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.