The political costs of IMF's cure<\/p>\n
By Aleksius Jemadu<\/p>\n
JAKARTA (JP): Indonesia might have to pay political costs for
\nthe government's recently announced reform measures, aimed at
\nregaining economic stability, which were suggested by the
\nInternational Monetary Fund (IMF).<\/p>\n
In order to increase national efficiency and the
\ncompetitiveness of the economy, the government measures included
\nthe gradual reduction of import tariffs and trade regulations for
\nvarious commodities, the lessening of obstacles hindering
\nexports, the elimination of special tariffs for automotive
\nproducers who achieve high local contents by 2000, and a review
\nof investment and expenditures by the public sector.<\/p>\n
Indonesia's problem has stemmed not only from the weakening of
\nits currency but also from a \"crisis of confidence\" which has
\nbeen due to its failure in practicing good governance. Various
\neconomic reform packages are said to be half-hearted measures
\nwhich reflect more the prominence of vested interests of powerful
\ncorporate lobbies rather than economic priorities. For instance,
\nthere has been no clear explanation as to why the government has
\nsuspended costly and vital infrastructure projects, while sparing
\nequally expensive but less urgent projects.<\/p>\n
Some analysts welcomed the fact that the IMF has asked the
\ngovernment to undertake much needed structural reforms for the
\nnational economy. Of particular importance in this regard is the
\ndemand for the elimination of monopolies and other distortions in
\ngovernment economic policies.<\/p>\n
Government officials often argue that Indonesia needs
\nconglomerates in order to be able to enter the global market.
\nHowever, there is a growing concern about the emergence of a
\nrelatively high concentration of ownership and market power in
\nthe hands of conglomerates. It was estimated that the operations
\nof the top 200 business groups in 1990 constituted the equivalent
\nof around one-third of the country's gross domestic product
\n(GDP), of which about a third was controlled by the top five
\ngroups, according to a World Bank report in 1993.<\/p>\n
Most Indonesian conglomerates were also said to be
\ninefficient, less export-oriented and grown mainly out of either
\nfamily ties or quid pro quo connections with government
\nofficials. The preservation of the economic interests of some
\nwell-connected conglomerates was considered by some observers as
\na major stumbling block for a more comprehensive deregulation in
\ncertain sectors of the economy, especially with respect to some
\nagricultural products. The coincidence of the economic crisis and
\nthe depoliticization of society will inevitably lead to the
\nstrengthening of the state's power, which constitutes a close
\ncollaboration between the ruling elite, multinational capital,
\nand domestic capital.<\/p>\n
What will be the political costs of the IMF intervention?<\/p>\n
IMF authorities have always assumed that the politics of the
\nrecipient country should be made subservient to its economic
\ndevelopment. They, therefore, have tended to take political
\nstability for granted. Their main argument has been that a nation
\ncan only have political democracy if it can free itself from an
\neconomic crisis.<\/p>\n
It is a common phenomenon in developing countries that
\neconomic problems could lead to the political activation of
\ngrassroot elements of society. In response to a government's
\nausterity programs, the working masses have asked for higher
\nwages, lower inflation, more government services, tighter control
\nof foreign corporations and higher taxes on the rich. At the same
\ntime, such political activity can be perceived by the ruling
\nelite as a threat to their interests and their international
\ncollaboration. The greater the threat, the more likely the
\nemergence of \"hardline\" groups in the military and bureaucracy to
\npromote a more complete subordination of society.<\/p>\n
The indispensability of the role of international capital in
\nthe economic development of a recipient country could lead to the
\nestablishment of a strong cohesion between state power,
\ntranslational capital and national entrepreneurs. These three
\nactors could monopolize the appropriation of all development
\nresources at the expense of the majority of the people. Such
\neconomic exclusion could exacerbate existing social and economic
\ninjustices.<\/p>\n
Some political observers suggest that prior to the
\npresidential election next March, political tensions will tend to
\nincrease. Indonesian politics will become more uncertain and
\nunpredictable. This is partly due to the fact that both the
\ngovernment and the people seem to believe that Indonesia's future
\nleadership can be taken for granted. The fact that the nation is
\ngoing to face unprecedented economic difficulties could turn such
\na belief into a political fiasco.<\/p>\n
This is indeed a moment for reflection. All Indonesian people
\nare supposed to unite their strength in a spirit of solidarity to
\nbear the burden imposed by the IMF-sponsored austerity programs.
\nThis can only be done if government officials can free themselves
\nof illegal corrupt and collusive practices.<\/p>\n
Speculating on the possible political consequences of the IMF
\ncure in solving the monetary crisis may not necessarily mean that
\nIndonesia should reject international assistance. The message of
\nthis writing is to persuade the government not to forget the
\nsacrifices people will have to bear in accepting the IMF cure.
\nThey have already suffered a lot in coping with the increasing
\nprices of basic needs due to the depreciation of the national
\ncurrency.<\/p>\n
The writer is the director of the Parahyangan Center for
\nInternational Studies at the Parahyangan University in Bandung,
\nWest Java. He holds a Ph.D. in social sciences from KU Leuven in
\nBelgium.<\/p>",
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