.
Don Greenlees, Jakarta -- Indonesia backed away yesterday from claims President B. J. Habibie offered to open an investigation into the killings of the Balibo Five during the initial, covert phase of the invasion of East Timor in 1975.
Quoting Dr Habibie, presidential aides said Indonesia would be "quite open" in dealing with any new allegations about the deaths of the journalists, but did not want to jeopardise relations with Australia or the peace process on East Timor.
Senior government sources, describing an investigation as "politically unwise", said earlier that an Indonesian-initiated inquiry was unlikely to be undertaken despite the fresh claims suggesting a cover-up by military commanders. "Frankly, the military is already in a bad shape and one more accusation against them at this time may make them feel there is an effort, not just nationally but internationally, to corner them," one source told The Australian yesterday. "The President should be careful about saying something that pleases a foreign government but alienates him from the military at home."
The signal that Jakarta was reluctant to conduct its own investigation came as doubts were raised over whether Dr Habibie at any stage promised an inquiry. British Minister of State for Foreign Affairs Derek Fatchett claimed he had received an assurance from Dr Habibie in Jakarta that inquires would be initiated.
But Indonesian and foreign diplomatic sources said yesterday that Mr Fatchett had only raised the issue as he was walking out the door at the end of a meeting with Dr Habibie on October 8.
Quoting Dr Habibie, presidential spokeswoman Dewi Fortuna Anwar said Dr Habibie had told Mr Fatchett Indonesia was concerned about human rights and if there was a formal request for information "the Government is quite open".
"The President also cautioned that in looking at the past we must not endanger a very good relationship between Indonesia and Australia and we must not endanger the peace process on East Timor," Ms Fortuna Anwar said. Controversy over the deaths of the five Australia-based journalists -- two of whom were British citizens -- has been reignited by fresh testimony from an East Timorese man that he saw Indonesian troops shoot four of the men and stab the fifth in the town of Balibo on October 16, 1975.
The witness, Olandino Guterres, claimed the then field commander and now Information Minister, Yunus Yosfiah, gave orders for the killings. Lieutenant-General Yosfiah has denied any involvement. Diplomatic sources suggested it might be difficult for John Howard to avoid raising the issue with Dr Habibie during a visit to Jakarta, tentatively scheduled prior to the start of the Asia-Pacific Economic Co-operation leaders' summit in Kuala Lumpur next month. Dr Habibie has sent two letters to the Prime Minister since his re-election stressing the need to strengthen bilateral ties.
Washington (Agencies) -- The United States on Wednesday banned the use in East Timor of weapons supplied to Indonesia and continued a ban on education and training aid to the Indonesian Armed Forces. President Bill Clinton signed the restrictions into law as part of a massive US$500 billion catch-all spending bill sent to him by Congress on Wednesday, which included US foreign aid programs.
With this legislation, Washington stated that any weapons sold to Indonesia could not be used in East Timor, Reuters said. "This could be the most support any Congress has shown for East Timorese rights since Indonesia first invaded it in 1975," the East Timor Action Network said.
Indonesia insists East Timor integrated into the country in 1976, one year after it entered the territory to help quell a local civil war. The United Nations still regards Portugal as the administering power of its former colony.
The group's Washington representative Lynn Fredriksson said the action was seen as a signal to President B.J. Habibie and the Indonesian military that the United States continued to find "the occupation of East Timor unacceptable". Indonesian Armed Forces (ABRI) spokesman Maj. Gen. Syamsul Maarif could not be reached for comment on Thursday.
Training between the two countries is banned under a program known as International Military Education and Training (IMET) but continues under a separate program known as Joint Combined Exchange Training, run by the Pentagon.
The US administration has defended the training against congressional criticism as a way to enhance American military readiness and increase US engagement with Indonesia. Congress cut Indonesian military participation in IMET in 1992 in response to the November 1991 shooting in Dili, the East Timor capital.
United Nations Secretary-General Kofi Annan said on Thursday pro-independence violence appeared to have died down in East Timor. Annan, who last week appealed for an end to violence in East Timor, also said UN-mediated talks with Indonesia about the future of the territory appeared to be going smoothly.
Anti-Indonesian protests broke out after Governor Abilio Jose Osorio Soares told civil servants they risked being fired if they opposed Indonesia's proposals on granting autonomy, but not independence, to East Timor. "We were worried about the violence that we noticed in the (East Timor) region," Annan told a news conference during a visit to Tokyo. "From the accounts that I'm receiving, it seems that it has died down but I can't say that it is entirely over," Annan said. He said the UN also wants Indonesia to cut its troop numbers in East Timor and release political prisoners as part of a peace settlement. "They (Indonesia) have indicated that will be done, so we will be monitoring that very closely," Annan said.
ABRI recently pulled out combat troops from the territory, and those who remain are said to be involved only in community development programs.
Antara reported on Thursday that the United Nations assistant to the secretary-general, Tamrat Samuel, had made a sudden visit to Baucau, some 130 kilometers east of Dili, to meet with Bishop Basilio do Nascimento.
Bishop Basilio was among the organizers of last month's talks among East Timor figures in Dare. The meeting issued the Dare communique which among others recognized two aspirations regarding East Timor: the preference for a referendum and the preference for the government's proposal of special autonomy.
Samuel arrived in Dili on Wednesday and had talks with local government officials, proautonomy groups and Dili diocese Bishop Carlos Felipe Ximenes Belo.
By Louise Williams in Jakarta and James Woodford in Canberra -- A senior minister in the Habibie Government has flatly denied new allegations that he supervised the killing of five Australian- based journalists in East Timor, but President B.J. Habibie has promised to re-examine the deaths during the 1975 Indonesian invasion.
The Minister of Information, Lieutenant-General Muhammad Yunus Yosfiah, said yesterday: "I am not involved in that case, I deny the allegation, I never got any information about the journalists, I never met the journalists."
ABC TV's Foreign Correspondent program aired an interview last night with a witness to the killings, who said the journalists were shot and stabbed at Balibo under the direct command of the then Captain Yunus Yosfiah, of the elite Red Beret force.
On Saturday, the Herald reported the evidence of two witnesses interviewed in East Timor who added their backing to claims that the five journalists did not die as the result of "cross-fire in the heat of battle", as an Australian Government report claimed.
The new evidence adds to the weight of other witnesses who have previously come forward in Australia and Portugal saying the leaders of the attacking force knew of the presence of the journalists in Balibo and planned to eliminate them. It also casts further doubt about the conclusions of the 1996 Sherman Report, which found that it was likely the Balibo five were killed in the heat of battle.
"People can say anything they want, I wasn't involved, that's it," General Yunus said in Jakarta yesterday, clearly annoyed by journalists' questions.
Foreign Correspondent reporter Jonathon Holmes said: "The eyewitness says that four of the journalists were shot. One was knifed in the back trying to surrender. "After their deaths the five newsmen's bodies were stripped of their civilian clothes and dressed in military uniforms left behind by Fretilin [pro- independence] defenders. The bodies were posed with machine-guns and photographed by, among others, the officer in command, Captain Yunus Yosfiah. The bodies were then burnt in the same house."
The journalists who died at Balibo on October 16, 1975, were Greg Shackleton, Gary Cunningham and Tony Stewart, of Seven News in Melbourne, and Malcolm Rennie and Brian Peters, both of National Nine News.
Earlier yesterday the British Embassy in Jakarta confirmed that Dr Habibie had promised the British Government it would re- examine the case, in response to a recent request from the Foreign Office. Peters and Rennie were British citizens.
General Yunus maintained there was "no need" to reopen the investigation, and denied the new allegations could damage his career as part of the reformist Habibie Government. He has been actively distancing himself from his earlier role in hardline military operations, and as information minister has presided over the opening up of the media.
In Canberra, the Foreign Minister, Mr Downer, refused to comment on the latest allegations, but on reports that Dr Habibie would reopen the Balibo investigation, said he would welcome such a move.
Sydney -- East Timorese leaders in Australia criticised on Thursday Indonesian Foreign Minister Ali Alatas two-day meeting with about 60 East Timorese representatives in Bali earlier this week. The representatives of the East Timorese resistance movement complained that they had been informed for the meeting, which began on Thursday, a mere 24 hours in advance.
East Timor's highly respected Roman-Catholic Bishop Dom Ximenes Belo declined an invitation to take part in the meeting, saying that it was "not useful to talk about reforms at a time when military operations are still going on." Benidicto de Silva, a member of the East Timorese students Solidarity Council, told the Spanish news agency EFE there could be no reconciliation and dialogue "as long as the Indonesian military presence in East Timor continues." Zacarias da Costa e Milena Pires of the Timorese Democratic Union (UDT) also criticised the meeting in Bali, pointing out that none of the members of the Timorese National Resistance Council had been invited to the meeting.
The Indonesian authorites have said the meeting was meant to outline a plan to grant a measure of autonomy, but not independence, to East Timor. A government spokesman said earlier this week that 39 East Timorese representatives supporting Indonesian rule and 19 representative who "want to break away" had travelled to Bali to take part in the meeting headed by Alatas.
The spokesman for the Indonesian government confirmed that the winner of the 1996 Nobel Peace Prize, Bishop Belo, would not attend the meeting. Belo is widely regarded as the occupied territory's spiritual leader.
