Wednesday, March 11, 1998

IMF bailout under cloud

The Nation

JAKARTA, 11 March 1998 -- The US$43-billion economic bailout for Indonesia was shrouded in greater uncertainties Tuesday after President Suharto was appointed to a seventh five-year term amid angry street protests and an intensified attack by people close to him on the International Monetary Fund.

A leading economist and a high-ranking source predicted that termination of the IMF package was ''more likely than ever'' now that Suharto has fully consolidated his position. Tuesday, he formally told the People's Consultative Assembly (MPR) that a trusted aide, Research and Technology Minister Jusuf Habibie, was his choice for vice-president.

Kwik Kian Gie, one of Indonesia's best-known economists, who had almost single-handedly warned about the current economist crisis since 1989, told The Nation that President Suharto had given ''clear hints'' on how he would deal with the IMF since Sunday.

Suharto told some parliament members that the IMF's requirement of reforms was based on liberal economic principles, and not in tune with Indonesia's much-revered Constitution which cherishes economy built upon family principles.

''Reading between the lines, he will terminate the cooperation as it is against the Constitution,'' said Kwik, predicting that Suharto might wait for some days, at least until the establishment of his new cabinet, before taking such a bold step.

But a highly placed source predicted Suharto might even move sooner than that. He said Suharto was probably ''angered'' with the IMF decision to delay the second US$3 billion disbursement of bailout fund. IMF officials suggested that they are going to wait until early April to see political developments and whether its proposed reforms are taking place.

Television host Wimar Witoelar, meanwhile, claimed ''scapegoating politics'' is the name of the game the Suharto government has been playing. Witoelar warned against the practice of ''very extremely narrow nationalism'' that has turned Indonesians' fingers toward the Chinese minority, the United States andthe IMF.

The 1,000-member MPR rose to its feet clapping and cheering when it unanimously re-elected the 76-year-old retired army general, Asia's longest serving leader, who has ruled for 32 years.

In Washington, IMF chief Michel Camdessus warned on Monday that Asia's economic recovery could unravel unless Indonesia carried out reforms agreed to under a $43-billion economic bailout deal.

No formal vote was taken by the MPR after all five factions within the grouping nominated only him. Instead delegates elected him by acclamation, shouting ''agree, agree'' when the assembly speaker asked if they wanted Suharto to stay in power.

Some raised their hands as the group celebrated with a standing ovation that echoed through Jakarta's national Parliament building.

Suharto stood for election unopposed after all rivals were shut out of the race by a tightly controlled political system. Many among the government appointees and legislators in the assembly are Suharto's relatives, friends and military officials.

Suharto, who assumed power in 1966, will be sworn in Wednesday.

Security forces have banned demonstrations for several weeks while the assembly convenes. Tens of thousands of security personnel have been placed on alert.

At least 10 people were arrested after police jostled and kicked protesters at one demonstration in a Jakarta park.

''What we saw was a peaceful demonstration of people exercising democratic rights,'' said Edmund McWilliams, political counsellor at the US Embassy, who attended the protest as an observer.

It was ''broken up in a rather vigorous, forceful, physical way'', he said.

Thousands of students staged pro-democracy rallies across the country Tuesday.

More than 1,000 students also rallied peacefully in front of the library building of the state Teachers University, a witness said.

In the East Java province capital of Surabaya, some 1,000 students rallied at the state Airlangga University campus, a resident who witnessed the event said. In the West Sumatra province capital of Padang, more than 1,000 Bung Hatta University students rallied for about two hours, demanding reforms and protesting against Suharto's reappointment.

More than 1,000 students of the Islamic University of Bandung and the University of Pasundan joined forces in the West Java province capital of Bandung and rallied against Suharto.

Worried by the potential for further unrest, the MPR on Monday extended Suharto's already ample authority by granting him wide emergency powers.

Meanwhile, a rift with the IMF deepened as assembly delegates accused the Washington-based lending agency of trampling on Indonesia's sovereignty and Suharto's family blistered the Fund in a series of local newspaper reports.

Four of Suharto's children conceded that the IMF funds were important, but not if they entailed the surrendering of the nation's control over its economic policies. They voiced particular displeasure with the IMF's refusal to support Indonesia's controversial plan to implement a currency board system.

''The rupiah may crumble, but our dignity must not,'' said one MPR delegate, Jusuf Kalla.

The comments echoed a statement on Sunday by Suharto, who proclaimed that the IMF reforms were ''not in line with the spirit'' of Indonesia's Constitution.

The president Tuesday was formally approached by political faction leaders of the assembly to ascertain his choice for vice-president.

''He says we need Habibie in order to prepare ourselves for the industrialisation era,'' Lt Gen Yunus Yosfiah, head of the military faction in the MPR, said after meeting Suharto.

Habibie, whose endorsement as vice-president became assured last month after he emerged as the only candidate for the post, is to be formally elected by the MPR Wednesday after Suharto's inauguration.

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