| Point of VIEW.
A purely analytical perception...
Continued from page 5
IT WAS LIKE ALICE IN WONDERLAND
Indonesias successful example had been a charade. A corrupt government built around the tenet that nepotism began at home, a government, which favored a non-Indonesian culture and raised them substantially above the rank and file because they could increase the ruling familys coffers. A nation of great riches frittered away by corruption and grandiose projects that achieved little and cost dearly. This was a country where the nations industry had been vested in the hands of rulers children and were treated more as playthings than as economic instruments of production.
There wasnt any real secret about what was going on. Anyone that wanted to look deeply could have seen that under the royal trappings were turmoil, greed and potential chaos. It was in the self-interest interest of people like the IMF and the World Bank to hold out this charlatan (Suharto) as the Second Coming to the emerging countries of the world. This was a superficial case that these institutions made to show that free trade worked when the example they were using was monstrously flawed.
They knew or certainly should have know that this was not a Democracy, for there were no free elections, it was port of egress and ingress as the "Royal Family" took a piece of whatever came in and whatever left, it was not a study in free enterprise, because the bidding was always won by a connected person, and it was not a land of opportunity as anyone wanting a better life had already moved to the United States, Malaysia or Thailand..
Simply put, it was convenient for developed nations to be able to show that a country was able to rise above its status and become a world economic power. It gave other nations hope that they could achieve the same result. It palliated the troops. It was good public relations. With Indonesia down the proverbial drain, who will they nominate next for glorious example of the year?
IT ISNT AS THOUGH WE GAVE OUR WORD ON THIS
To show that Indonesia and its allies are really in this together for the long-haul, in spite of International Monetary agreements to the contrary, on November 7, 1997, Malaysia, Thailand and Indonesia announced that the would commence a $3 billion bridge linking the three countries. Japan will design and construct the monolithic structure, which will be over 125 miles long. The essence of the project will remain conservative considering economic conditions are so perilous in the three countries. The bridge will contain a road, a rail link, and oil pipeline and a gas pipeline but the original plans to reconstruct an exact copy of the Great Wall of China to run parallel to bridge as a scenic event for drivers weary of looking at water for such an extended periods of time has been shelved to palliate the IMF.
Eventually as the economy worsened and the Suhartos families intransigence threatened to overcome whatever benefits that the IMFs funding would deliver, a message was sent by world leaders and the IMF, "get with the program or go down the drain". Suharto, who was at the time, running for reelection momentarily got the message. Obviously his thought process told him, play along, give in a little and then we will undo the whole thing after the election. So in going through the motions he announced, that his son, Tommys National Car project would lose its special tax and tariff exemptions and his clove distribution monopoly which threw thousands of farmers out of work while increasing the cost for cigarettes, Yusu Habibie, a Suharto crony, lost his government funding in his aircraft plane, Liem Sioe Liong, the richest man in Indonesia and another Suharto confidant, lost his sugar monopoly, and trading cartels in cement, paper and plywood controlled by Bob Hasan and friends will be terminated.
The plug will be pulled on Sitis will power plant and restriction on foreign investment will be ended in many retail arenas; for the time being. When all has been said and done, it is estimated that the extended Suharto family had accumulated over $30 billion in assets by 1989 (14) and these moves rather than hurt them, actual insure their economic productivity well into the next century. The Jakarta Post summed up Suhartos the likely scenario as follows: "The risk of a recurrence of corruption, collusion and market distortions is indeed quite big with the children and close relatives of so many top officials, provincial leaders, high military officers and retired generals quite active in business." (15)
When Indonesian Government officials were asked whether their additional obligation to build a separate 60 miles bridge between Malaysia and Indonesia was still going forward in spite of warnings by IMF officials, the officials responded by stating that it was and that they had their "fingers crossed" when they made the IMF Agreement and it really didnt count. They will not build that bridge in this lifetime, crossed fingers or not.
LETS HEAR IT FOR MICHEL THE VISIONARY
The quote of the century award goes to Michel Camdessus, managing director of the International Monetary Fund who must have had a severe hangover when he said after all of this had occurred, "Indonesia has had the courage to take the bull by the horns and to take very decisive measures, I have full confidence that the government will get the Indonesian economy on the rails for durable growth." The IMF was not the only agency to hold Indonesia out to be a special country that could be an example to others.
