Commentary

22nd March 1998

IMF: laying down the law for Suharto

By Mervyn de Silva

Watch the students... watch the stu dents... an old rule for journalists, foreign correspondents in particular, and for diplomats stationed in Third World capitals. And don't be too impressed by the "spectacular growth" (official growth rates) and the glitter of the capital. President Suharto's Indonesia, a country blessed with vast natural resources, could quite soon prove the wisdom of such warnings and cautionary counsel. At least 30 students have been injured in clashes with the security forces.

The clashes began when some 200 students gathered near the Teachers University in Surabaya the capital of East Java, and then spread to other campuses especially in Central Java. Just the day before the I.M.F. chief Michel Camdessus, had told TIME magazine in an interview the Fund would stop "a bailout package" if Indonesia did not implement "economic reforms tied to it". The TIME reporter asked the next obvious question, though he would surely have known the answer. AFP quoted Mr. Camdessus who obviously spoke on the record: "We have never hesitated to interrupt our financing when a country dosen't fulfil its commitments"... the all-too familiar reply as Third World readers would testify.

The average Indonesian family explains it all in terms of divine anger since 1997 saw drought, forest fires, a currency collapse, Stock Exchange slump, airplane crashes and riots. In short, malign divine intervention for which only prayers to the household deities would help, wrote Sander Theones and Quentin Peel.

It all began of course in Thailand but the other so-called Asian "Tigers", once the envy of poverty-stricken South Asian (SAARC) countries, were in deep trouble too. But the trend-setter, so to say, was not an ASEAN state but KOREA. Just before Christmas, the ECONOMIST. (Karl Marx had recognised it as the most intelligent defender of capitalism,) broke the disturbing news: For South Korea there is no respite. Every morning, it seems,as the currency markets open, the won (the Korean currency) collapses within minutes to the maximum extent allowed, a fall of 10% against the dollar. Then the stockmarket follows suit. Buyers of bonds cannot be found at any price. As riot police line up outside the banks, anxiety is turning to outright panic. South Korea's financial markets are melting".

MYSTERY MAN

The first sign that Indonesia, one of the most resource-rich countries in the world may be in trouble too, came with a news item which could have belonged to a mystery thriller or a James Bond adventure.

In March last year, the Djakarta media had a story about Michel de Guzman, the chief geologist of BRE-X MINERALS, who apparently jumped to his death from a helicopter flying over Kalamantan! Shortly after he disappeared, BRE-X had to admit that BUSANG the gold mine he had discovered and claimed to be the world's largest was a hoax! observed correspondent Sander Thoenes. It left Indonesia's reputation in tatters.

Indonesia was soon hit hard by a one-two punch.... economic and political!

POLLS AND RIOTS

The reputation of the ruling party, GOLKAR, was seriously damaged when countrywide riots erupted during the parliamentary elections. No foreign correspondent or diplomat in Djakarta was impressed by the party's claims of a "clear" mandate. In the new political climate, few international observers or Djakarta-based media- men would fail to question President Suharto's grip on his country, and his capacity to plan and implement a stable and credible transfer of power. Yes, the "transition" will surely require human and institutional resources much larger than what is available right now. If this reading of the situation is proved correct, post-Suharto Indonesia could create a situation that ASEAN may not be able to contain on its own.

ASEAN may have to appeal for help from the U.S. Japan and perhaps the U.N.too.

I.M.F. APPROACH

Meanwhile, the next instalment of 3 billion dollars - 43 billion is the Fund's total bailout package - will have to wait for President Suharto's "new cabinet". President Suharto's top aides are known to be opposed to ten of the IMF's 50 reform provisions. These controversial items according to Vice-President Yusuf Habibi have been closely examined in the past week, and only two have proved "unacceptable".

Unable to accept, let alone implement, all the measures recommended by the I.M.F. President Suharto searches for the last painful. "It may take three to six months of severs pain before a nationalist cabinet comes around to the view that it has no choice but to comply with the IMF's demands" says the Singapore-based economist and investment analysis P.K.Basu of UBS Securities. Djakarta must learn that it has no room to manouevre".

THAI RESPONSE

Meanwhile Thailand has taken the hard option. "The U.S.is prepared to reward Thailand for taking the prescribed medicine". Thai prime minister Chuan Leekpai was welcomed in Washington by Maurice Greenberg, the doyen of US-Asia business fraternity and entertained at the Waldorf Astoria by topflight US businessmen and investors. A one-to-one with Henry Kissinger was also on the itinerary. The Clinton adminstration has shown its appreciation of Thailand's co-operation with the I.M.F. The next week saw the I.M.F. approving 270 million dollar third tranche of a massive 17.2 billion "rescue program".

In the New World Order, the U.S. calls the shots. The U.S approves or rejects; the I.M.F. carries out the orders. When needed, the World Bank extends a helping hand.

How long can President Suharto of Indonesia, despite all his country's wealth, refuse to carry out the orders?

Hulftsdorp Hill

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