Indonesia has no alternative but to rely on IMF<\/p>\n
By Linda Sieg<\/p>\n
TOKYO (Reuters): The International Monetary Fund has come
\nunder fire for making a bad situation worse in Indonesia but
\nanalysts say Jakarta has little alternative to reliance on the
\nfund, no matter who rules the troubled nation.<\/p>\n
Indonesian President Soeharto, bowing to domestic and
\ninternational pressure, resigned on Thursday.<\/p>\n
Vice President Jusuf Habibie immediately took his place, but
\nanalysts questioned how long the controversial Habibie could stay
\nin power.<\/p>\n
Risk remains, meanwhile, that tough reforms mandated by IMF
\nbailouts in South Korea and Thailand could spark serious
\npolitical unrest in those nations. But analysts say their greater
\nprogress towards political reform should help avert Indonesian-
\nstyle turmoil.<\/p>\n
Hailed as a savior when Indonesia turned to it for help last
\nOctober, the IMF has since come under heavy criticism for setting
\ntoo strict terms for its assistance and for failing to adapt its
\ntraditional prescriptions to Asian-style ills.<\/p>\n
\"In Indonesia, the method and timing of the broad structural
\nreform policies included in (IMF) conditionality was too hasty
\nand complicated the problem,\" an advisory panel to Japan's
\nfinance minister said in a report on the Asian crisis issued on
\nTuesday.<\/p>\n
The IMF masterminded a $40 billion-plus rescue deal for
\nIndonesia last October but twice had to revise the economic
\nreform program linked to the bailout.<\/p>\n
Fund defenders, however, say that while some criticism of the
\ncontent of harsh IMF prescriptions is valid, an ossified
\nIndonesian political system built up during President Soeharto's
\n32-year rule must bear most of the blame for the current chaos.<\/p>\n
\"When the crisis hit last year, the political system wasn't
\nable to respond,\" said Bruce Gale, Singapore manager of Hong
\nKong-based Political and Economic Risk Consultancy.<\/p>\n
Suharto's resignation on Thursday followed the death of more
\nthan 500 people last week, when the worst riots in three decades
\nswept the Indonesia capital.<\/p>\n
Economic collapse after years of booming prosperity ignited
\ngrowing dissatisfaction with the inequalities and rigidities of
\nSoeharto's regime, triggered the 76 year-old leader's downfall.<\/p>\n
On Wednesday the IMF said it could no longer meet a June 4
\ntarget to pay its next loan installment and would have to
\nreassess the economic assumptions underpinning the program.<\/p>\n
Ultimately, though, Indonesia will have no alternative to
\nrelying on the IMF to help it out of its economic woes.<\/p>\n
\"Even a new government won't blame the IMF because they are
\ngoing to need IMF support, and lots of it,\" Gale said.<\/p>\n
Habibie was quoted on Thursday as saying he could honor all
\ncommitments with the IMF and continue promised reforms.<\/p>\n
Analysts said the fund's reaction and the nation's worsening
\neconomic crisis would be key factors in determining how long
\nHabibie stayed in power.<\/p>\n
\"It all depends on the economic situation. If there is no
\nimprovement in the economic situation and the IMF will not
\nrelease the funds, then it will be very difficult no matter who
\ncomes up,\" Hilman Adil, director of the Center for Social and
\nCultural Studies in Jakarta, told Reuters Television (RTV).<\/p>\n
The foreign investment community has reacted with distaste to
\nHabibie's free-spending and unorthodox economic views in the
\npast. \"The IMF has actually specified some of Mr. Habibie's
\nprojects for condemnation in its reform program at various
\ntimes,\" Gerry Van Klinken, professor at Sydney University, told
\nRTV, adding the IMF was unhappy with Habibie's approach to
\neconomic policy when he was Research and Technology Minister.<\/p>\n
IMF officials in Tokyo declined comment on Thursday.<\/p>\n
But the World Bank said it was ready to resume operations in
\nIndonesia as soon as the capacity to carry out economic reforms
\nreturned.<\/p>\n
\"We will be moving quickly in close collaboration with the IMF
\nto restart operations as soon as we have a sense of the emerging
\nplayers here,\" Dennis de Tray, the bank's director in Indonesia,
\ntold Reuters Television, adding the first priority for Jakarta
\nwas to form a credible and competent cabinet.<\/p>\n
Risk remains, meanwhile, that Thailand and South Korea could
\nsuffer more social unrest and political instability as they move
\nto implement more reforms agreed on with the IMF.<\/p>\n
\"At times when the economy is in recession there is always the
\nrisk of social unrest, and the risk that will spill into
\npolitical instability for countries like Korea and even Thailand
\ncan't be ruled out,\" said Rob Subbaraman, an economist at Lehman
\nBrothers Japan Inc.<\/p>\n
Still, Seoul and Bangkok are seen as better positioned to
\navoid turmoil on an Indonesia scale.<\/p>\n
\"The strength of South Korea and Thailand is that they
\nbasically have governments in power that people have a certain
\ndegree of confidence in, and there is an agreed mechanism by
\nwhich these governments can be held accountable,\" Gale said.<\/p>",
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