Tapol bulletin no, 145, February 1998 This is the Published version of the following publication UNSPECIFIED (1998) Tapol bulletin no, 145, February 1998. Tapol bulletin (145). pp. 1-24. ISSN 1356-1154 The publisher’s official version can be found at Note that access to this version may require subscription. Downloaded from VU Research Repository https://vuir.vu.edu.au/25995/ ISSN 1356-1154 The Indonesia Human Rights Campaign TAPOL Bulletin No. 145 February 1998 Economic crisis spells doom for Suharto Since seizing power in 1965 after one of the bloodiest massacres this century, Suharto has succeeded in staying in power for more than thirty years thanks to a system of brutal repression. Economic de­ velopment became the basis for the regime's claim to legitimacy, at the same time transforming the Suharto clan into one of the world's wealthiest families. But economic disaster has now brought the regime to the brink of collapse. The man who should have been crushed by the weight bled, the weight of debt denominated in dollars forced of world opinion for presiding over the massacre of up to a thousands of businesses into virtual bankruptcy, laying off million people in 1965/65, for the genocidal invasion and hundreds of thousands of people. Malaysia was also se­ occupation of East Timor, for the 1984 Tanjung Priok mas­ verely hit but the next major victim was South Korea sacre of Muslims and numerous other mass slayings and where the chaebol or conglomerates were also weighed for brutal military operations in West Papua and Aceh, will down by a mountain of debt. after all be felled by the ignominious failure of his eco­ The IMF rode to the rescue, first pledging more than nomic policies. $17bn to Thailand; then came the $43bn bailout for Indo­ It seemed to some that the economic difficulties which nesia in October, followed in December by a record bailout began to engulf Indonesia last August following the crisis of nearly $60bn for South Korea. In Thailand, the crisis led in Thailand could be resolved by a bailout from the Inter­ national Monetary Fund. However, when the bailout of $43 billion (not $38 billion as we reported in our last issue) was CONTENTS announced, there was widespread scepticism. What the ECONOMY country needed was not a rescue packet to patch up the financial system but a complete overhaul of the authoritar­ Economic crisis spells doom for Suharto p. l ian political system under which corruption and nepotism 'Balanced budget' propped up by foreign aid p.6 have thrived, concentrating untold riches into the hands of POLITICS the Suharto family clique and cronies. Now for the Suharto succession p.8 SOCIAL UNREST The role of the IMF A wave of food riots and protests p. I I POLITICAL TRIALS For the first time in more than half a century, the IMF, A rash of political trials renowned for its crippling Structural Adjustment Pro­ p.13 grammes that have devastated so many economies in Af­ CENSORSHIP rica, was called in to mount a major operation to save the The censors are at it again p.16 'Asian tigers' from collapse. The 'tigers' which had until UK-INDONESIA TIES only a few short months ago been praised to the skies as New focus for British aid? p.18 the path-setters for an ever-expanding global economy in HUMAN RIGHTS the twenty-first century, turned out to be bubble econo­ Journalist's murder trial collapses p.19 mies. In Thailand where the affliction first struck, whole EASTTIMOR sectors of the economy had invested in prestige projects, New organisation set up in East Timor p.20 hotels and high-rise office buildings financed by tens of Two Timorese sentenced to death p.22 billions of dollars borrowed from overseas bankers. Indo­ BOOK REVIEW nesia quickly followed suit, also overburdened by huge From behind bars, Danang Kukuh Wardoyo p.24 private sector debt. As the value of the currencies crum- nomic crises are occurring at one and the same time. [For ECONOMY an analysis of the current political crisis, see separate item.] to a change in government under public pressure; in South More so in Indonesia than anywhere else, 'Asian values' Korea, a presidential election in December resulted for the have been used to argue that democracy must not be al­ first time ever in victory for dissident Kim Dae Jung. Even lowed 'get in the way' of economic progress. Only in Indo­ with these political changes, the bailouts in those countries nesia is there a powerful military force ready to hand~e. all have confronted many difficulties and are far from being signs of dissent with its 'security approach', and a poht1cal out of the woods. But in Indonesia, the chances of political system that prevents even the most basic