The meeting in Bali took place amid news reports claiming that Indonesian troops members in East Timor had recently been raised following a partial withdrawal earlier this year. There have also a number of reports of armed clashes between Indonesian occupation troops and East Timorese freedom fighters.
Ghaffar Fadyl, spokesman for Indonesia's foreign ministry said on Thurday the East Timorese attending the meeting had "appreciated what Alatas explained to them" (regarding Indonesia's autonomy proposals for the troubled territory), adding, "but it is not yet known what their views are on the proposals."
Louise Williams, Los Palos -- Less than two weeks after the brass bands and media circus of Indonesia's "goodwill" withdrawal of combat troops from East Timor in July, a big barge slid silently to shore under the cover of darkness on the lonely, distant coast to the east.
Here the locals usually retreat into their scruffy thatch huts as the sun sets over the brilliant turquoise ocean and endless white-sand beaches, their lives long defined by the grinding cycle of poverty, war and military abuse.
But, on the night of August 8 this year, villagers in the coastal settlements of Com and Lautem heard the soldiers coming back. Those who ventured out say at least 20 trucks full of commandos and marines crawled slowly up the winding road into the mountains, their lights off.
Ten days later, another barge of soldiers was seen heading through the crystal waters to the crumbling Portuguese port town of Lore. In May, with the fall of the Soeharto Government, the East Timorese had been buoyed by the first hopes of peace for 23 years, under promises of reform by the incoming President, Dr Jusuf Habibie. By June, talks between their spiritual leader, the Nobel Laureate, Bishop Carlos Belo, and President Habibie had secured a promise of a gradual end to military occupation and a search for a new peace formula.
The East Timorese Governor, Abilio Soares, spoke from the docks of Dili of Indonesia's "honour" as hundreds of troops boarded ships to leave in July. But this week, Bishop Belo and the UN Secretary-General, Kofi Annan, were forced to call again for an end to Indonesian military activity. In Dili, a senior military officer confirmed troop numbers had not been cut. Those withdrawn during July's public relations exercise had been replaced. "It is correct we haven't reduced numbers. This is just a normal troop rotation," said Lieutenant Colonel Supadi, Chief of Staff in Dili, after the city was shut down by three days of protests over the new military operations.
There are reports of paramilitary groups being re-armed, fanning fears of civil war, says an informed Catholic Church source. He adds: "It seems nothing much has changed. The troops were withdraw for a while, but now they are back. The people were told not to go out into their fields because the soldiers would be carrying out operations in the bush."
| Political/economic crisis |
Andrew Marshall, Jakarta, -- Crisis-ridden Indonesia is not short of worries on the economic front, but policy makers are now grappling with an unexpected new concern -- is the beleaguered rupiah bouncing back too strongly?
President B.J. Habibie has hailed the rupiah's gains as a sign of newfound confidence in Indonesia. The currency climbed to 6,975 against the dollar this week, recapturing levels not seen since early February, before the political and economic turmoil that accompanied former President Suharto's fall sent it reeling. Analysts agree that the rupiah's recent rise is good news for indebted Indonesian firms, and will allow the country's crippling interest rates to fall to more tolerable levels. But they warn that exporters now face a tougher challenge, and that the most important goal of exchange rate policy should not be a stronger currency but a more stable one.
Chief economics minister Ginandjar Kartasasmita said on Wednesday he hoped the rupiah would not climb beyond 5,000 to the dollar as this could hurt exports, and he regarded the best equilibrium rate for the currency as between 7,000 and 8,000. The rupiah, which stood at around 2,400 to the dollar in July 1997, has traded as low at 17,000 this year.
Ginandjar's comments sparked a rupiah retreat on Thursday, with dealers saying it seemed the authorities were uncomfortable with a rate stronger than 7,000. Analysts said they expected the central bank would stop converting dollars from aid and loans into rupiah, something which has helped lift the currency in recent months. Ginandjar told Reuters on Thursday authorities would not act to halt the rupiah's rise. "The government will not interfere if the rupiah strengthens beyond 7,000," he said. "(Bank Indonesia) will continue to buy rupiah to convert its dollar loans."
Bank Indonesia Managing Director Miranda Goeltom also stressed the government would not stand in the way of a firmer rupiah, and said further strengthening beyond 7,000 was likely.
Many analysts remain pessimistic about the rupiah's longer-term prospects, saying it could easily tumble from its recent peaks. They say a sustainable rate must be found if economic recovery is to take root, and that rate would be weaker than current levels. "The key word is stability. It's not just that a strong rupiah is good," said Alex Wreksoremboko, head of research at Merrill Lynch in Jakarta. He said the rupiah's gradual strengthening between July and September provided a relatively stable environment for business. "The last two weeks have destroyed the image of stability created between July and September. Now we are all left guessing again and you cannot expect new employment opportunities to be created, you cannot expect new investment in this sort of environment. It concerns me the rupiah is volatile again."
He said a strong rupiah need not be a major burden for exporters, as the price of imported raw materials would also fall. But without stability, firms would find adjustment hard. "I have been worried because it seems the strengthening of the rupiah is hurting the one sector of the economy that is still working, the only engine left -- the export sector," he said.
Sani Hamid, analyst at MMS Standard & Poor's in Singapore, said an ideal scenario for the rupiah would be a short-term stabilisation at or slightly above current levels to ease debt repayment and allow production to restart, followed by a creeping rupiah depreciation to allow exports to be boosted.
"But achieving this ideal scenario will be very hard," Hamid said. "In the very short term it could go to 6,500 or even 6,000 if the stops are triggered. But in the next three to six months it's hard to see how it can sustain these levels." He said maturing short-term corporate debt, plus worries about instability ahead of elections due to be held in May, were likely to rattle the rupiah and could push it back to around 11,000. Analysts agree that one benefit of the rupiah's gains is that it provides room for interest rates to ease further. But they warn that expectations the stronger currency will spur debt repayment may be premature.
Chia Woon Khien, head of Asian research at SEB in Singapore, said the corporate sector would find debt repayments tough anywhere above 5,000 rupiah. Desmond Supple, director at Barclays Capital in Singapore, said few firms would be able to afford repayment even if the currency climbed to 6,000.
"For a certain group of companies which are bankrupt, of course a stronger rupiah is good," Wreksoremboko said. "But do we really want to save this group of people only? In my view what is important is creating employment, and the private sector will not move unless the rupiah is stable."
Padang -- About 2,000 angry villagers attacked an Indonesian palm oil plantation, burning down all the buildings at the company's base camp, reports said Monday.
The attack on the PT Tri Argo Adhiniaga (TAAN) company in the West Sumatra district of Limapuluh Kota, some 120 kilometres (75 miles) north of here took place on Saturday, district police chief Lieutenant Suhardi Sigit said.
Attackers from the nearby village of Mangilang burned a security post and the gate of the palm oil plantation on the main highway linking West Sumatra to neighbouring Riau province. The mob then went to the base camp some three kilometres into the plantation, wrecking wooden bridges along the way, and burned several buildings at the camp, including housing for soldiers deployed by the authorities since September. The some 40 soldiers stationed there were forced to leave the premises by the crowd. "All remaining buildings there were burned down and all (palm oil) seedlings in the nursery were ruined," Sigit said. Sigit said villagers were angered by statements made by TAAN president Saleh Ismail on television on Saturday which labelled them as "destructive and irresponsible," he said.
He said the villagers were also angered because the company continued to operate despite a suspension order by West Sumatra Governor Muchlis Ibrahim on October 7. Ibrahim temporarily suspended the company's operating permit pending settlement of a drawn-out dispute between the company and the villagers.
The villagers claim the company was not only felling forests in the region but also dumping the waste from the felling into the river. Villagers, who rely on the river water for their daily needs, have been complaining of serious skin irritation.
The attack was the fifth on the TAAN plantation. In the previous attack on October 3, two people were injured. In September, thousands of villagers attacked the base camp, damaging and burning vehicles and buildings there, prompting the deployment of the soldiers.
Jakarta -- Indonesia's military chief, echoing the leader of the country's most influential Islamic movement, said conflicts among the country's political elite were behind more than 150 murders in East Java, a report said Monday.
"I agree when it is said that this is because of a conflict between the political elite. There are certain political interests which want to make use of the current difficult situation for their aims," General Wiranto said according to the Kompas daily. Wiranto, speaking in a meeting between authorities in East Java and local civic and religious leaders in Banyuwangi, a town in the eastern tip of Java, said the conflict had caused suffering for the people.
Abdurrahman Wahid, who heads the country's some 30-million-strong Nahdlatul Ulama Islamic (NU) movement, Saturday said his group already knew the "puppetmaster" behind the wave of killings, but mentioned no name. Wahid, who is better known as Gus Dur, said the motive of the attacks "is to incite NU members. They want to create national instability, thereby disrupting plans to hold general elections in 1999."
Most of the attacks have been directed at suspected warlocks but prominent local NU members have also been targetted and Gus Dur said the murders were done "neatly and in a very organised way," with professionals sent from Jakarta to either carry out or organise the killings.
"ABRI (the Indonesian armed forces) promises it will try to unveil who is the mastermind behind all these problems," Wiranto said. "ABRI is certain of its current capabilities and will certainly find those behind all these problems," he added.
However, he declined to speculate on the rumors that personalities close to President B.J. Habibie were behind the violence saying "I do not want to send the country toward disintegration.
Speculation in East Java about the killings has also fingered the military, or members of the nation's second largest Moslem movement Muhammadiyah. But the military and the police, who have been criticised for being unable to stop the killings, have denied involvement.
