Saturday, October 31, 1998

Financial meltdown in Thailand exposes fragility of Indonesia

Andreas Harsono
The Nation

JAKARTA , 31 Oct. 1997 - Four months ago people in the world's fourth most populous nation were still absorbed in attending jam-packed housing exhibitions and taking out loans to buy new homes as Thailand was draining its national reserves in an ill-fated attempt to save its currency.

In just 45 days, all of that has changed. Today, Indonesians are guarding their diminishing assets and hoping a regional financial crisis that began when speculators battered the Thai and Indonesian currencies will soon come to an end. That hope, though, is growing dimmer as the crisis continues to spread.

Government officials, optimistic as usual, said Indonesia would not be affected by the regional crisis that resulted when the Thai government permitted the baht to float on July 2 and, despite some misgivings, people continued to consume expensive imported goods and brandish their credit cards, convinced that Indonesia's economic fundamentals were stronger than those of Thailand.

Indonesia's total debt-to-GDP ratio was 109.5 per cent, considerably lower than Thailand's 197.9 per cent, and its current account deficit as a percentage of GDP was 3.4 per cent compared with an alarming 8.9 per cent for the Thai economy.

On top of that, some 20 years of constant economic growth averaging about 7 per cent a year and careful attention to the advice of the World Bank, whose Jakarta office is the second largest after its headquarters in Washington DC, had created a strong impression that President Suharto was right when he declared the Indonesian "miracle" to be underway.

Confident of the economy's resilience, officials continued to convince people not to worry as their Thai neighbours started to lose thousands of jobs, abandon construction sites and even cut up their credit cards.

Indonesia's foreign debt stands at about US$110 billion, about $65 billion of which is in private hands. Short-term debt was estimated at about $25 billion, considerably less than Thailand's estimated $45 billion.

Yet speculators did not buy the government line and soon attacked the rupiah and other regional currencies, including the Malaysian ringgit. Bank Indonesia, the central bank, continued channelling greenbacks into the market to stabilise the battered currency.

In addition to the speculators, who include Hungarian-born financier George Soros, Indonesia's huge conglomerates bought more dollars to pay their overdue foreign loans. Slowly, Bank Indonesia's foreign reserves, estimated at $20 billion, began to be drained of hard currency and the government became alarmed.

For most of the public, the first real shock came when Indonesian Finance Minister Mar'ie Muhammad and Bank Indonesia Governor Sudradjad Djiwandono announced on Aug 14 that the Indonesian government had decided to float the rupiah just as Thailand floated the baht.

Within a month and a half following the baht's de facto devaluation, everything had changed in Jakarta. The rupiah plunged from around Rp3,400 to the dollar to more than Rp4,000 in mid-September. There were no more statements about the rupiah being stronger than the baht.

Bank Indonesia also made a number of other decisions aimed at keeping the remaining dollars in Indonesia.

Indonesia's economic free-fall is now seen as a case of free markets exposing the weaknesses of the country's basic economy.

Indonesia watcher David Jenkins of the Sidney Morning Herald called Bank Indonesia's attempts to stabilise the currency "largely cosmetic", and other analysts predicted that sooner or later, just like Thailand, Indonesia would seek the International Monetary Fund's help.

Unlike democratic Thailand, though, where elections are heatedly contested, Indonesia is suffering from a serious image problem. It has a reputation for extensive corruption and wholesale cronyism.

Perhaps more troubling to Western countries, it is probably best known for its abysmal human rights record.

In neighbouring Asean countries such as Singapore, the Philippines and Thailand, business executives and government officials know they cannot place major investments in Indonesia without involving Suharto's children, whose business activities range from infrastructure to media, from operating satellites to managing taxis.

Not surprisingly, there is fear among foreign investors about the political stability of a country led by an ageing president with no obvious successor.

The 77-year old Suharto, who is widely expected to win a seventh five- year term in office in March, decided on Oct 8 that his administration should seek help from the Washington-based IMF to help restore confidence in Indonesia.

Four IMF bankers arrived in Jakarta the following week and have since been involved in negotiations on a $2 billion bailout. IMF Asia-Pacific director Hubert Neiss, one of the architects that shaped the IMF bailout of Thailand, also met with Suharto to discuss the new credit line.

The negotiations, like those for a $1 billion IMF credit line in July to the Philippines and the $17.2 billion international bailout for Thailand in August, are using accelerated rules drawn up after Mexico sought help in 1995.

Experts said Indonesia's high foreign exchange reserve might encourage the IMF to offer a smaller package, yet concern that a large package would be needed to reassure jumpy markets could point to a larger deal.

The IMF is expected to pressure the Indonesian government to scrap monopolies on staple products such as soyabean, cooking oil and flour, but not sugar or rice. Analysts also said the international institution is to ask the under-performing banking sector to be closed or merged as well as for subsidised petrol and diesel prices to be increased.

