Suharto-IMF plan hits the poor
By Max Lane
The contradictions of the Indonesian economic and political situation have sharpened greatly over the last few weeks. The first blow to the Suharto regime was the massive drop in the value of the rupiah in the wake of the austerity budget delivered by Suharto on January 4.
Almost immediately, the rupiah plunged from around Rp4000 per US dollar to Rp8000 per dollar. Over the next few days, the rupiah collapsed further to 12,000 per dollar. In recent days, it has revived back to the 8000 level.
The per capita income of Indonesians as measured in US dollars has dropped by at least 60% over the last six months. This is reflected in the inability of an increasing number of Indonesians to get access to basic commodities as prices soar.
Prices of basic foodstuffs and cooking oil have increased 20%. Massive hoarding has made some goods scarce, including rice. The government has been forced to announce that it will import an additional 500,000 tonnes of rice to meet demand as panic buying continues.
The rupiah plunged as local capitalists lost confidence in the economy. The prospect of an extended period of austerity and delay in government projects means a contraction in the Indonesian economy.
The government is the single biggest customer for development projects, and any postponement will hit a wide range of businesses. It has become clear that the massive bail-out by IMF billions will not expand the economy but may help stabilise it — so the IMF hopes — at a lower level of activity.
As the rupiah plunged to 10,000 to the dollar, the IMF used the opportunity to force further concessions from the Suharto government. Desperate to restore some stability to the currency, Suharto has been forced to accept even more stringent conditions.
The new letter of intent signed between the IMF and Suharto on January 15 increased concessions on two fronts. First, the regime has had to agree to end subsidies for electricity and oil.
Increased fuel prices will especially hit the 50 million poor in Java. Since the destruction of Java's forests and the loss of all firewood, the mass of people are dependent on kerosene for both cooking and the essential boiling of drinking water.
The rise in energy prices will maintain high inflation for an extended period. The official Suharto-IMF estimate is that inflation will be at least 20% per year for the foreseeable future.
In addition, Suharto has been forced to surrender some of the privileges that his family and cronies enjoy in business.
His son, Tommy Suharto, has been forced to give way to the desires of Japanese and US car manufacturers. His national car project will have to give up its privileged position of not having to pay any tariffs on imported components and other taxes.
A number of other monopoly positions, such as in cloves distribution, will also be surrendered.
While Suharto's children, relatives and cronies will be annoyed at this necessity, it will not affect their general domination of the Indonesian business class. Their business empires remain the largest in Indonesia and will easily be able to continue their domination as long as the economy does not go into general collapse.
US, Australian support
With Suharto's agreement to IMF conditions came a revival of foreign support for his government. While IMF and US Treasury officials were visiting Jakarta, so was US secretary of defence William Cohen.
Cohen indicated that the US would back Suharto politically during this period. He made it clear that "structural stability" in south-east Asia was a key priority for the US and that Indonesia figured centrally in this framework.
Asked about Suharto's intentions regarding standing again for president, Cohen replied: "I did not try to discover his political aspirations. But from everything I saw, he is very strong and is in excellent health. It is very different from the rumours that have been circulating recently."
Cohen backed up these comments with a more concrete gesture, promising to lobby the US Congress to restore Indonesia's participation in the Pentagon's military training program. Congress suspended Indonesia's participation following a campaign by some members over East Timor, labour rights violations and Indonesian crony financing of the Democratic Party's presidential election campaign.
Similar support has been offered by the Howard government and through such spokespersons for Australian big business as Paul Keating, who saw Suharto just before the latter signed the new agreement with the IMF. Keating echoed Cohen's assessment of Suharto's health and political strength and praised Suharto for moving to full deregulation of the Indonesian economy.
Cohen's stance and the high praise given to Suharto by the visiting head of the IMF and US officials reflect US understanding that the implementation of the new IMF package has the potential to increase mass discontent.
Mass lay-offs in the construction industry — already estimated at 2.5 million — an official inflation rate of 20%, scarcity of many basic products and possible massive increases in kerosene prices will increase the suffering of the mass of people. There will be no visible decline on the wealth of the cronies; their conglomerates will continue to dominate the Indonesian commercial world.
In a situation of increasing tensions between rich and poor, the US and Australia will be opposed to activities by opposition figures that appeal to the discontent of the poor. This will apply even to very moderate figures such as Megawati Sukarnoputri.
Cohen's meeting with armed forces commander in chief Feisal Tanjung came only days after Tanjung had declared, "The armed forces will not hesitate to cut to pieces all anti-government groups".