Wiranto also said he expected the trials of those caught for murders to begin before the end of this month. Police have already arrested at least 125 people following the murders, reports have said.
The tension that has gripped several districts in East Java following the killings has spread to provincial capital Surabaya, the Jakarta Post daily said. On Sunday, thousands of members of an NU task force were deployed to guard Moslem preachers in and around Surabaya, the daily said.
Killings of suspected warlocks have since also spread to West and Central Java. On Sunday, hundreds of people in Banjarnegara, Central Java, attacked the house of a man suspected of practicing black magic. The house was damaged but the man escaped, the daily said.
Habibie who took over from former president Suharto after the latter resigned amid rising public pressure on May 21, has pledged wide ranging reforms that include fresh elections for May 1999.
Gus Dur said Saturday the violence was intended "to maintain the status quo" by causing splits among Indonesian Moslem movements (NU and Muhammadiyah) ahead of the elections.
But, popular socio-political observer and talkshow host Wimar Witular was quoted by Kompas daily as saying the East Java killings was also part of ploy to divert attention from the issue of corruption and collusion against former president Suharto.
The wealth of Suharto is currently being investigated by a government team to see whether any had come from corruption, collution and nepotism.
The murders have raised both domestic and international concern, including from visiting US Assistant Secretary of State for East Asia and the Pacific Stanley Roth who took up the subject during his meeting with Habibie on Friday.
| Human rights/law |
Surabaya -- Following threats made to Moslem preachers by unidentified people here, journalists have been warned that they will be among the next victims in the killing spree which has so far claimed more than 150 lives in East Java. The threats were printed on flyers and circulated widely among the public in the provincial town of Jember. "We have been smeared by reports of the killings, so it will be better if we eliminate the reporters from Jember," one of the unsigned flyers said. East Java Governor Irnam Utomo said Tuesday he would guarantee the personal safety of journalists reporting on the gruesome murders.
Meanwhile, witnesses said that dozens of mysterious drifters recently turned up in Jember, Banyuwangi, Surabaya, Malang and Pasuruan. They were reportedly handed over to the authorities by local residents. In a gruesome wave of revenge, angry mobs decapitated a number of people suspected of being "ninja killers" and carried their severed heads on poles through village streets in Malang on Sunday and Monday.
Vigilante groups were formed after more than 150 people were mysteriously murdered by what witnesses have said were masked killers dressed in black. Many of the victims were preachers and others were accused of practicing witchcraft. Following frustration over the apparent inability of the police and the military to bring the mysterious murder spree to an end, there have been numerous reports of mob violence and killings of suspected "ninjas" in recent days.
Police have arrested dozens of people in connection with the murders, but say they have been unable to established a motive for the killings that first began in August. Minister of Defense and Security/Armed Forces Commander Gen. Wiranto said in Jakarta on Monday that 69 of the 157 suspects so far detained were members of Nahdlatul Ulama -- the country's largest Islamic organization whose members appear to have been targeted by the so-called "ninja killers."
NU leaders have called for calm and have condemned revenge killings by vigilantes. Wiranto has also said that conflict among the country's political elite might be behind the murders.
In Jakarta, Antara reported that Achmad Tirtosudiro, the chairman of the Association of Indonesian Moslem Intellectuals (ICMI), expressed regret on Tuesday over allegations made by Nahdlatul Ulama chairman Abdurrahman Wahid, who on Sunday said that at least one Cabinet minister was involved in the killings. "A Moslem figure should have not talked like that," Achmad told reporters at the State Palace after meeting President B.J. Habibie.
Abdurrahman, better known as Gus Dur, said on Saturday his group had identified the mastermind behind the wave of killings but mentioned no names. Achmad said that after learning from sources that Abdurrahman was referring to cooperatives minister Adi Sasono, he checked with the minister. "Gus Dur's statement was absurd and impossible. Adi Sasono said Gus Dur was joking," he said.
Jakarta -- At least five workers were injured and 35 others were being interrogated after a clash Friday between police and protesting workers in northern Sumatra, a Indonesia's human right group said Friday.
The clash in the North Sumatra capital of Medan, occurred as about 700 workers of PT Latex Indotoba Perkasa, who were on a strike, asked the company management whether they could be allowed to return to work. However, dozens of policemen who have already guarded the glove factory, pushed the workers away, said Ridwan, a lawyer at the local Legal Aid Foundation.
The workers have began the strike some days ago, demanding higher pay and other improvements. "Four workers were injured by rubbers bullets," he said. "The other one was believed to be beaten after being taken to a police station." Police officials weren't available for comment.
According to Ridwan, 35 protesters were brought a police station for interrogation and none of them was released so far. In a letter to the local police, the foundation strongly protested what the described as "inhumanly treated" of the workers.
The Friday clash was the first in the Indonesia's third largest city since May, when thousands took to the streets in protest over price hikes. At least five people were killed and dozens were injured by gunfire.
| News & issues |
Jakarta -- Indonesia's legal mechanism is incapable of prosecuting ousted president Suharto, alleged to have amassed wealth during his 32 years in power, an Indonesian group fighting corruption said Wednesday.
"Our legal mechanism is very inefficient and not functioning. The thief is there, the stolen goods are also there, but it cannot exterminate the culprit because its weapon can only shoot no more than two meters," said coordinator of the Indonesian Corruption Watch (ICW), Teten Masduki.
Masduki said the only alternative to prosecute Suharto for his alleged abuse of power to enrich his relatives and cronies, was through the political mechanism. He said the country's highest legislative body, the People's Consultative Assembly (MPR), should make a "political judgement" based on the allegations and evidence that have already been laid out by several independent anti-corruption groups.
"MPR then must issue a decree to confiscate the massive wealth of Suharto, his relatives and cronies which have caused great loss to the country, the national economy and more important, to the people," Masduki said in a press conference here after releasing ICW preliminary findings on Suharto's alleged corrupt practices.
He also called on Suharto's successor President B.J. Habibie to appoint a special prosecutor who should be granted "full authority" to bring up corruption charges against Suharto, his family and cronies. Masduki said although the government has reviewed and revoked numerous presidential decrees issued to benefit Suharto's relatives and cronies, it has so far failed and been reluctant to follow up with legal steps. "Revoking presidential decrees and cancelling contracts equal to allowing and removing sins without punishments. The government is making a big mistake in its efforts to eradicate corruption," Masduki said.
The ICW listed at least 39 decrees issued by Suharto between 1980-1998 which it says should be enough evidence to prosecute the former president on the base of abuse of power. Another anti-corruption group, the Indonesian Society for transparency said last week that it had identified at least 79 decrees, out of more than 500 that Suharto had issued in the last five years of his rule, which smacked of corruption, collusion and nepotism. The ICW also said at least 44 multinational companies were involved in Suharto-linked projects and businesses, including US-based Kellog, Chase Manhattan Bank and Bechtel, Japan's Chioda and Mitsubishi Bank, as well as France's Credit Lyonnais and Banque Indosuez.
Jakarta -- The Indonesian parliament Thursday passed a new bill that controls demonstrations and protests in the country, which is being plagued by violence and protests.
The bill, submitted late last month by the government, was passed during a plenary session of the 500-member parliament, also attended by Justice Minister Muladi and Armed Forces Commander Gen. Wiranto, who also is minister of defense.
"It has gone through a long and grueling process," Wiranto said after the session. "Finally, it was fully accepted by both the parliament and the government." Departing from the original draft, the new bill doesn't limit the number of protesters, but requires the organizers to name those responsible for every 100 participants.
It also allows demonstrations, rallies and public gatherings outside the presidential and vice presidential palaces, house of worships, military installations, hospitals, airports and seaports, train stations and bus terminals, within a certain radius.
Protests would only be permitted at a 100-meter radius from the palaces' fences; a 150-meter radius from the military installations; and a 500-meter radius from other strategic sites. Labor strike and freedom of expression in the media as well as religious and campus activities were excluded from the bill that bans protests during national holidays.
There is no need for police permits, but the organizers have to notify the police three days in advance at the latest, and one day in advance for any cancellation. The police are obliged to guard the protests. Otherwise, they can face either criminal, civil or administrative sanctions.
Jakarta -- The government stood its ground during the deliberation of its three political bills on Wednesday insisting that next year's general election use a combination of district and proportional representation systems. Represented by Minister of Home Affairs Lt. Gen. Syarwan Hamid in a hearing with the House of Representatives, the government insisted that it wanted the Armed Forces (ABRI) to stay in the legislature. The government also dismissed suggestions that it should be excluded from the National Elections Committee and the Indonesian Electoral Committee in order to ensure an independent poll.
Syarwan argued the government was completely ready to prepare for the "May or June poll". Besides, he said, the proposed "independent" National Elections Committee (KPU) need not wait until January (when the bills are expected to be passed into law) to launch the election's preliminary stages. "Actually, the preparations for the poll have started," Syarwan said, but did not elaborate. The election -- planned by both President B.J. Habibie's government and the House to be held either in May or June -- will involve the participation of many new parties. It is also expected to introduce greater democratization after 32 years of "Soehartoesque democracy", when elections were often rigged in favor of the dominant Golkar grouping -- which was supported by the powerful Armed Forces (ABRI) and the bureaucracy.
