Sander Thoenes Award - ArticlesThe smoke from Indonesia’s forest fires has barely reached the skies above Jakarta. While millions cough and cry from the fumes on the islands of Sumatra, Kalimantan, Sulawesi and Irian Jaya, the smog in the capital can be blamed only on the perennial traffic jams.
Neither has the recent crash of the currency, the rupiah, nor the slide of the stock exchange yet filtered through to the man on the Jakarta street. These financial setbacks have so far only been felt in the corporate boardrooms high up in the dozens of brand new glass towers.
Only half a million Indonesians - out of a population of 200m - own shares. And only a few dozen families control the large banks and enterprises that have seen their unhedged debt sky-rocket as the rupiah sank.
But President Suharto has noticed. As his sixth five-year term comes to an end - making him, with King Hussein and Fidel Castro, among the world’s longest-surviving rulers - Mr Suharto has witnessed an unexpected twist in his country’s economic success story.
For the first time in years, growth will fall below 7% this year and, if the currency crisis persists, could dip below 5%. That would have a devastating impact on job creation in a country plagued by under-employment.
On the political front, riots marred parliamentary elections in May, spoiling what the president had called a “feast of democracy”. As if this were not enough, he has had to admit - twice and in public - that his government has failed to contain the forest fires that have sent a choking haze over five neighbouring countries in the past three months.
“For that reason, Indonesia, once again, sincerely asks for forgiveness,” he said on Sunday during a military parade before an army that brought him to power in 1965 and ensured his election in 1967.
One of his sternest critics has also taken notice, both of the fires and of the collapsing rupiah. “So far, people don’t feel the effects,” says Abdurrahman Wahid, leader of Nahdlatul Ulama, a moderate Moslem organisation which claims 35m members and is Indonesia’s biggest non-governmental body. “Only after a few months will the devastating impact of the monetary crisis be felt by society at large.”
Foreign investors have taken notice too. The government owes roughly $50bn to foreign creditors: this had never been enough to worry them until it suddenly became worth 30% more in rupiah terms.
When the rupiah fell below Rp3,000 to the dollar in September, Mar’ie Muhammad, the finance minister, said the government would face a budget deficit of Rp9,200bn ($2.53bn) in the 12 months to March 1998 unless it made big spending cuts. He subsequently announced cuts of Rp3,200bn, mostly delays in infrastructure projects, but has yet to announce others. Indonesia is legally committed to a balanced budget.
Even before the latest rupiah fall, Ida Bagus Sudjana, mines and energy minister, said the currency crisis had raised the cost of subsidies on oil products to Rp3,000bn, nearly a third more than budgeted for the whole financial year. Mr Sudjana said the government might raise domestic fuel prices, especially diesel oil and kerosene, but he called for a cross-subsidy by industry of the oil products used by private consumers. More than 60% of rural households rely on kerosene for energy and lighting. Another minister lobbied for reforms that would probably have led to higher prices for basic foods.
Few believe the government will dare upset Indonesia’s poor with a sharp increase in prices. But Mr Wahid predicts that prices will rise sharply regardless, because of a severe drought and the effect of the falling rupiah on import costs.
“For now there are price rises but not yet steep ones,” Mr Wahid says. “But work stoppages are taking place because factory owners don’t know any more how to calculate their cost [and fail to pay wages]. Workers are being laid off. More importantly, a shortage of goods will occur because imports will become unaffordable. Shop owners are complaining that they can’t raise prices any longer because people won’t buy. People will be angry.” On Monday, Moslem students in Jakarta demonstrated outside Bulog - the state monopoly that regulates food prices - demanding the resignation of its director and a price freeze on staple foods.
Mr Wahid is not predicting a popular uprising. But the timing of even limited unrest could have a powerful impact on the presidential elections in March, he says. It could also precipitate a backlash.
“The anger will come, and it will come precisely around the time the Consultative Assembly meets,” Mr Wahid says, referring to the hand-picked gathering that will elect a president and vice-president. “The president is a stubborn man. He will cling to power, perhaps taking drastic measures against possible competitors, including more restrictions on political life.”
This week, General Feisal Tanjung, chief of the armed forces, gave a hint of what might lie in store when he vowed to crack down on any opposition movement that disturbed the elections. Mr Wahid responds belligerently: “If there are any unconstitutional actions, then we will not hesitate to use our force to defend democracy ... We can bring 2m people to the streets of Jakarta alone. That is my warning.”
Few believe that either the outbreak of fires or the economic downturn will be sufficient to rally support for a rival presidential candidate. Mr Suharto, 76, has made clear he will be running for a seventh five-year term.
But opposition leaders and sympathisers alike predict that public unrest would undercut his stature in the military and restrict his ability to pick a successor when the time comes. Even in better days, the vice-president, Try Sutrisno, was foisted on Mr Suharto by the army.
Even if it takes two months, Indonesia’s fires will eventually be put out by the monsoon rains. But it will not be so quick or so easy to end the political and economic aftermath of the currency crisis. Mr Suharto will be left with the delicate task of balancing domestic concerns with those of international investors. He just might get his fingers burnt in the attempt.
