Indonesia's President Suharto was re-elected to a 7th, 5-year term, as expected. But the national crisis -- plunging currency, high inflation and rising unemployment -- has caused severe social unrest. Meanwhile, the I.M.F. has delayed the financial bailout until Suharto implements economic reforms. After a background report, Treasury Sec. Robert Rubin discusses Indonesia's importance to the region and to the global economy.

JIM LEHRER: Now, a Newsmaker interview with Treasury Secretary Robert Rubin. I spoke with him earlier this evening from the Old Executive Office Building in Washington.

JIM LEHRER: Mr. Secretary, welcome.

ROBERT RUBIN, Secretary of the Treasury: Nice to be with you, Jim.

JIM LEHRER: How serious is the situation in Indonesia right now?

SEC. ROBERT RUBIN: Oh, I think it's a very serious and a very difficult situation. It's also a situation that we have an enormous stake in in terms of attempting to do whatever we can to contribute to Indonesia putting in place a reform program and restoring financial stability. It's obviously very much in the interest of the Indonesia people, but it's also very, very much in our economic and national security interest.

JIM LEHRER: This thing has been drawn a kind of crude way as Indonesia pulls itself out, either the IMF way, or the Suharto way, is that--would you agree that that's a decision that Indonesia must now make?

SEC. ROBERT RUBIN: No, I really wouldn't, Jim, and I don't think that it frames that way at all. I think that if you look around the world at countries that have had these kinds of problems, the best path back and very often I think really the only path that is likely to work is to put in place a good, strong reform program that deals with the problems that gave rise to the instability in the first place a And by doing what I've just said not only deal with those problems but also re-establish confidence and financial stability. And I think that's precisely what Indonesia needs to do going forward.

JIM LEHRER: But specifically, President Suharto wants to deal with the short-term problem, does he not, in other words, with a currency, a currency board to build up the currency, and leave the reform, the major reforms, to another time.

SEC. ROBERT RUBIN: Well, he is very focused on the currency, and I think that he's correct in being focused on the currency, but the key to having the currency recover is to have confidence in the financial markets, both because of the importance of foreign investment and also because of the importance of the Indonesians not moving their currency out of Indonesia, not converting the rupiah into dollar, yen, or whatever. So I think it all comes down to the same thing: reform and a strong currency are really two parts of the same purpose.

JIM LEHRER: But it's not overstating the case to say that President Suharto does not see that, see it the same way today?

SEC. ROBERT RUBIN: Well, I think it's complicated, Jim, and I really think that rather than--at least for me--

JIM LEHRER: Okay.

SEC. ROBERT RUBIN: --rather than trying to second guess what--or figure out exactly how he sees it, what we have tried to do is to continue focusing constructively on trying to reach the point where Indonesia implements the kind of reform program we're talking about, and I don't think that--I don't think that it's necessarily right to jump to conclusions about what he thinks. I think it's actually a very complicated situation.

JIM LEHRER: Okay. The IMF has said they're going to delay this next payment, this $3 billion payment. It was due next week. It's now going to be delayed until April because they do not like what President Suharto has done so far in terms of implementing the reforms that the IMF thinks should be done. Do you support the IMF's decision on that?

SEC. ROBERT RUBIN: Well, the IMF always and invariably links its disbursements to sustained adherence to reform, and I think that's correct, because the key in all of this, Jim, is reform. It's reform that deals with problems, and it's reform that creates confidence, and then that leads to financial stability. So I think that for the IMF to be taking that position is correct. Having said that, I think that what we all need to do looking forward is make whatever contributions that we can to helping reach a point where Indonesia implements on a sustained basis the kind of reform program that would help it get itself back on the right track.

JIM LEHRER: But what do you say to the Indonesians who say okay, that's fine, the IMF wants certain things done, they're going to withhold this payment, in the meantime, our country is on the verge of financial collapse? Give us the $3 billion; we can argue about the other things later.