Tanjung added that the army would be ready to face any threat to security in the run-up to the People's Consultative Assembly (MPR) meeting in March. "We will strike down and out-manoeuvre any group, from left or right, which dares to take a stand against the government", he told journalists.
He said the intelligence agency, Bakin, was keeping close watch on all extreme groups that are planning to disrupt the meetings of the MPR.
A Sydney Morning Herald editorial on statements by Megawati pointed to what are big business's major concerns: "Ms Megawati's decision to turn up the rhetoric against President Soeharto and his Government seems particularly risky. On Saturday she said that the middle classes and the poor were being asked to bear the burden of a crisis caused by 'economic criminals' ... these kinds of statements have the potential to bring popular emotions that much closer to boiling point."
US big business media, such as the New York Times, have not yet gone so far. They have maintained political criticism of Suharto's authoritarian style and refusal to arrange a succession. If there is no further economic crisis, it is likely that the US will press to ensure that the composition of the next cabinet under Suharto is more reflective of pro-US and pro-IMF policies.
The support for Suharto from Washington and Canberra contrasts markedly with his increasing isolation within Indonesia. He retains support only from a very narrow spectrum of political and social forces within the formal political structures.
Major sections of Indonesian society have been progressively disenfranchised over the past decade.
Historically, there have been four major ideological groupings with a real base in Indonesian society. These are the modernist Muslims, the traditionalist rurally based Muslims, the Sukarnoist nationalists and the social radicals. All have had appeal among the middle classes, as well as poor workers and peasants.
Today these four groups are more or less represented by organisations outside the formal structure. The organisations are respectively the Muhammadiyah headed by Amien Rais, the Nahdatul Ulama headed by Abdurrahman Wahid, and the Indonesian Democratic Party (PDI) led by Megawati Sukarnoputri. Most of the social radicals are gathered under the banner of the National Democratic Struggle Committee (KNPD), which includes some radical Sukarnoists.
The People's Democratic Party (PRD), the strongest underground organisation, supports the initiatives of the KNPD.
The Sukarnoist PDI forces, led by middle class and middle business layers and with popular support from the urban poor and peasants as well as the KNPD and PRD forces, declared their outright opposition to Suharto some time ago. Megawati reiterated that in a recent speech, declaring she was ready to be a candidate for president.
The KNPD recently called for a coalition of 77 opposition groups to mobilise to remove Suharto, repeal all repressive political laws and end the military's role in politics. This call, which was reported in all the mainstream media in Indonesia, was also supported by the more radical Sukarnoist figures.
These included Megawati's sister Sukmawati Sukarnoputri, head of the Marhaen People's Movement, and Ciptaning, the head of the PDI Megawati party branch in Tangerang, the largest concentration of factory workers near Jakarta. Sukmawati and Ciptaning appeared with KNPD head Nur Hikmah at a well-reported press conference.
Muhammadiyah head Amien Rais has emerged as an opponent of the Suharto regime only since the May 1997 elections. Prior to this, his criticisms, while sometimes quite sharp on specific issues, remained within the framework of a loyal opposition. In the last few months, he has started calling for Suharto to step down.
He has intensified this call since the currency crisis, but there are no signs that he is attempting to prepare Muhammadiyah, an organisation that runs hospitals, orphanages, and schools, to become a political campaigning organisation.
However, on January 8, Rais called for an alliance between himself, Megawati and Abdurrahman Wahid to provide an alternative political centre. Abdurrahman Wahid declined the offer, stating that any attempt to build an alternative political centre would provoke the military into repressive action.
While Megawati has agreed to appear at some functions which Amien Rais is also attending, she has given no indication that she is interested in a political alliance.
Existing outside the formal political structure, all these opposition forces can contemplate change taking place only through extra-constitutional means: either a coup or a popular uprising.
Wahid and Amien Rais have veered away from a strategy of mass mobilisation. Wahid has spoken out explicitly against such a strategy. Megawati has approved some small mobilisations but has refrained from calling for any large scale mobilisations.
The only strategy left to them is to hope that the economic crisis continues, causing a section of the military to break from Suharto. If this happened before the MPR meets in March to elect the president, the military might be able to force Suharto to retire.
However, the success of Suharto's negotiations with the IMF make this unlikely unless another economic crisis erupts.
Only the PRD continues to call for a people's power uprising. The PRD has distributed hundreds of thousands of leaflets over the last few weeks urging the people to form local organising committees to fight for the overthrow of Suharto, the withdrawal of all repressive political laws and the end of the military's role in politics.
The leaflets also call on the people to demand a reduction in prices of all basic commodities, putting the PRD's line of march in direct confrontation with the IMF.