| Point of VIEW.
A purely analytical perception...
Continued from page 10
A HORSE OF ANOTHER COLOR
Suharto has stated that he would not run for re-election and because of what people view as a defect in the chain of succession, he had given the nod to Research and Technology Head, B. J. Habibie, Other than being a trusted crony of Suharto, Habibie has little to ingratiate him to the country or anyone else for that matter.
The Wall Street Journal stated on January 21, 1998, "Mr. Habibies detractors portray the diminutive engineer as a kind of Indonesian mad scientist who lacks a coherent economic philosophy as well as the military pedigree and political skills that have helped Mr. Suharto manage a country threatened by latent region, ethnic, social and religious divisions. His enemies characterize Mr. Habibie as a spendthrift who has squandered billion of dollars on such dubious projects as building a domestic aircraft industry. Some critics feared Mr. Habibies selection would send frightening signals to financial commitments to the IMF program, which slashed state financial backing for the airplane project. The World Bank and Indonesian economic technocrats have long denigrated Mr. Habibies pet ventures as a waste."
Habibie is also the author of the now infamous "zig-zag" theory of economics in which he indicated that high interest rates are the cause of inflation. Not only does Mr. Habibie axiom defy the laws of gravity but they also illustrate could happen under his misguided leadership. We could easily believe that this visionary will see that whatever is left of Indonesias wealth after they finish going through their current meat grinder will be squandered away by the crazed ideas of the proposed vice-president. The ever canny Suharto is obviously thinking, "that when they see this guys performance next to mine, Im going to look awfully good to everyone and they are going to want to keep me around." Very sophisticated reasoning for the despotic leader of the Indonesians.
"If Mr. Habibie is appointed vice president, "you can turn out the lights, you wont want to see whats going on, and its not worth the electric bill." Says Eugene Galbraith, global research director for ABN Amro Hoare Govett."
Not only was Mr. Habibie anointed er I mean appointed vice president, but Suharto overcome by rioting, resigned in the face of his own cabinet telling him that the time had come for him to turn over the reigns and thus Indonesias worst nightmare came to pass. One of the most obvious reasons for Suhartos fall was his literally embodying the term, crony capitalism. Habibie represents the worst of that world as well. He has insinuated his children into projects that feed off of government contracts. When the people demand that the Suharto extended family, return the graft into the nations coffers, we strongly believe that Habibie will be perceived to belong to this closely knit group of pillagers especially in lieu of the fact that the two families have interrelated business holding. How, indeed can one be separated from the other.
In a suicidal move, Habibie began releasing long time political prisoners, many of whom worked for independence for Indonesian provinces such as East Timor. As these charismatic folks begin to work their magic on the mainstream, a tidal wave will engulf Indonesian leaders. Muchtar Pakpahan, a major Indonesian labor leader was among the first to enjoy Habibies unusual style of government and did not waste too much time in paying Indonesias new leader back for his largesse. His opening volley was to announce that he would have 10,000 workers into the streets of Jakarta in a show of force to get Habibie to resign. He indicated that the only reason that he was not having 100,000 workers screaming for his abdication was the fact that Habibie had been so nice to him. With friends like these, as we say, we dont need many enemies. But we are getting too far ahead of our story and we dont want to ruin the surprise ending.
HAPPY NEW YEAR
In the meantime, Chinese New Year will not be a lively event this year in Jakarta, at least for the ethnic Chinese. Government officials have banned public celebrations, apparently because there are such strong feelings between the Muslim and Chinese cultures. Toha Reno who is an official at the Jakarta Public Order Office stated: "The tougher action is needed because of what has been happening nowadays, People could easily get angry over things and riots based on ethnic issues have rocked the country several times in the past. We are afraid that if there were celebrations, they could spark jealousy in some people."
While the government was busily banning anything to do with New Years for the Chinese it was also getting its head handed to it by new adventures in the currency trading realm. As the free fall of the rupiah continued, not having learned anything from previous mistakes made by literally everyone in the Pacific Rim, it defended the indefensible and with money that it could ill afford to see go down the tube. And down the tube it went; the folks over at their central bank determined to make a stand, $6 billion worth and when the market soaked up the $6 billion like a hot knife cutting through butter, the rupiah continued in descent into the neither regions, unabated.
A viscous spiral raged out of control, companys had to pay their offshore debts with dollars and yen, and only had rupiah. Thus they would sell the rupiah and buy what they needed to debt repayment causing their currency to be mired in a permanent downward progression. Indonesia, with almost every major company in the country bankrupt for all practical purposes, has now determined to "reschedule" their debt. Reschedule is a fancy word for not paying it while you negotiate better terms with creditors. For the most part, this action, although severe is better than sitting around with your thumb in your mouth. More important though, it will give the rupiah time to recover. All in all, the first really positive step since the crisis began. When the day was over, Standard and Poors reduced the countrys credit from BB to B, external debt was $140 billion of which $66 billion was corporate, the rupiah was 14,000 to the dollar and rising.
Copyrighted Worldwide ©1997 Chapman Spira & Carson,