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.