SEC. ROBERT RUBIN: I don't think, Jim, that the $3 billion is really particularly the point. I don't think the $3 billion--and this is true I think in other situations around the world as they've happened too--the official money isn't what solves these problems. What solves these problems--because you have vast markets and you have large debts outstanding--what solves these problems is getting the system working again. The official money gets you a little bit of breathing space, but what gets these work--systems working again is confidence and confidence comes from reform, so my answer is that the key to getting things back on track, both in the short-term and the longer-term, is not getting their hands on--is not Indonesia receiving the disbursement, but, rather Indonesia committing to and implementing on a sustained basis a reform program. And I don't think a disbursement program alone is going to accomplish anything.

JIM LEHRER: Former Secretary of State Henry Kissinger and others have said that you and the IMF, what you really want in Asia and particularly in Indonesia is revolution; you don't want reform; you want them to change their entire economic system from the bottom to the top, is that correct?

SEC. ROBERT RUBIN: No, I don't think that that's--I actually don't think that's quite--I have spoken to Kissinger, and I think I have a pretty good sense of his view. I don't think that's a fair characterization of his view. What we have said is that there are certain problems, structural issues, particularly structural problems, that gave rise to the problems in Indonesia along with what I think was probably excessive credit extension to Indonesia. And what Indonesia needs to do is to have a reform program that addresses those problems, and, in addition, has a discipline program of macroeconomic policy. And I think you put those two together, and I think that you then are on the path or Indonesia would be on the path that would give them the best--the highest probability of getting back where they need to be. But that isn't a revolution; that is simply a set of reforms that addresses the problems that gave rise to this financial instability. And that is a doable thing. The problem--the question is now getting it, or Indonesia getting it done.

JIM LEHRER: One of the problems has always been cited in getting things done in Indonesia as far as the finance and economic situation is concerned is--are all the ties of the Suharto family into the economy, children, Suharto children, who have monopolies in various large industries, various Suharto friends who have all kinds of ties and interests in the banking industry from the top and to the bottom, and that is what the stumbling block is here. Do you agree with that?

SEC. ROBERT RUBIN: I think I'd put it a little bit differently, Jim. There, obviously, are concerns with respect to the issues you've just discussed, but I think that in terms of establishing or re-establishing, I should say, the financial stability, certain of these ties that you've just discussed are directly and immediately relevant, and that's what the IMF program attempted to deal with, and as Indonesia thinks its way through to a reform program, which hopefully they will, it seems to be it's those particular ties they need to worry about. For example, there are monopolies in certain areas that really do have an adverse impact on the economy. There are protective tariffs that really do have an adverse impact on the economy. There are infrastructure projects that really are not economically sound and that soak up a lot of public resource. Those are the kinds of issues that they need to deal with in a reform program and also happen to involve or may involve, at least, the kind of ties you're talking about.

JIM LEHRER: But, Mr. Secretary, aren't--what you're talking about, aren't you really talking about remaking the way that country operates?

SEC. ROBERT RUBIN: No. I think you're talking about a concrete and specific list of reforms that--a discreet list of reforms which, if initiated, and then sustained, could have a real--and I think very positive effect on the economy and at the same time cause investors, both inside Indonesia and outside Indonesia to begin to have confidence again. And that is, I think, a practically doable objective, which is where the Indonesian government needs to wind up in order to get back to where--it needs to be not only in the interest of the Indonesian people but very much in the economy interest of the American people as well. We have very large economic national security stakes in all of this.

JIM LEHRER: Is it correct to say at this point, as we sit here tonight, though, Mr. Secretary, that at least in the IMF's opinion Indonesia is not doing those things?

SEC. ROBERT RUBIN: I think, as I said a moment ago, that there are serious concerns and problems that exist at the moment, but I don't think that's where the focus needs to be. I think the focus needs to be both--as I said a moment ago--for their interest, for our interest, for all sorts of reasons, on getting this thing right, and that's certainly our focus as we go forward.