Political scientists and non-Golkar legislators have raised doubts about the government's proposed electoral system. Some have said the system was designed to give Golkar -- with its well-established chapters and branches across the country -- a head start.
Critics have proposed that the existing proportional representation system be retained but with a thorough overhaul. They also suggested that the government's involvement in the organizing of the poll be ended.
According to the bills, next year's poll is expected to elect 4g5 House members -- with 428 elected through the district system (215 for Java and Bali, 213 for the rest of the country) and 67 through a proportional system. Syarwan argued the number 428 reflected a "very fair result considering the balance of population and regions". "So, establishing the lines of electoral districts will only be done within a regency, and not beyond that. From the 1998 (national) regency population data, if the quota for an electoral district is 600,000 people there will be 24 regencies that will need to have more than two districts," he said. Syarwan did not name the 24 regencies.
Syarwan also expressed on Wednesday the government's intention to retain 55 House seats for ABRI, claiming it was "the national consensus". The 550 House members will also be members of the 700-strong People's Consultative Assembly (MPR). The remaining 150 appointed members will be regional representatives (81) and social groups' representatives (69). The United Development Party (PPP) faction has criticized the plan because the 81 regional representatives will be hand-picked by the regional legislative councils elected in the 1997 general election during Soeharto's regime. "Don't exaggerate, please," Syarwan said in his response on Wednesday.
He argued that if Golkar lost the election, the regional legislatures would not dare pick "Golkar people" to be sent as regional representatives to the House.
In the hearing presided over by Hari Sabarno of the Armed Forces faction, Syarwan said the government had taken steps to ensure a free and fair poll. The House on Wednesday established an 87- strong special committee to deliberate the bills in detail. They will resume the reading of the documents after the special session of the People's Consultative Assembly (MPR) on Nov. 10 to Nov. 13.
Jakarta -- Indonesian President B.J. Habibie said he would not step down before 2000, as surveys published Thursday indicated the nation had mixed feelings on whether he should hang on or go now. "If I met demands for my resignation during the special MPR session next month, I would precipitate the end of democracy in the country," Habibie was quoted as telling visitors to the state place Wednesday.
Habibie, a long-time protege of fallen leader Suharto, was referring to repeated calls from student protestors to quit because he is too closely identified with Suharto's 32-year regime. Students, and some opposition reformists, also argue that the presidency was confered on him by Suharto on May 21 when the former president stepped down and not by the People's Consulative Assembly (MPR), as stipulated under the constitution. "I must not stop, not be afraid of (student) rallies as they are a part of democracy," the Antara state news agency quoted him as saying.
The MPR, the nation's highest legislative body meets in November to pave the way for the first elections since the fall of Suharto in May of 1999. The elections in turn will empower the MPR to appoint a president and vice president.
Limited opinion surveys, assessing Habibie's performance in the five months since Suharto stepped down, appear to give him a temporary reprieve, but not beyond 2000. The noted weekly magazine Tempo, in its findings, said 76 percent of Indonesians did not want Habibie re-appointed as president at the end of next year.
But the Tempo survey showed that 60 percent thought he should stay on until the new government is in place either in late 1999 or January 2000. Only 28 percent believed he should quit next month and nine percent said he should leave now.
"Amid the turbulent situation such as now, it is best that we follow through with the existing regulations. A change of power would only worsen the situation," an East Jakartan resident identified only as Prasetyo, was quoted by Tempo as saying. The poll, a joint effort between Tempo and an independent market research group Insight with input from 499 respondents from five Jakarta districts, showed only 22 percent saying Habibie should be reappointed next year.
Another opinion survey released by the Central Board of the Islamic Students' Association (PBHMI) and reported by the Merdeka daily on Thursday gave Habibie more positive points -- 47 -- than negative -- 28 -- for his performance in the political, economic, legal and cultural fields.
The 21 positive points earned in the economics field included the recent lowering of food prices, the freezing of three troubled banks' operations, and the scrapping of corrupt contracts with state firms, the report said.
PBHMI chairman Anas Urbaningrum said Habibie earned 10 black marks in the economic field, including for a lack of action taken against owners of troubled banks and the rupiah's continued weakness against the dollar. Pluses in the political sector included his apology for human rights abuses committed by the Indonesian military and his willingess to be criticized for his shortcomings. Negative sentiments lingered however over the mystery surrounding the whereabouts of 14 activists kidnapped by the military before Suharto's fall May 21.
The Tempo poll, with a sampling error of five percent, was carried out in stages with a combination of direct and phone interviews. It showed that 80 percent of respondents see Habibie as still part of the Suharto regime. Among the reasons given for rejecting a second term for Habibie were that he lacked public support (71 percent), had failed to erase the image of the Suharto regime (61 percent), and was unable to solve the current economic crisis (57 percent).
Defending his assumption of the presidency and his relationship with Suharto, Habibie, a German-trained engineer, said Wednesday that although Suharto had been his guru, his own "brains and heart" were what led him.
Jakarta -- The World Bank said Friday that a recent investigation conducted by the bank and the Indonesian Ministry of Education uncovered deficiencies and irregularities in the construction of World Bank-financed schools recently completed in East Java and West Sumatra.
The World Bank said it found that work was incomplete or sub- standard at 18 recently built schools in East Java. "This was found to be the case although local officials had signed off on the constructions as being complete and one-hundred percent satisfactory," the bank stated.
Meanwhile, in West Sumatra, the Ministry of Education found that some contractors had used funds improperly and some schools weren't completed according to contract specifications.
Dennis de Tray, World Bank country director for Indonesia, said: "It is unfortunate that at the very time Indonesia needs to make sure all children are provided school places, we are presented with a situation that requires the closure of new schools because they were poorly constructed," de Tray said.
The World Bank said the director general of primary and secondary education issued a clear warning to all provincial authorities that construction contracts must be awarded in accordance with the required transparency standards and completed according to specifications.
Louise Williams -- It is almost a pathetic image. Once they were the most powerful family in the land, accustomed to trotting the globe in their private aircraft and slicing up the national economy in their opulent living rooms, squabbling over contracts like children sharing out cake.
Now, insiders say, the Soehartos are virtual prisoners in their own homes, rarely seen in public. Their lifestyle has been reduced to clutching the television remote control, and their homes are sealed off by tanks and troops. Only the former president of Indonesia's parrot has failed to acknowledge his master's rapid fall from grace, still greeting him every morning as "Bapak [Father] President" at his home in the leafy, colonial suburb of Menteng in central Jakarta.
When the Habibie Government finally announced it would seek "clarification" of the wealth amassed by Soeharto during his 32 years in power, a lone bunch of flowers was carried past the soldiers and the bored journalists camped out at the roadblocks that ring the complex where much of the extended Soeharto clan live. The note said simply "Perseverance", and was signed by an ordinary family from the city's middle-class outskirts.
But that is where the sympathy ends. Many of the members of the elite who benefited handsomely under Soeharto have betrayed him, calculating that their own survival depends on distancing themselves from the old man.
"I am very sad to see those who were licking Soeharto's boots now harassing him and claiming to be reformists just to save themselves," says one former political ally, who himself jumped off the Soeharto ship just weeks before it sank.
A recent survey carried out by the University of Indonesia found that 74.6per cent of Indonesians believe that Soeharto was lying during a broadcast on his daughter's television station last month in which he claimed to have "not one cent" squirrelled away in accounts overseas. And more than 95per cent of respondents said he should "account" for the "various deviations" during his rule.
Since Soeharto's resignation, amid the chaos and violence of the riots in Jakarta in May, an old taboo has been broken. For decades public discussion of Soeharto's affairs was tantamount to treason. Now, newly liberated tabloids drool over the latest scandals: this week a popular TV soap opera star said she had given birth to the illegitimate child of Soeharto's socialite grandson, Ari Sigit, when she was only 16. She was, she claims, paid a small fortune for her silence and an agreement to hand over the baby to Sigit's aunt. Now, five years later and burdened by regret, she says the cheque was never cashed and she wants her son back. (In any case, the cheque was drawn on one of the family's banks, which has collapsed).
One insider says that the wife of Soeharto's second son, Bambang Trihatmodjo, was snubbed by other mothers when she picked up her children's school report cards recently. Her husband, meanwhile, was lining up to be questioned by police over financial crimes and is banned from leaving the country.
The Soeharto grandchildren, the source says, have been taunted by their former friends and street vendors alike. "I think they were caught by surprise by the weakness of their friendships. Now, they are very much ignored. I think they are considered a social problem, a liability to be associated with," says Rizal Ramli, an economist.
Some old associates says Soeharto's six children, all of whom built business empires during his rule, are frightened by the almost daily demonstrations against the clan's wealth, despite a deal cut with the armed forces for "protection". Others say the children are furious about the Government's decision to investigate their father's wealth and are determined to obstruct the proceedings. They are also said to be obsessively collecting articles written about them since their political demise.
They have been forced to resign from all their positions within the ruling Golkar party and the Parliament. But Soeharto still holds the key to the party's war chest, refusing to sign over more than 800billion rupiah ($175million) locked inside several of the charitable foundations set up under his government and used to channel political "donations" from business associates.
They have resigned from high-profile positions in their own companies, and domestic and foreign business partners who once considered their signatures gold are now rushing to dump them.
The economic crisis -- combined with the end of privileged access to contracts -- has wiped out the share values of the former first family's companies. Scores of politically sensitive contracts with Soeharto companies have been cancelled.