democratic proc­ change are out of the question as long as the Suharto re­ esses from impinging on a tightly controlled system pre­ gime is not fundamentally overhauled. This is what has sided over by a dictator who has even curbed the role of­ made its economic crisis incomparably more difficult to cabinet ministers so as to protect his family's wealth. In the resolve, notwithstanding the efforts of the IMF. absence of democratic processes, there is almost universal agreement that the system is in the grip of such paralysis that it is difficult to see how things can change without de­ scending into the bloodshed that marked Suharto's own seizure of power in 1965. It is precisely the lack of democ­ racy that has fuelled the lack of confidence in Indonesia's chances of resolving the economic crisis. So much for Asian values. US/IMF in control The IMF intervention in Indonesia has passed through two stages; the October 'rescue' followed two and a half months later by the 'rescue of the rescue'. In the process, the IMF has won for itself a position right at the heart of government, having been given a seat in an Economic and Financial Resilience Council set up on 15 January by Su­ harto, to be headed by the dictator himself. How did such a situation come about? The IMF deal with Jakarta in October was supposed to curb the role of monopolies, put mega-projects worth bil­ lions of dollars on hold as a cost-saving measure, and clean up the banking system by liquidating unsound banks. But in all cases, vested interests intervened. After a government announcement to shelve 59 mega-projects, Suharto re­ prieved 15 of the projects a week later, most of them in­ volving businesses of his sons and daughters. The disman­ tling of state monopolies of trade in basic commodities was half-hearted. The US dominates the IMF as the largest contributor to Two of the sixteen banks ordered to close belonged to its reserves with the biggest share of votes on its counsels. members of the Suharto family . Although it was argued at Washington initially held itself aloof from the Asian crisis, the time that Suharto was not averse to inflicting damage becoming involved only when it began to see that the US on his own kith and kin, foster-brother Probosutedjo took economy might be affected and that its regional security the government to court to protect his bank, almost win­ interests were at stake. During negotiations for the IMF ning his case; the case is still pending. Bambang Tri, one of bailout for Thailand, Clinton stayed on the sidelines. When Suharto's sons, slipped through the net by giving his 'liqui­ Indonesia's tum came, the Clinton Administration, scared dated' bank a new name and carrying on as usual. The bank out of its wits by a sharp fall in share prices on Wall Street closures fuelled a run on other banks forcing Liem Sioe in October, did a U-turn, announcing that it would contrib­ Liang, the owner of the country's biggest private bank, ute $3bn. US Treasury officials played an active behind­ BCA, to dig deep into his own cash reserves to prevent the the-scenes role in negotiations for the South Korean bail­ bank from running out of money. People's confidence in out. But in January, as we shall see, when Indonesia's deal the banks had been profoundly shaken in the process. with the IMF was in a state of collapse, Washington pulled Each of these jolts shook confidence in the rupiah out all the stops to force Suharto to toe the line. which suffered sharp falls in value, accelerating to such a degree that it had lost sixty per cent of its value, falling Asian values from Rp2,460 in July to around Rp 6,000 at the end of the However, in Indonesia, the prospects for political year. This did not bode well for the thousands of corpora­ change are paralysed in a regime that allows no space for tions and banks which hold millions of dollars of short~ popular participation in the political system, let alone in tern:i debt, faced now with ~ huge increase in · the rupiah government or Parliament. The economic crisis erupted at a equivalent needed to pay their creditors. Already hundreds time of growing pressure for Suharto to step down, with of businesses were laying off workers, an estimated two the March session of the MPR, the supreme legislative m!llion casual w.orkers .in the construction industry were body which will 'elect' the country's next president, fast without work, pnces of imported goods including raw ma­ approaching. What makes the Indonesian crisis nothing terials for ind~str~ were rising inexorably, while prices of short of a nightmare is that full-blown political and ec- staple goods hke nee and sugar were also rising.