HK analysts warns of potential unrest

HK analysts warns of potential unrest

HONG KONG (AFP): Indonesia's deepening economic woes will cause an escalation in social unrest in the months ahead, with ethnic Chinese likely to be the targets of angry mobs, analysts said in a report received here yesterday.

Currency pressure, declining economic fundamentals, a drought and smog caused by forest fires all combine to create a bleak future for the southeast Asian giant in the short-to-medium term, the respected Hong Kong-based Political and Economic Risk Consultancy said in a report.

"After a lull of several months, social tension is set to rise once again as the economy feels the combined effects of the drought and the financial crisis," it added, saying inflation was on the rise, food prices were set to surge and the government would have to use precious foreign exchange to import rice to cover a shortfall in domestic production.

"The more immediate concern, however, is the possibility that there may be a run on one or more of the nation's ailing banks," the report said.

"From this it is only a short step to further anti-Chinese riots.

"Significantly higher inflation could also trigger labor disputes by workers demanding higher wages."

The Indonesian military also appeared to be preparing the ground for a crackdown on increasingly vocal and influential non- governmental organizations at the People's Consultative Assembly next March, it said, noting "warnings by senior officers that the armed forces will not tolerate any attempt to disturb the general session."

The analysts predicted strong opposition to such a move by some cabinet members who realized any crackdown would result in unfavorable international publicity which would impact on business.

"The good news is that such social unrest is unlikely to be accompanied by political instability of the sort witnessed in Thailand over the last few months," the report said, adding President Soeharto was almost certain to begin another term next year.

Indonesia's response to the forest fires -- which the analysts said had damaged the agricultural sector as well as reducing tourism and angering neighboring countries -- were an example of "the extent to which vested interests can combine with bureaucratic inertia to frustrate policy implementation," they added.

Repeated pledges by the President and some of his ministers to crack down on forestry industry burning to clear land, which was blamed for sending thick smog over Singapore, Malaysia and parts of the Philippines and Thailand, had little tangible effect, the report said.

Tycoon Bob Hasan has since spearheaded a forestry lobby campaign to play down the impact of the fires, it said.

The analysts praised Indonesia for seeking International Monetary Fund assistance to deal with the financial crisis but said the government was not doing enough itself.

The postponement of some major projects meant little as they were not scheduled to begin for some time, the consultancy said, while other major planned developments were going ahead when they should be dropped.