From news of what the family has lost since May, a picture is emerging of what they had, and how they obtained it. The list of deals is overwhelming; land swaps that gave the children valuable blocks of government land in central Jakarta in exchange for rice fields on the city limits, government-owned shares sold at a huge loss to a Soeharto family company, incredible oil trading monopolies which netted profits of between 20 and 70 US cents a barrel in a country that exports 1.4million barrels of oil a day -- and even monopolies on the processing of driver's licences and the charter rights for the annual Haj pilgrimage.
But in his handful of appearances since May, Soeharto has appeared confident and defiant. He has repeatedly denied he has any money to hide. Bambang has joined in, claiming the economic crisis has ruined his extensive businesses and that he can no longer be called a rich man. "Indonesia's case is unique: the toppled leader is still here," says a noted economist, Syahrir. "In the Philippines the Marcos family fled; so did the Shah of Iran.
"No matter how absurd it seems, Soeharto still thinks he can manage this country in one way or another. Imagine somebody who spent 32 years in power, everything he said became the law of the country, he was surrounded by people who served his will and those he didn't like he just threw away."
Soeharto is a shrewd and intelligent man. Many analysts believe he may not have "even one cent" deposited under his own name. It is also clear that the Soeharto fortune -- estimated at anywhere between $US4billion and $US40billion -- has been greatly diminished by the economic downturn and the collapse of the family's biggest economic asset, political power.
How much of the money was moved offshore in advance under powers of attorney remains unknown, despite claims from Austria that the Soehartos may have been behind a sudden $US7billion jump in foreign deposits during the first quarter of 1998. Another mystery surrounds the huge fire in the brand new central bank building earlier this year, in which tens of thousands of financial documents were destroyed.
But perhaps more important is the question of just how determined the Habibie Government is to investigate the Soeharto fortune. When B.J. Habibie accepted the mantle of leadership from Soeharto, it was like an aging mentor passing the baton to his younger protege, so close were the two men. Habibie, like many of Soeharto's former political allies, benefited greatly during his mentor's rule.
On the one hand Habibie's tenuous hold on power demands that he be seen to be accounting for the excesses of the past; on the other, the business interests of the Habibie family and the Soeharto children overlap in at least three areas.
"Soeharto had a couple of months before the investigation was announced to tie up loose ends. Any cash that could be traced is now untraceable. They covered their tracks very well, is my guess," said one diplomat. "I think he went on television [denying his wealth] to throw out a challenge to Habibie: "Push me too hard and I will come out with evidence that you benefited too.'"
One former Soeharto business associate said: "They are just sitting there, trying to look cool, sweating it out, under the protection of the army. They are taking the attitude that "This is my story, I am sticking to it. You think I am a thief, then prove it.'
"But the people on the streets will get angrier and angrier. So Soeharto is under a kind of house arrest. Yes, he can go anywhere he likes, but people will throw rocks at him. Remember, these are people who used to fly anywhere they wanted in their own planes - now they are just holding the television remote controls."
Siti Hardiyanti Rukmana, or "Mbak [sister] Tutut" as she is better known, is sick from the stress of it all. Just over six months ago Soeharto's eldest daughter was the darling of her father's ruling Golkar party, energetically criss-crossing the country as party chairwoman, head of the Indonesian Red Cross, and then Minister for Social Affairs in her father's last Cabinet.
As Soeharto's eldest child she was often favoured by father, accompanying him at official public functions after her mother died in 1996 and sharing his passion for politics. There was even speculation that he was building a political dynasty, with Tutut his immediate heir.
In public she was careful to project a conservative image, her head covered with a Muslim scarf, albeit fashionably toned to match her modest dress. Those close to her say she fancied herself as the "mother of the nation" and she was genuinely fond of children and concerned for their welfare.
Privately, though, the gossip was less kind. Tutut was widely rumoured to be close to a senior retired general, who was not her husband, and behind the scenes at home she was said to fight viciously with her younger brother, Bambang, over the business opportunities her father could bestow.
When Tutut was just 21, she became a shareholder in Bank Central Asia, controlled by her father's buddy Liem Sioe Liong, who became Indonesia's richest man under Soeharto's patronage. From that humble base grew her own business interests expanding into an empire straddling toll road constructions and operation, finance, oil, petrochemicals, agribusiness, television and banking. In 1997 the book Asia's Wealth Club listed Tutut -- now 49 -- as worth $US2billion.
"Tutut is at home resting. She is ill from all the stress," said another source, mentioning the scandal of Ari Sigit's alleged "love child", whom Tutut has been raising. She may also be feeling quite unwell over the state of her business affairs.
In July 1997, the shares under her control in her publicly listed toll road company, Citra Marga Nusaphala Persada (CMNP), were worth about $US286million. Last week they were worth about $US1million. The collapse in First Family shares goes way beyond the impact of the 75per cent depreciation in the rupiah, and reflects investors' concern that the company may eventually become the target of corruption investigations.
"If you look at CMNP's balance sheet, their best asset was "goodwill' from the Government. Now that is gone," said a finance industry source. Indonesia's drivers were also caught in Tutut's financial net when they processed their licences. According to a police source, only 4,500 rupiah per licence went to the state from the 52,500-rupiah processing fee charged by a company owned by Tutut under a five-year administration contract signed with the national police. That contract is now under review.
In June this year Tutut missed a $US6.3million interest payment on $US175million worth of bonds. A company spokesman said banks had been "reluctant" to change her rupiah into dollars to meet the deadline. Hong Kong's Peregrine Bank had already collapsed, forced to the wall by a $US450million bad debt owed by the Steady Safe taxi and bus company, in which Tutut had a interest.
Her own 17.5per cent interest in the Bank Central Asia didn't help. A huge run on the bank, as well as the torching of many of the BCA branch offices during anti-Soeharto rioting, emptied its coffers and exhausted the central bank's willingness to print money. Seventeen per cent of all the money within the Indonesian banking system was withdrawn in one week. The Habibie Government took over the management of BCA. Now Liem Sioe Liong is trying to wrest back control by handing over much of his own business empire to the state. None of his assets in which a Soeharto also has an interest are on the payback list, so Tutut's is not part of the recapitalisation.
Her plans, says insiders, are to return quietly to the rural villages of Java and hand out food to the poor and money to the local schools. Less is known about the emotions of her two most prominent brothers, but a great deal is slowly being revealed about their businesses.
"These are people who always used other people's money. There is no doubt that over the years they became richer and greedier and their father lost control over them. People used to take their businesses to them on a platter," said the former Soeharto associate. "Now they have to compete, and even if they do have some legitimate businesses to offer no-one wants to deal with them. "To their credit, they were personally always very polite to deal with."
They were also obsessively private. Said one business consultant: "Deals were done at home. Once the consultant had made the presentation, he left. Even one of my wealthy colleagues was astonished at the number of cars and the opulence. He was even more surprised when a pet tiger came padding through the living room."
Not so polite were the men known as the "underlings". According to Jakarta sources the family's business pimps operated on commission, and would simply report back when another deal was done. An Australian expert on Asian business, Michael Backman, has identified 1,247 separate and active companies in Indonesia alone which count one Soeharto or another as a significant shareholder.
"If you were at the mercy of the underlings they would kick you around something terrible. They applied terrible pressure in the name of Bambang or Tommy and made all sorts of threats to ruin your business if you didn't comply," the former associate said.
Bambang Trihatmodjo, 46, was worth an estimated $US3billion last year. Last week he was called in by police for questioning over banking crimes and has been banned from leaving the country. The charges against him relate to exceeding the legal lending limit at his now liquidated Bank Andromeda, essentially meaning he and his business partners used depositors' money to fund their own big petrochemical project, Chandra Asri.
Bambang's flagship Bimantara Citra has more than 100 subsidiaries with interests in telecommunications, broadcasting, oil and gas, the automotive industry, infrastructure, finance, electronics and entertainment. Bambang's 388million shares in the publicly listed slice of his empire were worth $US759million in June 1997. Last week they were worth about $US580,000, trading at only 150 rupiah per share, or 2.5 Australian cents each.
"This is a really, really unprecedented loss on the share value, and that doesn't include the company's performance itself. Bimantara has lost a lot of contracts, the auto division is facing an 80per cent contraction in the market, the Chandra Asri deal is a financial time bomb," the former Soeharto associate said.
Even his magnificent luxury Dharmawangsa Hotel, set in lush gardens in south Jakarta, is eerily empty, its opening last year coinciding with the economic collapse. Now his luxury Grand Hyatt hotel in the city is being snubbed in favour of hotels with less obvious crony connections.
One of the biggest cash cows for the Soeharto boys was Pertamina, the state oil and gas monopoly. One senior oil industry executive says Tutut once approached him for a contract. "I told her to talk to Bambang, and he told her to back off, that is how they divided things up. I didn't hear from her again," he said.
How the First Family, and other cronies, milked the Pertamina system is a long and complicated story. Simply put, they acted as brokers for Pertamina, which has a monopoly on imports and exports of oil. Indonesia is a significant oil producer and exports about 1.4million barrels a day, but at the same time imports about 350,000 barrels a day of a cheaper oil type for its domestic market.
Pertamina announced it was cancelling trading contracts with two companies, one part-owned by Bambang, the other part-owned by Soeharto's youngest son, Hutomo "Tommy" Mandala Putra. The Minister for State Administrative Reform, Hartarto, once a cosy political ally, announced that Pertamina would save $US82.76million a year simply by not dealing with the Soehartos.
