For Indonesia, It's supranationals to the rescue

For Indonesia, It's supranationals to the rescue

By David DeRosa

NEW CANAAN, Connecticut (Bloomberg): Notice the fancy footwork
on Indonesia. Not one but two supranational agencies -- the
United Nations and the International Monetary Fund (IMF) -- are
trying to put Indonesia back together.

The drill is this. The United Nations will sponsor the troops,
keep the peace, and set up a war crimes tribunal. The IMF will
pay the bills. If Indonesia doesn't behave itself, the IMF will
threaten to stop paying the bills.

Indonesia, being economically strapped and having consented to
foreign military forces on its soil, is pretty much a conquered
nation at this point.

Wouldn't you love to be a fly on the wall in former president
Soeharto's dining room? The old general must be bitter and
twisted about what is happening to his country. Plenty of people
must have wished that Soeharto would die and go to hell -- but
who among his enemies had the imagination to wish that he remain
alive and be in hell, speaking metaphorically?

Anyway, Indonesia is the latest example of what has become the
real new world order. Got a crisis? Call in the United Nations or
IMF or North Atlantic Treaty Organization (NATO). This is what
Washington prefers. For political and diplomatic reasons, the
United States doesn't think it would be a good thing to be seen
responding unilaterally to a crisis. This is why the
supranationals get so much play these days.

The powerful nations of the world have a hankering to do their
crisis work through the third party auspices of the supranational
organizations. By using NATO to bomb Yugoslavia, or the UN to go
into East Timor, or the IMF to impose conditions on Russia, the
supporting participants create a precondition of moral rectitude.
Future recriminations are obviated by the initial unanimity of
resolve.

Here is how to do things these days if you get to be Secretary
of State: (1) Declare that a crisis exists; (2) Get a consensus
for action from friendly nations; (3) Arrange with some
supranational organization to front for you; (4) Send in the Air
Force, the Navy, the Marines, and the Army (in that exact order
to mitigate casualties).

Yet all supranational agencies are not equal in Washington's
eyes.

The number One favorite for the United States is the IMF.
First of all, the United States has a veto on any major issue
before the IMF because it owns 18 percent of the votes. Important
issues, like dealing with the disposal or revaluation of the
IMF's gold, require an 85 percent vote of approval.

Moreover, the senior staff of the IMF, Managing Director
Michel Camdessus, First Deputy Managing Director Stanley Fischer,
and Director of Research Michael Mussa, usually think along the
same lines as the senior U.S. money men, Treasury Secretary Larry
Summers, and Federal Reserve Chairman Alan Greenspan.

Relations are very friendly between the IMF and the U.S.
policy works -- you can just picture them getting together some
time in the future to reminisce about the days when they were the
hub of the world's financial superstructure.

One guy who will not be invited to stop over for an old-
timer's whiskey and soda will be UN Secretary General Kofi Annan.
That is because his UN doesn't play ball with Washington. The
voting works differently at the United Nations than it does at
the IMF and there is no clear advantage to the United States.

A case in point was when Former U.S. Secretary of State
Lawrence Eagleburger, then in retirement, called Annan a "pest"
for his involvement that thwarted military action against Iraq.
The United States was all set to clobber Iraq when, to its
chagrin, Annan pulled off a last minute deal to allow resumption
of the contentious armaments inspections. Annan earned himself
the status of a suspected sympathizer with the enemy.

This is probably why the United Nations was sidelined in the
Kosovo action. Using NATO was a clever way of taking Annan down a
peg or two. It was almost painful to watch Annan trying to get a
word in edgewise as the NATO bombs were falling on Belgrade.

Still, the allies have had to go back to the United Nations
for East Timor, if only because geographical considerations
exclude an involvement by NATO. It isn't going to be easy. This
is civil war, not one country invading another, and although
there are plenty of victims, there may not be many good guys who
can be counted on to help. This isn't going to be the kind of
action that can be won by a remote-controlled air war. This is
going to be down and dirty on the ground.

Indonesia could be a morass for the IMF too. Right now it's
hard to see how Indonesia could be held to the terms of previous
IMF agreements, especially with respect to the wide spectrum of
political and economic reforms. Reforming Indonesia under normal
circumstances is probably a pipe dream -- but thinking about
cleaning house in a country that's practically in a state of
civil war is about as realistic as trying to put a new TV antenna
on the roof during a hurricane.

The writer is president of DeRosa Research & Trading and
manages an investment fund. He is also an adjunct finance
professor at Yale School of Management. His opinions don't
necessarily represent those of Bloomberg News.