JIM LEHRER: But the concern is that they're not doing it. I mean, isn't that what caused this whole problem, why the United States, why you sent former Vice President Mondale, you and the President did, to try to work this thing out, and there doesn't seem to be any change in the position of the Indonesian government, is that right?

SEC. ROBERT RUBIN: I would--let me put it just slightly differently.

JIM LEHRER: All right.

SEC. ROBERT RUBIN: I don't think I would actually totally agree with that. I think clearly there are concerns and there are problems. And the Indonesia government needs to work its way through those problems. But I think that sending Vice President Mondale was a constructive and useful thing to do, and I think we will continue to focus on what we can do that is constructive and useful, so this winds up where it needs to wind up. And I would hope that the Indonesian government, which will now have a new cabinet very--by--I guess by the end of this week--early next week--will continue also to focus on finding a way to arrive at a reform program that can serve the purpose that needs to be served.

JIM LEHRER: So you think President Suharto is going to do what the IMF wants?

SEC. ROBERT RUBIN: Well, you keep trying to reach a conclusion--

JIM LEHRER: I--

SEC. ROBERT RUBIN: --in a world that is uncertain and I think not readily predictable. But I--I think that that's what we all need to work toward. I don't have a crystal ball in terms of what's going to happen. But I have a very high level of--very highly developed view as to what needs to happen, and I think that while there are obviously a lot of problems, I think it can happen, and that's what I'll work to try to make happen.

JIM LEHRER: Moving from the specifics of the finances and the economics to the social end of the problems in Indonesia, many are concerned if this problem is not dealt with and dealt with quickly and correctly, there could be chaos in the fourth largest country in the world. Do you agree with that?

SEC. ROBERT RUBIN: I think it's a very serious problem. I think it's a very serious concern, and I think that itself is a very serious concern that affects obviously the Indonesian people enormously but can affect us as well, and I think there's even a broader concern, Jim, and that is the concern we've had throughout this Asian crisis, which is the possibility that one country being in very serious trouble can affect other countries, and you can begin to have what's called a contagion effect, which is to say that developing countries around the world could get involved. I think the probability of that happening is low, but if it happens, it could have very severe impacts on our economy. And that is precisely why we have said to Congress that the IMF, which is now badly under-funded, needs to get the additional funding and needs to get it very quickly, so that if such a crisis develops, we are able to deal with it, as opposed to being subjected to the very severe effects that could occur and not having the capacity to deal with it.

JIM LEHRER: Is Indonesia important enough in this contagion scenario that if it should fail, for whatever reason, that it could trigger the very things that you're talking about?

SEC. ROBERT RUBIN: That's a question that nobody can possibly predict. We are in a new world. It really is. It's a world of enormous opportunities, the world of global financial markets, the global economy, but it also has new risks, and people have never dealt--the world has never dealt with quite these kinds of problems. What we've been doing is working with Thailand, with South Korea, as you know, and with other nations around the world, developing countries, to help them strengthen their systems, so that they will be as invulnerable or at least their vulnerability will be as small as possible, but there's no way of telling whether something is going to trigger a contagion or not. And it's because there's no way of triggering it, that it's critical that we have the capacity to deal with it, and that goes back exactly again to getting full funding for the IMF and getting it quickly.

JIM LEHRER: You probably know more about this than anybody in the United States. This is your job as the secretary of the Treasury. Help those of us who are not as closely involved in this and as informed as you are. How worried should the average person be about this situation in Indonesia?

SEC. ROBERT RUBIN: I think that the average person--I think every American has a stake with respect to what happens in Indonesia, and I think that both with respect to Indonesia, itself, and more broadly, these risks of the global economy, I think people need to be aware of them, and I think that they need to be conscious of the fact that, although there are great opportunities, as I said a moment ago, with the global economy, there are also risks, and I think what should follow from that awareness is support for public policy that's addressed to dealing with those risks, and that gets us back once again to having Congress enact full funding for the IMF and doing it quickly.

JIM LEHRER: All right. Mr. Secretary, thank you very much.

SEC. ROBERT RUBIN: You're more than welcome. It's been nice being with you, Jim.