Arifin Panigoro, head of the Medco group of companies which controls oil fields off Sumatra, believes the family accumulated huge amounts of American dollars after entering oil trading in 1984. "All the oil goes through family companies assigned by the Government, so they get a fee," he said. "But they also got involved in the spot market. When they made a profit they took it; when they made a loss it was booked to Pertamina. I think now we can reduce the brokerage fee by 30 cents a barrel."
Another executive from a large international oil company found himself assigned to Bambang as a 10per cent partner. "The rules are that when a field is declared commercial by both Indonesia and the oil company, then an Indonesian interest takes a 10per cent stake. Pertamina chose the partner, and we got Bimantara."
Technically, such a partner is expected to put up 10per cent of the capital. But Bimantara didn't pay. "We had a lot of arguments and we decided to carry them, which means they pay back the money out of their share of the oil, plus a heavy penalty. They still haven't earned any money, so maybe they just wanted to be in oil for the prestige."
Another disaster for Bimantara was Pertamina's insistence that Bimantara be allowed to build the East Java gas pipeline, using a $US400million loan from Japanese banks to be paid back using the "tolls" for gas transport. The project was delayed by two and a half years and completed in 1994. The problem now is that the pipeline's biggest gas customer, the state electricity company, PLN, is virtually bankrupt and can no longer pay the "toll", so Bimantara can no longer pay the Japanese banks.
For Tommy, the youngest son, business has never been worse. Insiders say he was the family's "lucky charm", and, as such, indulged by his father. Last week the Habibie Government presented Tommy with a bill for unpaid taxes on his Timor car project. This was the so-called "national car", fully imported from South Korea with exclusive tax concessions in exchange for a promise to increase the local content of the vehicle on an annual timetable. The project never went beyond stage one. Only $US200million of a $US700million loan facility arranged through state banks was drawn down, but now the cash- strapped Government wants the tax paid back. One consultant estimated the tax bill at $US168million.
Early on in the economic crisis, Tommy also lost Indonesia's main private airline, Sempati, which he ran in conjunction with a foundation controlled by the armed forces. The American dollar leases on the aircraft could not be met, so they were flown back to their owners one by one.
At the same time, demonstrations by airport staff prompted the cancellation of a lucrative cargo handling contract held by Bimantara. At the insistence of the International Monetary Fund Tommy lost the outrageous clove monopoly under which he had controlled the key ingredient of popular kretek cigarettes.
Tommy was also forced to sell his 60per cent stake in the luxury Italian sports car company Lamborghini, which fitted the bachelor image he promoted before his recent marriage.
Pertamina has announced the cancellation of a joint venture with Tommy's Humpuss group to operate a petrochemical refinery, and is renegotiating down the cost of using a tanker fleet owned by Tommy and his eldest brother, Sigit Harjoudanto.
According to George Aditjondro, a sociologist who has been compiling an inventory of Soeharto's wealth for years, one of the family's most viable remaining businesses is the tanker fleet, now based in Singapore and out of reach of Indonesia's zealous reformists.
The fate of Sigit's estimated $US450million is far less clear, as is the 1997 valuation of $US200million put on assets controlled by Soeharto's second daughter, Siti "Titiek" Hedijanti Harijadi, who has real estate and retail interests, and the $US100million estimated for the youngest daughter, Siti "Mimiek" Hutami Endang Adiningsih, who has interests in plantations and transport.
Sigit's name was most frequently heard in connection with "Bob" Hasan, Soeharto's golfing buddy and high-profile deal maker. Hasan lost his own cash cow to the IMF reforms. This was a timber cartel that handled three-quarters of the world's plywood exports for a fee. Both Sigit and Hasan hold a 10per cent stake in an investment company, known as Nusamba. The remaining 80per cent is owned by three foundations controlled by Soeharto.
Indonesia's charitable foundations, or yayasans, are the missing links in any investigation of the Soehartos' wealth. Roderick Brazier, of the Castle Group business consultancy in Jakarta, estimated the 13 foundations controlled by the family to be worth about $US2billion.
According to Syahrir, the economist, the creation of the foundations in the early 1970s was the beginning of the distortion of the national economy. They were established in the name of certain charities - foundations for asthma, for school and mosque construction, and scholarships, for example - and were not subject to tax or to external audits. The Government then approved the compulsory deduction of a small percentage of the wages of civil servants and members of the armed forces, and deductions from state banks as donations.
"They started taking deductions from the salaries of 3million civil servants in the 1970s up to the late 1990s, so of course they took a lot of money away. Then, with such huge amounts of money they [the family and other cronies] sometimes used the foundations as banks at a low interest rate to build a project allocated by the state," Syahrir said.
Most of the foundations were used for business investment, and many foundation names appear on projects in Indonesia, according to a senior Golkar source. The accounts were not open to public scrutiny. "So, if you wanted to do business you donated to a yayasan controlled by Soeharto or his friends, then that money could be used for political campaigns or the accumulation of personal wealth," the source said.
The regulations enforcing compulsory deductions have been abolished, but executives of the four largest foundations controlled by Soeharto have refused to pass their funds to the Government and have insisted they will continue with their charitable work.
The most contentious of these is the Dakab foundation, set up in 1985, to finance Golkar, and now subject to protests over its use for "unfair" political gain. According to a Golkar source the assets of the foundation are at least 800billion rupiah. The remnants of Soeharto's Golkar group now want the money for their own election campaign next year, but Soeharto is refusing to budge.
HOW much money do the Soehartos really have left? Up to $US18billion, says the Indonesian Business Data Centre. Between $US8billion and $US10billion, says the Castle Group. "Anyone who claims to know cannot possibly know," Michael Backman said. "For a start, it is still not clear exactly what they have. Secondly, most of their assets are in Indonesia and all asset prices in Indonesia have collapsed, so this would have a big impact on the family's wealth. Also, many assets were only of real value while Soeharto was in power, and are not tradable. If pressed, I would say well under $US10billion."
The Jakarta-based consultant Hidayat Jati said: "Whether he has X billion dollars or not doesn't really matter. Everyone is looking for this lost treasure chest as if everything will be OK when they find it. But, even if Soeharto does have $US40billion, this is a structural problem for the economy and confidence won't return unless that is addressed.
"How did a president push around banks and force them to finance questionable projects? How did the Timor car get approved? The way the First Family did business was a structural problem."
Soeharto's old friends in the new government have been careful not to call the recent rounds of questioning "an investigation", but a "clarification", coming almost apologetically to his house with the news.
Within Indonesian society, it is true, there is considerable reluctance to humiliate the former president, both because he presided over long years of economic growth and because the habit of obedience to such absolute authority dies hard. The same cannot be said for the children. No such public service is tempering the public's demands for accountability.
Can an investigation succeed? Of course, says Suharsono Hadikusumo, a tax expert and former senior Finance Ministry official. "I worked in the Finance Ministry in 1990. I knew the following: Bambang Trihatmodjo applied to the Finance Minister to take over the shares of PT Intirub, a state-owned tyre company. The minister established a team of experts to assess the value of the 1,000 shares.
"They put the value at 7 million rupiah per share. Some time later the Finance Minister sold the shares to Bambang for 1million rupiah each, and the state suffered a loss of 6billion rupiah. Bambang then resold the shares to the Salim group, certainly at a huge profit. It was a very easy money-earner."
Suharsono says the records are still in the Finance Ministry archives and could easily be investigated if the political will were there. He also points to highly profitable land swaps of state land for developments by family members, saying all the records are still available.
"The public pressure for bringing Soeharto to court is increasing," said Rizal Ramli. "I don't think Soeharto and Habibie made a deal, but Habibie knows that it is in everyone's [the elites'] interest to protect each other. But if someone comes to power without emotional and historical connections to Soeharto it might be different." TITLE: Freeport controversy may keep investors away
Business Times - October 21, 1998
Shoeb Kagda, Jakarta -- The ongoing controversy between one of Indonesia's largest foreign investors and the country's legislators is threatening to undermine the country's standing among foreign investors, and could disrupt its long-term economic revival.
Amid allegations of corruption, the House of Representatives (DPR) Commission Five on Monday demanded that the government renegotiate its contract of work (COW) with gold and copper mining company PT Freeport Indonesia in Irian Jaya to secure greater benefits.
The demand, if carried out by the government, could have a chilling effect on future foreign investments in Indonesia especially in the lucrative mining and oil and gas sectors, an analyst told BT. The House Commission Five for mines and energy said it would set up a team to assist the government to renegotiate the COW with PT Freeport in the near future. The COW is due to expire in 2022.
The commission also urged PT Freeport's parent company, US-based Freeport McMoran Copper & Gold Inc, to comply with the divestment terms of the 1991 COW which obliges it to sell up to 51 per cent of its shares to Indonesian companies or the government within 20 years of signing the contract. But new investment regulations introduced in 1994 eased mandatory divestment requirements for foreign companies.
"We are very worried that such demands will be extended to other projects if the legislators find problems with the approval process," said one Western investment adviser who is working closely with the government to attract foreign capital. He added that legally, the COW signed by PT Freeport is water-tight but that political motives were behind the calls in Parliament. "It seems to me that certain people who were excluded from the deal with PT Freeport are frustrated and are therefore putting the heat on Mr Ginandjar and the project."