It is unlikely that Indonesia's controversial car project, for which exclusive tax and tariff concessions have been granted to presidential son Hutomo "Tommy" Mandala Putra, will be scrapped.

Suharto, however, has received more help than embattled Thai Prime Minister Chavalit Yongchaiyudh. Singapore agreed to lend as much as $10 billion, while Malaysia is prepared to channel $1 billion in addition to Japan's offer of unspecified financial assistance.

The assistance of both Singapore and Malaysia is based on bilateral agreements, although both countries support the IMF package. Yet analysts reacted with disbelief to Suharto's remarks that Singapore had offered the $10 billion in help.

"It's incredible. I'm surprised by the sum of money. $10 billion dollars is more than expected, even though we know Singapore can well afford it," a Singapore-based economist said.

Thursday, October 29, 1998

Minister who killed journalists?

A minister helping the Indonesian press is alleged to be the man behind the killings of journalists in East Timor. Andreas Harsono writes.

INDONESIAN Information Minister Muhammad Yunus got the first protest just a few days after taking office in May. More than two dozen Indonesian journalists staged a protest inside the compound of his office in Jakarta, asking Yunus to release Indonesian journalists in prison and to free Indonesian media from government censorship.

Surprisingly Yunus decided to let the protesters come into his office and held a one-hour impromptu meeting. Some senior journalists like Goenawan Mohamad of the Tempo weekly magazine and Atmakusumah Astraatmadja of the Dr Soetomo Press Institute joined the protesters and aired their demands that the newly-installed President BJ Habibie administration free the media.

''Insya Allah, I will fulfil your demands but I cannot promise,'' said Yunus who repeatedly used the ''God willing'' phrase when talking about his future policy. The minister needed only two weeks to prove that he meant it.

In early June Yunus announced a number of ministerial decrees which basically deregulated the print media publication procedure, freed journalists to set up their respective unions, reduced the compulsory relay of the state-owned RRI news reports over private radios and allowed the relaunch of the Tempo and DeTIK weeklies banned in 1994.

In a related development, the Habibie government also pardoned and released several Indonesian journalists who were jailed for ''defaming the government'' and ''for sowing hatred against the government'' of former President Suharto.

Many political observers here believed that Yunus had made a major decision. Some noted journalists even said that his decision is actually the most important, if not the only, contribution of the Habibie administration in democratising Indonesia.

Others said Yunus, who is still an active army lieutenant general, had brought more changes than any other information minister in the modern history of Indonesia. He has issued more publishing licences than any other ministers since Indonesia gained its independence in 1945.

But the question remains the same. Is this the man who ordered his troops to kill five Australian journalists in the border town of Balibo in East Timor when Indonesian forces were invading the former Portuguese colony in October 1975?

Many Australian media reported that Yunus is actually the army officer of the Kopassandha special command who had led the attack in Balibo and blasted everything in sight with AK-47 assault rifles and RPG-2 rockets.

An East Timorese told Australia's ABC feature programme that he was part of the force which attacked Balibo and saw Indonesian soldiers under the command of a ''Major Andreas'' -- supposedly the nickname of Yunus -- fire into the house where the journalists were sheltering.

Olandino Maia Guterres claimed to have seen much more, including the stripping of the bodies and dressing of them in Portuguese uniforms so that they could be photographed. In short, Guterres said Yunus had ordered the killing of the journalists.

Yunus himself has repeatedly denied his involvement. In a number of conversations with foreign visitors, which include representatives of the New York-based Committee to Protect Journalists and the Toronto-based International Freedom of Expression Clearing House, he simply said he does not know the Australian journalists.

''I am not involved in that case, I deny the allegation. I never got any information about the journalists, I never met the journalists,'' Yunus once said.

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 in Sydney.

Yunus himself has maintained there was ''no need'' to reopen the investigation, and has denied the new allegations could damage his career as part of the reformist Habibie government.

When meeting senior journalists, the general prefers to talk about his love of sports. Yunus is widely known among army circles as a sports maniac who himself trained his two adopted East Timorese sons to become national players and sent his son to practice golfing in the United States.

But unlike their Australian counterparts, Indonesian media have shied away from reporting the call to reinvestigate the killings, as if trying to say that the case is over and they do not want to expose any controversy surrounding a person who has almost helped them to open up the media. ''It's not the appropriate time,'' quipped a veteran journalist.

The Jakarta Post, the leading English-language newspaper here, quoted a wire report on a statement made by the Committee to Protect Journalists, questioning whether the minister is actually the man who had ordered the killing of the journalists.

Other mainstream news organisations remained silent. Perhaps, a reinvestigation will bring brighter light both in Australia and Indonesia if Indonesian journalists themselves put aside their self interest in promoting and institutionalising press freedom and begin to join their Australian colleagues to be skeptical on the issue. Perhaps Yunus is ''Major Andreas''. Perhaps he is not. Surely an investigation is needed to establish the truth.

