Keating defends RI against market

Keating defends RI against market

SYDNEY (Reuters): Indonesia has been "punished" by financial
markets more severely than other Asian nations because of an
inaccurate view that it was a rogue state, former Australian
prime minister Paul Keating said yesterday.

"The future of the Indonesian economy became caught up in
judgments about its political system," Keating said in a lecture
at the University of New South Wales.

"Indonesia was disproportionately punished because a grossly
inaccurate view had taken hold in some quarters in Europe and
north America that it was some sort of rogue state..."

Keating said Indonesia had been compared with the politically
corrupt regimes of former Zairean president Mobutu Sese Seko and
former Philippines president Ferdinand Marcos.

"Some of the commentary we are seeing about Indonesia has a
chilling tone to it," said Keating, who as Labor prime minister
between 1991 to 1996 made six visits to Jakarta, forging a deep
personal friendship with 76-year-old President Soeharto.

"Those who argue that the screws should be tightened on
President Soeharto and the government because this will somehow
force political change show tragically little understanding of
what the consequences of widespread unrest in Indonesia would be
for real people in the real world."

Keating was also critical of the International Monetary Fund
and its US$40 billion-plus Indonesian rescue package.

"The IMF has done its job with good intentions, but I agree
with those who argue it has been the wrong job," he said.

"The international goals for dealing with the crisis...were
expanded and restructured to include, explicitly, wholesale
economic and social reform, and implicitly, a change in the
political leadership."

Keating said reform of the banking and finance sector and the
rescheduling of Indonesia's crippling corporate debt were badly
needed, along with political openness.

But he said some reforms, such as the dismantling of the clove
monopoly of Soeharto's son Hutomo (Tommy) Mandala Putra were
unnecessary and politically unachievable, and were delaying the
restoration of market confidence in Indonesia.

Keating said Jakarta had sent out confusing signals about its
commitment to reforms, such as the plan to establish a currency
board which would peg the rupiah to the U.S. dollar.

"The regrettable truth is that times like this require
directness and clarity rather than the Javanese obliqueness," he
said. Soeharto is Javanese.

Keating praised Soeharto's 32-year rule, arguing it had
transformed Indonesia from a rural to an industrial economy,
slashed poverty, raised literacy levels and created a new middle
class of around 15 million people.

"Indonesia has not been good at telling its own story,"
Keating said.

"The current rate of exchange is quite unreal. A fiction which
bears no relationship to the strengths of the Indonesian
economy," he said. The rupiah, now around 8,400 to the U.S.
dollar, has fallen about 70 percent in value against the dollar
since July 1997.

But Keating warned that the pace of reform being demanded and
the depressed economic outlook of rising food prices,
unemployment and possible hyper-inflation were likely to lead to
further social unrest.

Indonesia has been hit by riots over soaring prices and food
shortages during the past two months.

Keating also warned that the Asian crisis had serious
political and strategic consequences and that Asia was facing a
"perilous moment" which could see isolationist policies emerge.

"The whole direction in which the Asia Pacific has been moving
-- towards economic and political openness, towards a sense of
Pacific community -- is at risk," he said.