The controversy was triggered last week by US political analyst Jeffrey Winters who said that Ginandjar Kartasasmita, the Coordinating Minister for Economy, Finance and Industry, should not head the government's anti- corruption campaign due to accusations of collusive practices concerning PT Freeport during his tenure as mines and energy minister from 1988 to 1993.
Mr Ginandjar has vigorously denied these accusations and voluntarily handed over data and files containing information on the Freeport agreement to the Attorney-General's Office on Monday.
Political analyst and former cabinet minister H S Dillon, however, noted that at the heart of the issue is a move, by certain political factions aligned to President BJ Habibie, to discredit Mr Ginandjar and his team ahead of next month's special session of the People's Consultative Assembly (MPR).
"The current cabinet has been put together by Mr Ginandjar and if he is removed because of this episode, than the Habibie camp will have a free hand in forming its own cabinet. With this attack on Ginandjar, the bugle has been blown and the battle has begun," he said. Mr Dillon added that although foreign investors were not the direct target, they could be scared off if the government back-pedals on its contracts due to political motives.
In a written reply to questions from BT, PT Freeport denied that there had been any corrupt or collusive practises involved in the negotiation and signing of the agreement. The statement added that contrary to the press reports, the DPR concluded that it would only review the internal distribution by the government of the taxes and royalties paid by the company and not the contract itself.
"Freeport Indonesia's COW, like all approved COWs, has no clause allowing either signatory to reopen, or renegotiate the terms of the contract," the statement noted. The company was the largest corporate taxpayer in Indonesia in 1996, paying US$273 million in taxes, royalties and dividends to the government. Last year, the company paid US$187 million (S$302.9 million) in taxes and an additional US$50 million in royalties and dividends. "In addition, Freeport voluntarily provided US$33 million for social programmes that benefited the local area around our mine," said the statement.
Jakarta -- Few people in this country buy the Armed Forces' (ABRI) warning of a possible communist comeback, believing that the Indonesian Communist Party (PKI), outlawed since 1966, has been used as a convenient scapegoat when no other answers are available according to a survey jointly commissioned by The Jakarta Post and D&R weekly magazine.
The survey asked 1,130 people in five major cities between Oct. 6 and Oct. 10 the question of how they saw ABRI's claim that the PKI was actively maneuvering behind the scenes to wreak havoc on the country.
"There is no other scapegoat but the PKI" received the largest vote, with 36 percent of the respondents ticking the answer. That the warning was "a force of habit by ABRI" was the next most popular answer, with 31 percent. Nearly 19 percent of the respondents said ABRI's warning was based on accurate political intelligence and 1.4 percent believed that PKI had subverted the country's political system.
The survey by the Resource Productivity Center was given to 250 people in Jakarta, 225 in Surabaya, 215 in Yogyakarta 225 in Bandung and 215 in Denpasar. It sought to determine people's attitude to the recent repeated warnings particularly those made by ABRI, that communism was making a comeback.
In the latest claim, the military said the mysterious killing spree which began in the East Java town of Banyuwangi was the work of descendants of PKI members. The killings targeted Moslem religious teachers and people who were said to have practiced black magic.
Earlier, the military said recent protests organized by Forkot, an alliance of student senates from several universities and colleges in Jakarta were "communist" inspired The same accusation was leveled against the People's Democratic Party (PRD) two years ago when its leaders were rounded up by the military and later jailed.
PKI was the largest communist party outside the communist bloc when it was crushed and outlawed in 1966, six months after the Army blamed it for engineering an attempted coup against then president Sukarno. The abortive coup itself set off bloody clashes between communist and noncommunist forces that left hundreds of thousands of people dead.
Since then, the military has constantly warned the nation of a latent danger of a communist revival. But, as the poll shows few people in this country believe that the threat really exists. The respondents were divided on why the issue of the communist threat had persisted to this day.
More than 22 percent believed that, as an ideology, communism was still very much alive. More than 20 percent said the issue was being kept alive by the New Order regime as a way to justify its policies. Another 18 percent said the issue was alive because it was difficult to erase the memory of PKI brutality. Yet another 16 percent said the issue was being used to intimidate people, and 16 percent said it was part of the government's policy of divide and rule. When asked, whether they believed ABRI's claim that Forkot and PRD had been subverted by PKI, 73 percent gave a definite "no" and only 23 percent said yes. Similarly, 75 percent of the respondents disagreed with the view that radicalism was synonymous with communism.
Respondents who believed that the communist threat was part of ABRI's political engineering were asked for the possible reasons. "It's a tool to quell the opposition" came top with 37 percent, next came "a tool for the New Order to preserve power" with 28 percent and 24 percent said the threat was used to intimidate people.
Of those respondents who did not think that ABRI was engineering the communist threat, 51 percent said communism always flourished amid poverty and 46 percent said communism still existed and could stage a comeback.
When asked what it was about communism that was deemed threatening, nearly half of the respondents said the ideology precluded the existence of God. More than 43 percent said communism justified all means to achieve its ends, and 33 percent said communism was not compatible with the national identity. Another 18 percent say communism's greatest threat is that it does not recognize private property. The totals exceeded 100 percent on some of the questions because respondents were allowed to tick more than one answer.
The latent danger of communism came third when people were asked what they considered the greatest threat facing the nation, with 20 percent of respondents ticking it. Topping the list was the prolonged crisis with 56 percent and national disintegration with 41 percent. Seventeen percent of the respondents ticked ABRI's dual function.
The government's attitude toward the communist issue is currently ambiguous. Last month it dropped the requirement for all TV stations to broadcast Pengkhianatan G30S/PKI (The Betrayal of the September 30 Movement/PKI), a dramatization about the abortive coup. The film had been a compulsory program for all stations on every Sept. 30 since its release in 1984.
The Ministry of Education and Culture has now agreed to review the official record of the Sept. 30, 1965 affair and the ensuing developments that led to the downfall of Sukarno and Gen. Soeharto's rise to power in 1966.
Yet as far as the government and military are concerned, the communist movement is still a major threat. This is most apparent in the political bill currently being debated by the House of Representatives. The bill, drawn up by the government of President B.J. Habibie still requires candidates running for elected public office to prove that they were never involved in the communist movement. In the past, this entailed tight screening conducted by the military.
The survey did not find significant differences between the answers provided by respondents in the l9-to-34 age group--who made up 71 percent of the respondents--and the older respondents who experienced the turbulence of the mid-1960s.
| Arms/armed forces |
United Nations -- Indonesia, grappling with a severe shortage of hard currency, has been forced to slash its defense spending and shelve an ambitious military modernization program.
"Given the state of our economy, it would be the height of irresponsibility to continue with our arms purchases," Indonesian Foreign Minister Ali Alatas told IPS today. The only exception would be an order for 16 British Hawk fighter aircraft already in the pipeline. "Our first priority is to put our economy back on track," Alatas said. "We have no plans for any major weapons purchases." The biggest single casualty of the cash crisis is a proposed $500 million arms deal with Russia under which Indonesia was to buy 12 Sukhoi Su-30 fighter planes and eight Mil Mi-17 military helicopters. The Russians also were hoping to offer sophisticated radar-guided air-to-air-missiles and air-launched anti-ship missiles, pushing the overall cost of the arms package to an estimated $1 billion. A sizeable part of Russian package was to due to be paid under a barter agreement between the two cash-strapped nations. The Indonesians were going to "exchange" tea, palm oil, coffee, textiles and cement for Russian military equipment. But with the lingering cash crisis in Jakarta and a $40 billion bailout package from the International Monetary Fund (IMF) and other Western donors, the Indonesian government couldn't possibly justify the arms deal -- barter or no barter.
Indonesia also was expected to postpone plans to purchase about four used submarines from Germany which were negotiated in August 1997. Prices of the submarines were not disclosed.
Last month, the British government agreed to guarantee payments owed by Indonesia to British Aerospace Company for 24 Hawks purchased in September 1992 and an additional 16 contracted in December 1993. The aircraft are in the process of being delivered. Indonesia's military spending, which reached $3.1 billion in 1996 and $3.3 billion in 1997, has been reduced to an estimated $2.5 billion in 1998. If the planned military modernization program continued as scheduled, the country's defense budget was expected to average about $3 billion to $4 billion annually through the turn of the century. According to the Washington-based Arms Control and Disarmament Agency (ACDA), the biggest arms suppliers to Indonesia were Germany and Britain.
Between 1993 and 1995, Indonesia ordered $110 million worth of arms from Germany followed by $100 million from Britain and $70 million in arms from the United States. In September the US Senate voted to curb the sale of arms to Indonesia if the weapons were intended to be used in the disputed territory of East Timor. The Indonesian armed forces are already equipped with a variety of US weapons systems, including F-16 fighter planes, Boeing maritime patrol aircraft, Lockheed C-130 transports and Bell and Sikorsky combat helicopters.
In June 1997, Indonesia backed out of a planned purchase of nine additional F-16 fighters from the US and canceled its participation in the US International Military Education and Training (IMET) program primarily because of Congressional criticism of alleged human rights violations by the Indonesian government and the armed forces.
| Economy and investment |
Henny Sender, Washington -- There were low expectations on both sides when the Indonesian delegation at last week's International Monetary Fund-World Bank talks held a breakfast meeting to present creditors with Jakarta's latest plan to deal with its corporate sector's huge debts.