The World Bank suggested that Indonesia as a "model for Third World development and held the country out as an example of sound macroeconomics and poverty elimination. At least the World Banks, James Wolfensohn had the common sense to cut his losses and conceded that, indeed, if anything, Indonesia is a great example of how not to get things done. While we cant give Mr. Wolfensohn full credit for his retreat, because he told a little fib in the first place, the World Bank certainly gets kudos for retreating when they got caught, which the IMF has not seen fit to do.
IMF LEADERSHIP LEAVES SOMETHING TO BE DESIRED
We are not sure that statements of this kind when they deal with nepotistic, corrupt bureaucracies that favor the few at the interest of the great majority of the population wash well. We understand that without some degree of optimism, psychologically driven macro-economics problems are hard to correct, but too much talking up of corrupt countries only prolong the enviable and have the problem come back to bite you at an inopportune time. Thus, Indonesia, was an accident waiting to happen when Thailand collapsed. Globally though, everyone had been so palliated by the statement of the IMF that no one would have believed that Indonesia would have so quickly followed Thailand's example. Thus, the IMF was faced with a multi-front economic war that almost sank everyone because they had needed an example but couldn't live with his clay feet.
Indonesias loans denominated in other currencies can not be repaid, and instead of a simple restructuring you are looking a plain old vanilla default. Effective resurrection, of any kind, to become enabled requires a large dose of blind faith, which is regularly injected by the IMF into the global press. The IMF issues these godlike utterances, blindly hoping for the best but knowing that not only are the statements patently false now, but they were known to be false when they are uttered.
The danger of this approach is the fact that sacrifices unsuspecting business people, who have every reason to believe that an organization such as the IMF has resources and information available far exceeding their knowledge and dive back into the boiling caldron without even testing the water. After being boiled alive, the IMF doesnt even acknowledge their mistake. More kindly, if indeed the man is totally immune to what is happening in the world and is only mislead, it would certainly indicate that someone has injected him euphoria simulator.
The New York Times reported on January 7, 1998 that in late December the IMF sent "President Suharto a strongly worded letter urging his officials to carry out economic changes. Members of the Suharto family and close friends of the President, who hold financial stakes in the countrys most lucrative businesses, have sought to dilute or evade such reforms. Twice in the last week, the Indonesian military, projecting unemployment soon of two million workers, said it stood ready to suppress protests that "disturb national stability." On December 24th, 1997, the Indonesian rupiah attained "disintegration heaven" by falling 12% against the U. S. Dollar in one day. This level had not been seen by the rupiah since the current monetary system had come into existence in 1971.
I DIDNT MAKE IT UP, THE GOOD FAIRY TOLD ME
Furthermore, in the Indonesian budget for fiscal 1988-9 beginning on April 1, 1988, released on January 6 showed a projected increase of 32.1 percent in both revenues and expenditures for the coming year in spite of assurances by the government to the IMF that there would be a move toward austerity. In addition, in spite of the fact that Suharto had "cashed the IMFs check", Indonesia was only in compliance with a few conditions mandated by the agreement. This immediately caused a further sell off creating record lows in the rupiah and the stock market while senior IMF officials reported to the Washington Post that the Indonesian government was not delivering on its promises of reform. (16) "IMF experts hastily packed their bags for Indonesia and began talking seriously to people that weren't listening to a word they were saying. (17)
On or about January 12, 1998 Michel Camdessus and his senior aids left for the country and "took the bull by the horns" in an attempt to reason with them. We doubt that Mr. Camdessus will stand by his recent statement of how good they are doing there especially in consideration that President Suhartos son who had opposed so ferociously the closing of 16 Indonesian banks because one of those was his, acquiesced and then reopened the bank with another name on the same site. "If that isnt taking the bull by the horns", we dont know what is.
Independent sources indicated they had now been able to uncover an attempt by the country to play down their foreign debt and new information placed that number at $200 billion, twice as high as the one being circulated in Jakarta. In spite of IMF statements to the contrary, Indonesia has hurdled into the lead in the worlds worst performing currency race, having in 1997 alone lost over 61 percent to the U. S. Dollar. An yet the bloodbath may not be over yet as the rupiah rolls down the Indonesian hills at an ever accelerating pace, for every 200 points it drops, another billion dollars is added to its foreign debt. (18) When the number $200 billion was drawn to the attention of Finance Minister, Marie Muhammad, he thought better of addressing it one way or the other, which in Indonesia, speaks volumes.
