Will economic crisis plunge
Indonesia into social and political crisis?
March 13, 1998
in this forum:
How likely is a revolution if the economic situation continues to worsen? If things continue to worsen and riots become violent, how important of a role will the military play? Why should the IMF and the international community bail-out his regime? What about the social costs of the crisis for the Indonesian people? Is the U.S. prepared to the end its support for Suharto ? Vanessa Marquez of San Francisco, CA, asks: I believe that too much has been made of the economic crisis in terms of international investment. What about the social costs of the crisis for the Indonesian people?
Edward Masters, former U.S. ambassador to Indonesia, responds:
I couldn't agree more. As you know, a large part of the present problem is the fact that private Indonesian banks and firms ran up a short term, largely unhedged debt which the Indonesian government estimates at about $74 billion. And, of course, it takes two to tango. Foreign banks loaned the money. The exposure of Japanese banks is the highest -- about five times that of U.S. banks -- and also ahead of the United States are German and French banks. Indonesia has had an excellent record during the past 30 years of honoring its financial obligations, and I'm sure it will this time. But the first priority must be programs to help the people. My answer to question number three contains some statistics on the problems faced by the people. I won't repeat them here, but I want to emphasize the point that this must have top priority, and the international bankers, who made what in many cases appear to be bad loans, will have to wait in line.
Ralph Cossa, Executive Director of the Pacific Forum at the Center for Strategic International Studies, responds:
As noted in my earlier response, there is both an economic and a social cost involved in the crisis and even the "cold-hearted IMF bankers" do in fact make provisions to adjust or react to worsening social conditions. It should be remembered that, current difficulties notwithstanding, Indonesia under President Suharto has significantly improved the lives of its citizens. It is also true that the poor will suffer disproportionately until this crisis is effectively resolved. His past, generally successful efforts to improve the lives of the people have gained Suharto a great deal of genuine affection throughout the nation. He seems unaware of just how severely this has been squandered by his refusal to deal effectively with the current crisis.
John Hughes, former editor and publisher of the Christian Science Monitor, responds:
The people of Indonesia deserve a better fate than their leaders have given them since independence. That can best be brought about by economic development and prosperity. The relative affluence that has come since the end of Sukarno to the middle and upper classes has not filtered down to the masses living at subsistence level. Economic progress and political freedom go hand in hand. These are now Indonesia's great needs.