Analyst says Indonesian outlook bleak<\/p>\n
HONG KONG (Reuters): Indonesia faces a troubled future of
\nsocial and political uncertainty and part of the blame belongs to
\nthe International Monetary Fund, an expert on the country said
\nyesterday.<\/p>\n
Eugene Galbraith, group head of research for ABN Amro and an
\nIndonesia resident for 16 years, said risks to stability were
\nlikely to come from the country's periphery, rather than from
\nJakarta, which was more firmly under the control of internal
\nsecurity forces.<\/p>\n
"Jakarta is the whole focus of internal security, so Jakarta
\nis controllable. But there are opportunities for unrest at the
\nmargin (of the country), which the government could not address
\nconcurrently," Galbraith said in an address.<\/p>\n
He predicted the "worst is yet to come," anticipating further
\nunrest when fuel subsidies are lifted on April 1.<\/p>\n
Riots have broken out and looting has been rampant in some
\nparts of Indonesia as disgruntled residents have taken to the
\nstreets to voice despair over rising prices of basic goods.<\/p>\n
Shops of ethnic Chinese have been targeted by the looters.<\/p>\n
Galbraith said it was worrying that the government had not
\ncome out more strongly against the violence aimed at Chinese.<\/p>\n
What was most disturbing was that President Soeharto had not
\nproclaimed that "Indonesians of Chinese descent are Indonesians,
\nwhich has sent a signal that they are fair game," he said.<\/p>\n
Galbraith said he believed the selection of controversial
\nResearch and Technology Minister B.J. Habibie as Soeharto's vice
\npresident in the next administration implied there were divisions
\nin the military.<\/p>\n
He said Habibie had angered the military in the past because
\nof his control of industries supplying military goods such as
\nplanes, ships and guns. The military nevertheless gave Habibie
\nits official backing last week.<\/p>\n
"If the army is divided, then my view of the future is much
\nmore cautious," he said.<\/p>\n
Galbraith placed a large share of the blame for Indonesia's
\nwoes on the IMF, which he said had handled the situation badly.
\nWhile the IMF's prescriptions to steady the staggering Indonesian
\neconomy were "uncontroversial," its way of dealing with the
\ncountry's leaders undermined their authority and failed to
\nrecognize political realities, Galbraith said.<\/p>\n
Galbraith described the IMF as "petulant" in its early
\ndealings with the country over the Asian financial crisis.<\/p>\n
On the topic of the currency board "the way the IMF dealt with
\nIndonesia was disgraceful. Giving an ultimatum to a sovereign
\nnation does not create a fertile environment for good political
\ndialogue," said Galbraith.<\/p>\n
In mid-February, the IMF threatened to cut off bailout funds
\nfor Indonesia if the government carried through plans to fix the
\nrupiah through a currency board system.<\/p>\n
The international agency later softened its stance, saying a
\ncurrency board was premature but could be considered in future
\nafter Indonesia carried out financial reforms.<\/p>\n
Galbraith acknowledged that the failure of a currency board
\nsystem would wreak havoc on Indonesia's financial markets.<\/p>\n
But he said the country may have little choice but to give a
\ncurrency board a try, now that its banking system was in tatters,
\nthe central bank was failing to offer leadership and the rupiah
\n"moves 10 percent in a day."<\/p>",
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