Daddy Suharto, did not kept the faith with the IMF, his daughters unneeded energy program has been rescued from the ashes and as well number one sons banking empire which had been shuttered and then reopened. Indonesia is still not serious about the extent of the their crisis, and in comparison to Korea, whose economy is twice as large, Indonesia has almost the same relative immediate problem. In spite of the fact that the country is rich in natural resources, it will probably not get the same bailout treatment afforded Korea because they are just not taking the problem genuinely enough, and the overall effect globally, will not create the potential "house of cards" that Korea could have.
The IMF sanguinity is only superceded by its failures, but apparently the thinking is that it is more important that an optimistic message be sent notwithstanding the fact that it is tainted, than no message at all. We would humbly suggest that an interjection of at least of modicum of honesty along with these vainglorious statements could go along way in restoring credibility to the organization. "Talking things up" just plain doesnt wash as a more sophisticated commercial world is well aware of exactly what is happening. Since he espoused his confidence in Indonesias ability to get its house in order, their currency has dropped over 30%, more than many that of many countrys that are considered basket cases. On the other hand, it is possible that he is just plain na�ve and if such is the case, we can hardly afford to invest more time with him in world that is crumbling.
I JUST KNOW I CAN MAKE THESE PEOPLE SEE THE LIGHT
What on earth is going to happen to this poor soul (Michael Camdessus) when on the day of his proposed visit to Indonesia, two of Suhartos children will be in court attempting to get restraining orders on the closures of their finance companies, thus undoing literally everything that the Indonesian Government did to appease the IMF. Unfrankly, Mr. Camdessus will spout another homily while trying to keep the Indonesian Phoenix from crashing and burning in front of a global audience, wiping out what little credibility the IMF had left
Indonesias highly regarded former cabinet minister, Sumitro Djojohadikusumo stunned the nation when he stated in the Jakarta Post that the Indonesian Government should be replaced. "There has long been a wide gap and dichotomy between macroeconomic policies, which are full of distortions and inconsistencies and marred by corruption and excessive protectionism." The full force of this statement is abetted by the fact that Sumitro is considered one of the top economists in the Pacific Rim and his son, a major general in the army is married to one of Suhartos daughters.
Aburrahman Wahid, who leads the 30 million Nahadllatul Ulama Group, a Muslim organization stated when asked about Suharto, "He should have stepped down a long time ago, we need different people." (1) This statement was mimicked by Amien Rais the leader of the 20 million strong Muhammadiyah Group, "It is time Suharto stepped down as this is a prerequisite to overcome the present multi-dimensional crisis." (19) To comprehend the meaning of these statements on has to understand that toleration of decent is not one of Suhartos long suites and people have been known to vanish for far less. Political opposition has become marginalized or inept and the government has no pretenders to the Suharto dynasty, In spite of this, the hue and cry has begun in a land of the quiet.
As the riots increased in intensity and the students began taking to the street to burn Suharto in effigy, and Indonesia inches ever closer to civil war Suharto needed a trump card to play to take the peoples minds off of the minor irritations of starvation and poverty. Suharto ordered his staff to find him something to use. Ingeniously they came up with the old "there is someone out to get us ploy". In common every day terms, this means that there is a plot to do in the entire country, and it is those conspirators that want the Indonesians to become a broken people that are to blame, not the honorable government that has labored long and hard to provide what is best for its people. Suharto stated for the record that, "In this kind of situation, there are signs that certain groups are using the chance to achieve their political goals, which they have failed to reach through democratic and constitutional means," Sounds a little like a page from the Hillary Clinton presidential defense primer.
The rioters were particularly interested in the largest private bank in Indonesia, Bank Central Asia, in venting their rage. Naturally the raging crowd centered on things with a Suharto imprenture and found a convenient target and with two Suharto offspring sharing ownership of the bank, it became a logical candidate. ATM machines were of particular interest to the rioters who either wrecked or pillaged 1250 of the devices. Not content with doing in the mechanical money dispensing machines, the raging mob determined to fix the bank permanently and did enough damage that 122 of the banks offices will be a long time in reopening. If it wasnt for the fact that Suharto controlled the "game" and was able to have the Indonesian Central Bank pump money into the bank, the riot and the allied run on the institution by frustrated citizens would have done it in.
As it became readily apparent that anything with the Suharto imprenture would be fair game, the run that developed on the bank and the bank became literally out of control and it was determined by officials that the situation had become so bad that it would be necessary for the government to take control. In a statement issued by Sjahril Sabirin, the banks "Director", he stated, "the bank had been taken over by the Indonesian Bank Restructuring Agency because it had borrowed more than double its total capital from the central bank."
Copyrighted Worldwide �1997 Chapman Spira & Carson,