The Habibie factor<\/p>\n
A magnanimous decision by President B.J. Habibie to withdraw
\nfrom the upcoming presidential election, as strongly recommended
\nby an alliance of Muslim-oriented political parties on Wednesday,
\ncould remove a major source of the heightened uncertainty and
\ntension engulfing the nation. It would be an act of commendable
\nstatesmanship on Habibie's part if he chose to become an
\nimpartial guardian of the next stage of the nation's
\ndemocratization process -- the election of a new and effective
\npresident.<\/p>\n
He should have, by now, fully realized that he is part -- and
\na very important part for that matter -- of the seemingly endless
\nstring of crises befalling the country.<\/p>\n
The national economy is adrift as the Habibie administration,
\nits credibility and legitimacy wholly destroyed by the Bank Bali
\nscandal and East Timor debacle, finds itself paralyzed to right
\nthe sinking ship. Since the International Monetary Fund, the
\nleader of Indonesia's US$43 billion bailout, and the other
\nlargest contributors to the program, the World Bank and Asian
\nDevelopment Bank, have refused not only to make further fund
\ndisbursements but also to deal with the Habibie government, many
\nreform programs have been put on hold. It is setting back the
\neconomic recovery by months or perhaps longer than a year.<\/p>\n
The three multilateral institutions put their reputation on
\nthe line in withholding further aid because the economy could
\nplunge into a second stage of crisis and waste the billions of
\ndollars they have already ploughed into the reform program. But
\nthey would face similar risks if they continued helping a
\ngovernment which condones high-level corruption or does its best
\nto sweep it under the carpet, which is what the Habibie
\nadministration is widely believed to have done immediately after
\nthe disclosure of the scandal almost two months ago.<\/p>\n
The creditors did not expect that corruption, which are
\nentrenched and institutionalized in Indonesia, to miraculously
\ndisappear within a short time. But to them as well as most
\nIndonesians, the web of under-the-table transactions were no
\nordinary example of corruption even by local standards. It
\ninstead is a numbing tale of grasping corruption allegedly
\nreaching all the way to the top of the government. The
\ngovernment's steadfast refusal to disclose the complete findings
\nof the audit by independent auditor PriceWaterhouseCoopers is
\nwidely viewed as a high-level cover-up.<\/p>\n
All the while, as uncertainty and tension simmer in the run up
\nto the General Session of the People's Consultative Assembly, the
\neconomy is being scorched. The exchange rate of the rupiah to the
\nU.S. dollar is about 25 percent lower than it was before Baligate
\nwas exposed in late July. This may inflict yet more burdens on
\nthe recapitalized banks, setting back their restructuring as the
\ngovernment, currently the majority owner in almost all major
\nbanks, may have to put up fresh equity capital.<\/p>\n
Despite a significant windfall from higher-than-estimated
\ninternational oil prices, the state budget is in big trouble due
\nto the suspension of foreign aid, which accounts for more than
\n35.5 percent of total revenue. The hole in the budget may grow
\nmuch bigger as the Indonesian Bank Restructuring Agency (IBRA)
\nand Minister of the Empowerment of State Enterprises Tanri Abeng,
\nboth deeply implicated in Baligate, appear now to be too
\ndemoralized to perform their tasks of raising almost Rp 30
\ntrillion for the Rp 218 trillion state budget. And Baligate
\nscares off investors interested in buying some of the Rp 600
\ntrillion worth of assets currently managed by IBRA, fearing that
\nthe assets could hide similar \"land mines\" which exploded in the
\nBank Bali snafu.<\/p>\n
Worse still, the plan to reschedule $6 billion in government
\nforeign debt in a bid to secure the next 2000\/2001 state budget
\nappears to be in disarray due to international creditors'
\ndestroyed confidence in the government.<\/p>\n
As strained relations with Canberra in the wake of the East
\nTimor ballot are deliberately whipped into jingoism by some
\nquarters in the government and military, coal and gold mining
\noperations in Kalimantan, Sulawesi and Sumatra are threatened.
\nHotels in Bali are already feeling the effects of room
\ncancellations by Australians, who usually account for almost 30
\npercent of tourist arrivals on the island.<\/p>\n
It is too late in the day for any amount of economic policy,
\nforeign aid or investment to help Habibie cast away the
\nuncertainty which looms over the country. Only a new, credible
\nand legitimate government can dispel the lingering uncertainty
\nand provide a leadership which is respected by the people and the
\ninternational community.<\/p>",
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