-- Andreas Harsono is The Nation's Jakarta correspondent.

Tuesday, October 06, 1998

Habibie unveils grand I'nesia vision

Kavi Chongkittavorn, Andreas Harsono
The Nation

JAKARTA, 6 October 1998 -- Indonesian President Bacharuddin Habibie has the grand vision of his country becoming a democratic nation which respects human rights and can synergise with the world community.

Habibie, in an exclusive interview with The Nation and iTV on Saturday at the Merdeka Palace, said he wanted to see Indonesians free to do "what they think is good for the country".

The president, who was an aerospace engineer, said his people were expressing themselves with new openness. "In the past 120 days, we have had 84 registered political parties. In the past, we only had three parties," he said. "People must be given a chance according to the UN charter."

Habibie has been credited for freeing the press in Indonesia. For starters, banned magazines have been reopened. Tempo magazine, which had been forced to shut down by the previous government, reappeared on the newsstands on Monday.

With democracy, Indonesia can generate a positive synergy with other Asean countries and allow them to tap into each other's resources, he said.

Asked if an open Indonesia would influence the future of Asean, he said each country would use what is best taking its culture into consideration.

In a bizarre analogy, he likened the calorie intake of a human with the concept of human rights. "Like human rights, a 1,500 daily calorie intake for a human is universal but the way you take it is not," he said with a broad smile.

"I am not allowed to tell you how to take your 1,500 calories. I am concerned about what I can do if you don't get enough calories. I am also concerned that if you take 3,000 calories a day you will get fat and die, " he said.

The president, who had just postponed a meeting with Malaysian Prime Minister Mahathir Mohamad, said he stood by the principle of non- interference, which has been the pillar behind Asean's code of conduct.

He said he did not see Indonesia as the only leading force in Asean because every member was a leader. "Each one of us has to play its role, " he added.

However, the president said his country, the fourth largest nation, will continue contributing to the region's peace and stability, adding that bilateral trade in Asean was the key behind close cooperation.

He said the assistance given to Indonesia during the time of its crisis by its neighbours including Singapore, Malaysia, Thailand and Vietnam, had been much appreciated.

Habibie spent nearly an hour discussing Indonesia's future, his plans to save the economy, his vision for Asean, on how the ethnic-Chinese community suffered from the race riots and his feeling towards the sacking of Malaysia's former deputy prime minister Anwar Ibrahim, whom he described as a good friend.

Habibie, always at ease with journalists, has never been hesitant in answering questions. Since there were no advance questions, the quick expressive replies from the president, who succeeded Suharto in May, were the highlight of the interview.

Since he took over the presidential seat, Habibie has spoken to more than two dozen foreign journalists from various parts of the world. His aides say this represents a new openness in Indonesia which he has been trying to promote via a freer press. His predecessor seldom spoke to journalists. During the interview with The Nation, he credited Suharto for being the father of the nation and for his dedication in improving the lot of the Indonesian people. Suharto stepped down from his presidency after the May riots and Habibie, the then vice-president, took over. Habibie still holds his position as the vice-president.

When asked if he had ever consulted Suharto after taking office in May, he said no. "I have never seen him and have had to do the work myself," he said.

He added the government's top priority was to restore the supremacy of law and order and ensure that there was no anarchy in the future. Indonesia, he pointed out, needed good laws implemented in a professional way.

The president said he wanted everybody in the Indonesian society to have the highest level of professionalism. He later explained that he was referring to the military, government officials, businessmen and journalists.

The growing disparity between the haves and the have-nots along with the pressing social issues resulting from the austerity measures have raised fears that the nation might turn into a state of anarchy. It is estimated that nearly 50 million or more remain unemployed.

With regards to the six-million Chinese community, Habibie said the government treated them like Indonesian citizens. "They have the same rights, the same responsibility like the rest," he said.

The president was compassionate when talking about Anwar, saying he was concerned about the former deputy premier's fate and that the Malaysian public be wise enough not to forget Anwar's contribution in the past.

"I am very concerned about how my friend Anwar Ibrahim has been treated. I'm concerned because people should not forget that Anwar Ibrahim has contributed a lot to his country," he said.

He said he was saddened by his arrest. "I think it is not good. You should not introduce bad things. It's bad enough if you just forget and delete [Anwar's contribution]."

Anwar has a sizeable following in Indonesia, where he befriended Muslim leaders and intellectuals. With their new-found freedom, the Indonesian press, while criticising Mahathir for his actions, has been openly sympathetic with Anwar. Last week, former Malaysian deputy prime minister Ghafar Baba, during a visit to Jakarta, lashed out at the Indonesian press for their criticism.