Individuals must act to end RI's crisis

Individuals must act to end RI's crisis

By Christopher Lingle

SYDNEY (JP): Despite an apparent respite from the currency and
financial woes that began in 1997, Indonesia continues to face an
ongoing structural crisis. Until there are deep changes in the
behavior of the individual citizens, Indonesia's problems are
going to deepen and extend into the foreseeable future.

It appears that President Abdurrahman Wahid and his cabinet
understands that they must provide an improved institutional
infrastructure to deal with the crisis they face. They continue
to support the Jakarta Initiative Task Force that was set up to
facilitate restructuring of the debts of private sector small and
medium sized enterprises.

This was crucial since over 2,000 private Indonesian companies
owe more than $60 billion in foreign debt and 300 trillion rupiah
in domestic debt. Most repayments of interest and principal on
their debts were stopped when the rupiah collapsed during 1998.
Now it is up to these companies to take their own initiatives
rather than waiting for further government action. For example,
most small and medium enterprises did not and still do not have
reliable financial reports.

Overall economic results in 1999 were an improvement over the
previous year when Indonesia's gross domestic product fell by
almost 14 percent while unemployment rose to over 15 million.
Although there has been some recovery from the decline in per
capita income to $400 from over $1000 in 1997, most has been
based on a stronger rupiah.

In his first budget speech, President Wahid offered great
promise of a commitment to strengthen democracy and to provide
the basis for good governance. If the will of the government were
to be implemented, it would bring be a crackdown on corruption
while easing economic hardship on its citizenry accompanied by an
establishment of the rule of law and an improvement in the
performance of public officials.

Unfortunately, internal turmoil and squabbling among
government officials may undo policy initiatives. In light of
these negative impressions, investors are likely to reassess
their interests given the protests against foreign businesses and
initiatives taken by Environment Minister, Mr. Sonny Keraf. His
announced intent to close the Indorayon pulp and rayon mill
without an environmental audit will give investors the jitters.
Meanwhile, thousands of demonstrators halted power supplied for
several days to an industrial estate on Bintan Island to protest
mistreatment at the hands of cronies of the Soeharto regime

Thousands have died in the past year in fighting that
continues to spread from Aceh to the Moluccas to Ujungpandang, in
south Sulawesi. Most recently the violence spread to Lombok where
Muslim mob attacks on Christians and ethnic Chinese was followed
by pillaging and looting.

Continued outbreaks of secular and religious violence will
doubtless frighten off foreign tourists while reducing a major
source of foreign exchange earnings. It may also contribute to
another ruinous round of depreciation of the beleaguered rupiah.

In practical terms, the budget relies heavily on foreign
investment to offset a growing budget deficit. Foreign capital
will be needed if the government is to be successful in its plans
to privatize and to liquidate the assets of failed banks. There
is also the expectation that the new IMF agreement, suspended due
to banking scandals, will provide up to $45 billion in
international credits. Yet despite commitments to the IMF, little
progress has been made regarding privatization. Only six state-
owned enterprises have sold shares to the public and in no case
has more than 35 percent of the capital been distributed. There
has been no true privatization resulting in transfer of control
to the private sector.

If all were to go according to plan and if the anticipated
foreign investment flows in, economic growth is estimated to
nearly 4 percent in the coming year. However, too much hope is
placed on what might be done by outsiders. The unavoidable truth
is that individual Indonesians are the key to resolving their
structural problems. Just as there is a limit to the contribution
of outsiders in dealing with these problems, there is only so
much that Jakarta can do. Individual citizens must behave in a
way to restore harmony to their communities.

Social and political stability must be restored before
business confidence and capital inflows can be resumed.
Indonesian citizens must not believe that stability is a matter
of government action. Every citizen must exercise personal
restraint and offer leadership for their immediate communities.
It is a simple matter that Mobs are made up of individuals, and
social disintegration is caused by a lapse of individual
responsibilities.

The writer is an independent corporate consultant and adjunct
scholar of the Center for Independent Studies in Sydney who
authored The Rise and Decline of the Asian Century. His E-mail
address is: CLINGLE@ufm.edu.gt.