IMF calling the shots in Indonesia



IMF calling the shots in Indonesia

By James Balowski

An article in the June 24 Far Eastern Economic Review stated: “Ask the average Indonesian who he'd like as his next president and he'll tell you Megawati Sukarnoputri. Ask him why, and he'll cite her pedigree as daughter of Sukarno — father of the nation and champion of the poor. Now, ask what her policies are. 'She's for the little people', says Nahuruddin, a street-side food vendor in central Jakarta. 'She's going to lower prices'.”


Although it is now more than one month since Indonesia's elections, it is still not clear whether Megawati's Indonesian Democratic Party of Struggle (PDI-P) will be able to form government, nor whether Megawati will win her bid for the presidency.

While PDI-P was well ahead in the early count, as votes started to come in from outer provinces — which have a disproportionate number of seats in the parliament — the state party Golkar began gaining ground. It is now in second place.

The PDI-P is expected to get around 34% of the vote and Golkar 22%. The two other “opposition” parties most likely for form a coalition with PDI-P — Abdurrahman Wahid's National Awakening Party and Amien Rais's National Mandate Party (PAN) — are expected to get 20% between them.

Although such a coalition would translate into 204 of the 500 seats in the People's Representative Assembly (DPR), it remains unclear how the United Development Party (PPP, which is in fourth place with 12%) will line up. If PPP, the armed forces (who automatically get 38 seats) and other pro-Golkar parties stitch up a coalition it will be a tight finish.

All members of the DPR automatically become members of the People's Consultative Assembly (MPR), the highest decision making body in the country. They are joined by 200 members appointed by the national and provincial parliaments, made up of 135 regional representatives and 65 representatives of social and mass organisations.

The MPR will elect the next president and vice-president in November and, depending on the final balance of forces in the DPR, there will be an intense battle to determine who will get the remaining 400 seats.

Anti-Megawati campaign

Megawati's opponents have launched a sexist campaign against her becoming president. According to Islamic law, they say, a woman cannot lead a Muslim country.

It is unlikely that this campaign represents a broadly held sentiment in Indonesia. While Wahid, the head of the Muslim mass organisation Nahdlatul Ulama, has cautioned that sections of his constituency would not accept a woman president, he has also publicly expressed his support for her. Rais, who used to lead Muhammadiyah, Indonesia's second largest Islamic organisation, has disputed that any such law exists.

Angry human rights and women activists have signed statements condemning the campaign as a “political trick”, “harassment” and an “insult”. Demonstrations protesting against gender discrimination in politics have been held and PDI-P supporters in the party stronghold of East Java have been travelling from town to town with long lengths of white cloth collecting blood oaths in support of Megawati.

The armed forces and Golkar

Despite calls for the armed forces to abstain from voting on the presidency, armed forces chief General Wiranto has made it clear that they will choose sides. Wiranto was quoted in the June 15 Jakarta Post saying, “The calls for [the military's] neutrality in the presidential elections are against democracy ... The military as a part of the nation is responsible for the country's future.”

Megawati's threat to bring former president Suharto and other corrupt members of government to trial if she becomes president may be merely an appeal to the widespread public sentiment. But even if she is genuine, it may prove an impossible task with some media reports suggesting that senior members of government have had sufficient time to conceal their ill-gotten gains. Key potential coalition partners such as Wahid have said that if Suharto returns the money he should be forgiven.

The only parliamentary parties to call for an end to the dual function of the armed forces (their intervention in politics and society) have been PAN and PPP and it seems that, regardless of which politician the armed forces decide to back, their dual function will continue for the foreseeable future. Certainly, their territorial command structure, essential for containing social unrest, remains intact.

Wall Street's preference

More than 100 million people, half the country's population, are estimated to be living below the official poverty line. Since mid-1997, Indonesia's average annual per capita income has plunged from the equivalent of A$1200 to $400.

Megawati's main base of support is among the urban poor in Java, those worst hit by the economic crisis and the International Monetary Fund (IMF) austerity program. If Megawati becomes president, she will face the problem of living up to these people's high expectations: she appealed to them by posing as the defender of the poor and promising to improve living standards.

What the United States and other imperialist countries want more that anything is political stability in Indonesia so they can get on with “business as usual”. Business as usual under the conditions of the IMF's $43 billion bail-out package means more cuts to services and subsidies on basic goods, “rationalisation” of the debt-ridden banking industry and the wholesale looting of insolvent companies by international capital.

Key to implementing such harsh measures is a government which is perceived by the Indonesian people as legitimate. Better still if the president has the support of most ordinary Indonesians.

Wall Street's preference was summed up nicely in a June 3 article posted by Reuters which quoted Martin Anidjar, an Asian debt analyst at J.P. Morgan. Anidjar said, “The best result would be a majority vote for the opposition, not because I think the Golkar party would be bad, but because there is already too much hope in the population for an end to this 34-year-old regime”.

The article also quoted Thomas Trebat, managing director of emerging markets research at Salomon Smith Barney, who said, “So the market simply wants to see a popularly supported government that does not significantly change the country's economic direction ... This is a suit of clothes that could be worn by any of the major party candidates. Megawati would come into office with more of a populist reputation, but could well become a pragmatist once she is in office.”

Trebat pointed to Philippine President Joseph Estrada and Venezuela's Hugo Chavez as examples of politicians who ran as populists then adapted to market economy imperatives once in government.

IMF calling the shots

Two senior IMF officials, Stanley Fischer and Hubert Neiss, met with the Habibie government and the five other major parties in mid-June. All have agreed to comply with the IMF “reform” package, but Fisher nevertheless emphasised that any major departure from the package risked further loans.

In June, within days of mooting the establishment of a fixed rate of exchange between the rupiah and the US dollar, PDI-P chief economic adviser Kwik Kian Gie was forced to announce that this would be introduced only “if the IMF agreed”. On June 15, according to Reuters, he said, “A fixed rate is not everything for us ... The whole package is very important. There is no way we will break up with the IMF.”

The IMF is already playing down the prospect of a confrontation with a PDI-P government. On June 15, Kadhim Al-Eyd, the IMF's senior representative in Jakarta, told Reuters: “There will be no showdown ... The PDI-P have said some aspects of the program may need to be changed and we agree with that. But everything will be discussed. This issue has been blown up out of proportion.”

Regardless of the final make-up of the government and despite the PDI-P's nationalistic rhetoric against foreign control of the economy, the party's basic economic policies have already been determined by the IMF. The future for Megawati's millions of devoted followers — the “little people” like Nahuruddin who are convinced that she will lower prices — remains bleak.