"All we wanted was to give a better explanation of the situation and get sympathy and ask everyone to cooperate in restructuring," said Finance Minister Bambang Subianto. "We didn't target new money." It was just as well. If comments at the meeting were anything to go by, the gulf between Indonesian debtors and their creditors remains as wide as ever. This exists despite the Indonesian delegation's brave words about the latest proposal -- called the Jakarta Initiative -- for dealing with the private-sector part of the country's estimated $140 billion in foreign debt, and recent amendments to the bankruptcy code. (Private-sector debt is about 50% of that total.) 'Quick fixes'
"The changes [in the bankruptcy law] are contradictory and inadequate," said Veronica Taylor, associate director of the Asian law center at the University of Melbourne, who specializes in bankruptcy and is involved in a training program to help Indonesian judges understand the subject. "These are quick fixes being grafted onto an institutional infrastructure that is dysfunctional."
The question marks over the private sector's massive debt and the efforts to deal with it show just how difficult it will be to put corporate Indonesia on the road to recovery.
The Jakarta Initiative merely suggests the procedures for negotiations between debtors and creditors. The government is concerned that if creditors force Indonesian firms into bankruptcy, the chances of an economic recovery become even more remote. "You need to restructure companies, not to liquidate them," said Richard Gitlin, chairman of US-based law firm Hebb & Gitlin and an adviser to the Indonesian government. "And if you liquidate companies, you kill the banks."
Few Indonesian companies have made payments on their foreign debt since the rupiah plunged early this year. That's because the depreciation has caused debt repayments in rupiah terms to balloon. At the same time, debtors and creditors haven't come to any agreements on debt restrucuturing. Mr. Gitlin told the breakfast meeting that several new debt-resolution procedures, such as the ability of creditors to implement out-of-court agreements in 45 days, will speed up resolution of the stalemate in negotiations.
New organization
He also noted that the government is setting up an organization to simplify regulatory approvals of foreign stakes in local companies, debt-for-equity swaps and new share issuance. He added that the government is establishing "facilitators" to address bankers' concerns, and an advisory committee with representatives from the banks. But even Mr. Gitlin had to concede that corporate borrowers and their lenders aren't speaking the same language. "Creditors say, 'We own the debt so we own this company,' " he noted. "The debtors, meanwhile, say 'Why should we agree to swap debt for equity when the rupiah is so low? We're not going to give away our company just because we are insolvent.' " Bankers at the meeting complained that they weren't speaking with their borrowers at all, let alone in a different language. And that was only the beginning of their complaints. "Creditors have no idea what is going on," said an official from Bank Berliner. "The information is insufficient. The whole process is still shrouded in mystery." In fact, creditors seemed far more interested in the bankruptcy procedures than in any alternative to them. "Debtors still have the mindset of, 'You have no power over us so why should we sit down with you?' " said the credit officer for a Japanese merchant bank. "So we at least need the bankruptcy code to get debtors to the table." These are early days to question the workings of the new commercial court that was set up in Indonesia as part of the amendments to the bankruptcy law. But there are concerns there as well. "You have to start from scratch," said Ms. Taylor of the University of Melbourne. "The new judges don't understand how commercial restructuring works in the world of common law. And then, of course, there is the question of enforcement."
`No precedents'
Moreover, she said, in many cases claims over collateral could also prove thorny. "In many cases, creditors never registered the security. They sometimes didn't take it or never considered the possibility that security may disappear. And under Indonesian law, it isn't clear what you can liquidate. There are no precedents. It's all untested." Still, many bankers take a more sympathetic view of the situation. "Indonesia is trying to do everything at once," said Morgan McGrath, regional manager for Southeast Asia with Chase Manhattan Bank in Singapore. "I'd love to see the bankruptcy law built up as a credible threat. But at the same time, if you want the medicine of reform, you have to make sure it doesn't kill the patient. It's a tough balance."
Andrew Marshall, Jakarta -- The rejuvenated Indonesian rupiah broke through the 7,000 level against the dollar on Wednesday for the first time in more than eight months, providing a ray of hope for an economy crushed by crippling debt and interest rates.
Analysts warned, however, the currency's strength was more due to temporary technical factors than any major reassessment of economic and political risk in the crisis-ridden country.
But they said the rupiah's gains created a window of opportunity for the government to push through the reforms needed to kick- start the economy. The crucial questions are how long the rupiah can sustain its gains, and whether the government proves willing and able to seize its chance. "If they fail to utilise this moment Indonesia is in trouble," said Budi Hikmat, economist at Bahana Securities in Jakarta.
The rupiah was quoted at 7,150/7,250 at 0745 GMT after earlier hitting 7,000 for the first time since February 12, before the economic and social chaos surrounding former President Suharto's fall from power dragged it downwards.
The currency sank as low as 17,000 in June as Indonesia reeled from the political uncertainty and economic damage caused by the mass unrest that accompanied Suharto's resignation on May 21. But over the last two months the currency has mounted a steady comeback, vaulting the crucial level of 10,000 to the dollar early this month. A rupiah recovery to 10,000 in the fourth quarter of 1998 was a crucial assumption of Indonesia's reform programme agreed with the International Monetary Fund in June.
Analysts say there are several reasons for the rupiah rally:
Many analysts say the currency could reverse direction and head lower in the months ahead, particularly if social unrest flares up around a meeting of Indonesia's highest legislative body, the People's Constitutional Assembly (MPR), on November 10.The government has been converting billions of dollars in foreign loans and aid into rupiah, in a thin market where even one million dollar positions can affect the exchange rate. Interest rates remain very high despite recent falls. Dollar demand has weakened because both the government and private sector have cut back on their servicing of foreign debt. Most companies have stopped making debt payments and a deal struck with the Paris Club allowed the government to reschedule $4.2 billion in payments due up to March. Partly due to a collapse in imports, Indonesia is posting a healthy trade surplus of more than $2 billion a month. The yen has made dramatic gains against the dollar.
A wave of mysterious killings in East Java which some blame on a political conspiracy, continued student protests and sporadic outbreaks of unrest are keeping the market wary. "There is no substantial improvement in domestic affairs. Look at the mysterious killings in Banyuwangi and the tension in the country," Hikmat said.
Barclays Capital says the rupiah could fall as low as 18,000 within 12-18 months if financing the country's budget deficit and bank restructuring programme unravels its tight monetary policy.
But many analysts believe the rupiah can hang on between 7,000 and 8,000 in the months to come. "We will come to a stage where Indonesia will stop converting foreign money they receive into rupiah. So the strength of the rupiah will be capped here," said Daniel Lian, head of Asian markets research at ANZ Investment Bank in Singapore. "But nevertheless it will maintain a firm tone even if we see an easing of interest rates."
Analysts say the rupiah's strength will help bring inflation under control and allow interest rates to be cut, allowing companies and banks to breathe. The country's massive foreign debt burden is also becoming more manageable, although even with the rupiah at 7,000, most companies remain technically bankrupt.
"Companies are hopeful about the (rupiah) trend but it hasn't come down far enough. Interest rates are still around 50 percent," said Manggi Habir, president director of Indonesia's Pefindo credit rating agency. "We need more time. Around 5,000 to 7,000 would be the right range."
However, analysts say a rupiah at 7,000 will allow the country to import more of the fertiliser and pesticides needed to boost food production, and help smooth the path of its planned bank recapitalisation programme, a crucial prerequisite for recovery.
"At 15,000 to the dollar, the bank recapitalisation programme was a dead loss," said the head of research at a foreign brokerage in Jakarta. "At 7,000, it might just work."
Kate Linebaugh, Jakarta -- The International Monetary Fund on Monday signed a new letter of intent with the Indonesian government, clearing the way for further release of assistance funds for the country. IMF Asian-Pacific Director Hubert Neiss said after the signing that the new letter of intent focused on the country's bank-restructuring and public-expenditure programs.
The IMF reviews its assistance program for Indonesia every month due to the volatility of the country's economic situation. "This letter of intent puts emphasis on bank restructuring and on the expansion of public expenditure for employment-creating projects and for social projects," Mr. Neiss told reporters after meeting President B.J. Habibie.
Mr. Neiss said he was satisfied with the pace of banking reform but that "what is important is that decisive steps are taken now." "The main hurdle in banking restructuring is yet to come," he said. That is "the recapitalization of banks, the repayment of liquidity credit, and the taking over by Ibra [the Indonesian Bank Restructuring Agency] of the nonperforming assets."
Last week, Indonesia kicked off its bank-restructuring program by converting liquidity support into equity in Bank Danamon giving the government a 95% stake. The government said it will transfer the nonperforming assets to the asset-management unit of Ibra, enabling the bank to attain an 8% capital-adequacy ratio once the restructuring is completed. The Indonesian parliament last week also passed a new banking law that allows for full foreign ownership of banks.
Mr. Neiss also stressed that the social programs included in the budget must be implemented "to protect the impact of the recession on poorer people and to limit unemployment". "These programs have to be prepared carefully but speedily because they are needed now," he said.
Reiterating comments made earlier Monday, Mr. Neiss said the rupiah has fallen too far in value. "If the [IMF] program goes all right, the trend should be upward right into next year."
While in this letter there are no alterations to the macroeconomic framework of the program this month, next month Mr. Neiss said the IMF and the Indonesian government "may look both at prices and balance of payments again." The completion of the monthly review paves the way for the approval of another $1 billion in assistance to Indonesia at the end of the month, Mr. Neiss said.