Thu, 28 Sep 2000

Focusing on embargo threats and unaccountable funds

Calls for an embargo can be understood while the inability to secure all public assets poses the threat of an increasingly declining public trust in the government, says political economist Revrisond Baswir, who teaches at the Gadjah Mada University in Yogyakarta.

Question: Has the United States been excessive with defense secretary William Cohen's statement on the possibility of an embargo on foreign aid if Indonesia fails to control the militias in West Timor?

Answer: Regardless of America's international political role, Cohen's statement made sense. And regardless of whether the threat is serious, we need to understand why Indonesia is under increasing international pressure.

The international community has long disliked the military which led to the embargo on loans for weaponry. But even with those sanctions, tragedies involving the Indonesian Military (TNI) continued, including the "earth scorching" of East Timor (after the August self-determination ballot).

The incident led to international demands to bring TNI officers to an international tribunal.

Amid the snail's pace in the investigation of rights abuses in East Timor, fresh violence broke out in Atambua in which relief workers of the United Nations High Commissioner for Refugees became victims.

This event again reminded the international community on the gravity of the problem in East Timor and the role of the military in it.

Q: What would the effect on a temporary hold on loans be?

A: In an embargo like that -- with the government being abandoned by the International Monetary Fund, the World Bank, or the Consultative Group on Indonesia -- the burden would be very heavy.

Planned government loans for 2001 have already reached US$4.8 billion. With debt rescheduling, the need for aid next year could reach $6.5 billion.

The effect of such an embargo could be reduced by cutting down on development activities or by not developing anything at all.

The problem is that based on the 2000 state budget we are not only in a deficit but also have a shortage of Rp 6 trillion for routine expenditures.

No loans would mean a higher deficit which could lead to the government operations becoming stagnant when it finds it cannot pay its employees or buy anything.

We could cover the gap by selling assets or privatizing state- owned firms but given our bleak economic prospect it would be hard to find buyers.

Q: What about cutting down more on fuel subsidies?

A: We could do that but it would mean an even higher increase, not merely 12 percent as planned. The policy would surely face strong resistance. The government could also reduce subsidies on other items like fertilizers -- but this would burden people even more especially as at the same time the government would be stopping projects, which could mean no jobs. An even bleaker picture would be if it had to raise taxes.

That is akin to people being hit by the ladder when they are falling into the river ...

Q: Would there be alternative channels for funds if foreign loans were to stop?

A: The one alternative would be a cleaning up of the handling of public money such as suppressing corruption; trillions of rupiah in nonbudgetary funds should be transferred to the budget as fresh income ...

Actually my friends in nongovernmental organizations and I hope that the government reduces foreign loans. A more radical stance is taken by the Anti-debt Coalition in which I'm in the steering committee. We want a total stop of foreign loans with the above mentioned alternative.

If public assets can be properly handled we wouldn't have a problem with foreign loans.

If we plan a loan of $4.8 billion or some Rp 40 trillion, the non-budgetary funds would be more than enough. The only problem is the difficulty encountered when it comes to non-budgetary funds.

We can observe the insensible reactions following the investigations on the funds within the Army Strategic Reserves Command (Kostrad). Its commander, Lt. Gen. Agus Wirahadikusumah, was removed.

An audit by a public accountant later and the Supreme Audit Agency revealed there were no irregularities in the use of Kostrad funds.

Worse, it seems they don't want to admit that foundations and firms under Kostrad are public assets. That is one case in one Army unit -- we haven't discussed other units in TNI.

So in the short term it is difficult for the government to gain other sources of funds apart from foreign loans.

Q: How about Iraq which is still under sanctions?

A: They might be surviving but infant mortality is rising because the flow of medication has been disrupted. But the citizens seem to be fully backing their government ... And Saddam Husein is not only the national leader, he's the military leader and has the military fully under control.

He can easily conduct a propaganda in the face of an embargo.

In many ways we're the other way round. We know Gus Dur (Abdurrahman Wahid) is at a loss in facing resistance from the old forces including those in the military, to the extent that the society is divided.

In such a situation, the difficulties of living under an international embargo could explode into resistance against the state, more so if the resistance was mobilized by opposition forces.

So what this nation is facing today is also a warning to civilian leaders and the political elite. They should realize that it's not the time for them to take over power, let alone public assets.

This nation needs people to work together, at least on how to face resistance (from the old forces), not to get back at them or to kill them but how we can avoid being manipulated or prevent them from perpetuating the old system.

Wouldn't an embargo be unfair as it would hurt the common people most?

There are indeed strong indications that the incidents (in West and East Timor) involved certain factions in TNI, mainly the Army. So if an embargo was applied, Gus Dur's government would face three fronts: elements in TNI and those supporting the old forces; the masses venting their anger on the government; and the international community.

So if the international community miscalculates (its strategy) by stopping aid to Indonesia, it would pave the road for the return of the authoritarian "pro status quo" elements.

Q: How could those former forces return?

A: If social economic conditions worsen under international sanctions, chaos would be quite probable ... and the government would lose even more. Those old forces could then use the situation to draw public sympathy by campaigning against the United States and industrialized countries in Europe in the name of anything, maybe nationalism.

They may not use figures from TNI which is tainted but a civilian figure known as a "reformist" to become a symbol of that movement.

Q: Would you say Cohen's statement was only to underline demands to settle the Timor problem?

A: Yes, and if donor agencies know the risks of stopping aid to Indonesia they would be forced to continue the aid. They clearly don't want the return of the military to power.

The international community must also calculate the increase in migration or refugees from Indonesia (should there be chaos). Outside parties know of such risks, similar to that of Vietnam's boat people. They have good intelligence. (Asip A. Hasani)