Indonesia Quiet Before Next Political Storm

by Kafil Yamin

Despite her perceived lack of political skills and acumen, Megawati, who became Indonesia's chief executive just a few months ago, continues to enjoy the confidence of many major political and social organizations.

But some Indonesians say they are still waiting for the new regime in this country of more than 200 million people to translate into better economic times as well -- and they have high expectations of the Megawati government in the coming year.

"The government was doing good enough in politics and social sector, but not in the economy," says Melly Sumarni, a 33-year-old government employee from Palembang, South Sumatra in western Indonesia.

"There was no longer big rioting or wide-scale violence. But we were no better then before in terms of the economy. I hope next year there will be some improvements," she adds.

But some analysts say that Megawati is squandering the goodwill she has won by following the wishes of the International Monetary Fund (IMF), World Bank and donor countries.

And that, they say, may mean another round of turbulence for this conflict-ridden country.

Among other things, the IMF and the World Bank have asked the Indonesian government to lift subsidies on fuel, electricity and food in order to generate state revenues.

But that puts a heavier financial burden on ordinary Indonesians, who may end up taking to the streets once more.

Mused Burhanuddin, a 36-year-old worker at a private company in Jakarta, says: "Things seem to be the same in the economy. All sectors are collapsing. There are no encouraging developments."

"We have been in this crisis for four years and we have not made any progress. If things continue as they are, it will be horrible. Well, we are getting accustomed to hardship, but we just cannot go on this way," he says.

At present, at least 36 million Indonesians are jobless. Even with a rosy political outlook, Indonesia would still see unemployment numbers climb in early 2002 because of U.S. import restrictions placed on Indonesian goods in the wake of the Sep. 11 events.

Legislator Antony Zainal Abidin also says poor foreign investment would slow the country's economic growth next year from 5 percent to 3.5 percent.

Some experts say that Indonesia has no choice but to comply with the "suggestions" of the IMF and the World Bank, being a recipient of loans from these institutions.

Yet even though Economic Minister Kwik Kian Gie says Jakarta "has no other way" to take, he admits, "suggestions from the IMF and the World Bank have put a heavier burden on the Indonesian people."

Abidin says "the government is in a big dilemma. Following the IMF and World Bank guidance will mean abandoning the people. But developing a people-based economy will displease its donors and it will not get funds to set its economic wheels in motion."

Indonesia has already signed a Letter of Intent with the IMF that says Jakarta will follow the Fund's guidance in the economic recovery efforts.

As it is, the central government is already unable to finance its national programs because of a budget deficit. Many are even wondering whether or not Jakarta has the money to pay the wages of state employees.

The privatization measures have already encountered resistance from local governments, which have accused Jakarta of simply transferring ownership of state companies from the central government to foreign investors.

Despite Economy Minister Kwik Kian Gie's comments that Jakarta is well aware that the IMF reforms put burdens on ordinary people, H.S. Dillon of the Center for Agricultural Policy Studies says: "The government and the IMF just don't learn that poverty in Indonesia is a structural problem."

"It is a problem of unjust land ownership, production, the standard of human resources, access to credit. So what we are supposed to do to resolve poverty is to change these structures," he adds. "But what comes to their heads are privatization, lifting of subsidies, liberalizing trade. They will surely turn things from bad to worse."

But it is the lifting of subsidies, especially on fuel and electricity, that is upsetting most Indonesians because it will lead to higher prices.

Analysts say this will further weaken the people's purchasing power and prolong social and political instability. They predict that inflation next year will reach two digits due to the soaring prices. Abidin foresees an inflation rate of 10 percent.

The Indonesian government is also under pressure to scrap trade barriers and reduce import duties on food imports. Cheap foreign food products are flooding local markets, leaving domestic producers in utter despair.

"I grow red pepper and it was harvested last week," says Farid Maulana. "But I haven't sold them to market because the price is not good. People prefer to purchase imported chili -- the quality is better and the price is cheaper."

Maulana says he has lost interest in farming. "I don't know what to grow," he grumbles. "Any plant I grow, the yield will not be profitable because we cannot sell them at lower prices than the imported ones."

"Starting January 2002, I will quit farming and become a construction worker," says Maulana, adding that farmers like him in his hometown in West Java have already sold their lands to nearby textile factories.

Dillon says some of Jakarta's policies are contradictory. "The government, in cooperation with the IMF, provides cheap rice. But at the same time, the IMF recommends simultaneous scrapping of import duties and other trade barriers. It causes foreign food products to flow in at low prices and our farmers can do nothing about it," he explains.

Economist Revrisond Basir says that by signing the Letter of Intent, Jakarta deviated from Indonesia's constitution, which emphasizes on a people-based economy.

"The 2002 state budget is very much market-oriented, whereas even in a liberal country like the United States, there are still restrictions to protect its people," he says. "The IMF has forced Indonesian government to do that."

Basir, however, is apparently still a believer in Megawati, the daughter of Indonesia's first president, and says that her government has the potential to lift Indonesia out of its rut.

"I think Megawati's government is making a serious attempt to fight corruption, despite big challenges," he insists. "If Indonesia (succeeds in having) a cleaner government next year, there are signs of a better situation in the near future."

Many do agree that at least social and political conflicts have subsided since Megawati came to power, thanks in part to the fact that her Indonesian Democratic Party-Struggle holds a majority of the seats in Parliament.

Says Abidin: "If this trend can be maintained and improved into social and political stability, there is light at the end of the tunnel."