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Saturday, January 24, 1998 Published at 17:25 GMT




Indonesia's Economic Decline


It's been another week of turbulence for the economies of South East Asia. What was once hailed as an economic miracle is now beginning to look more like a mirage. Of all places, Indonesia has been worst hit by the economic meltdown in the region. Now President Suharto has agreed to a programme of reforms demanded by the International Monetary Fund. Failure to revive Indonesia's economy could lead to widespread unrest in this, the world's fourth most populous country. Peter Morgan has just visited the capital, Jakarta, where he's been observing the decline of one of the Asian tigers:

Whatever also you could have said about the chickens, they were certainly full of life. As they flailed upside down from the small tough hands of the market trader, they appeared to share a view that the feistier you looked in the market, the less good you might taste on the plate.

But Mariati was less worried by the birds' exertions than their price which has risen by half since the summer. She decides to take neither. Her family will eat vegetables this weekend. Her job at the electronics factory - a job that had seemed so secure - is now under threat, and this is no time to be extravagant. At the end of the day it is very ordinary - almost insignificant people - like Mariati who will be damaged most by Indonesia's economic crisis.

Of course a few gorgeously suited bankers may face awkward questions about profligate lending at their annual general meetings. But millions of Indonesians are going to lose their jobs this year, and in Indonesia unemployment can mean destitution.

Indonesia has been amongst the world's fastest growing economies for the past thirty years. More or less ever since President Suharto muscled his way into power and presided over the extermination of half a million real or imagined political opponents.

Foreign bankers - much impressed by this record of expansion and stability agreed to finance Indonesia's industrial boom. But since the summer Indonesia's currency - the rupiah - has lost two-thirds of its value, and now it can't afford to repay its foreign debts. To give you some idea of the scale of the problem, it's estimated that 200 of the 228 companies listed on Jakarta's stock exchange are now technically bankrupt. Mass unemployment is inevitable and so is serious inflation. Unless the rupiah recovers, the cost of imports will treble.

This is a country in which political discontent can invite a beating, jail, or worse. So it was with a degree of amazement that I listened - in the suffocating heat - to Indonesia's main opposition figurehead, Megawati Sukarnoputri, laying into the government's rampant corruption, and calling for President Suharto to stand down.

I was packed, with perhaps a thousand of her supporters, into Megawati's back garden on the outskirts of Jakarta. I had already identified a rendezvous point and possible escape route with my cameraman if the army came in and the night turned ugly. But perhaps because of the presence of the international press, perhaps because of the army infiltrators reporting on their mobile phones that Megawati had explicitly not called for people to take to the streets, the rally ended calmly and the crowd melted back into the sweltering night.

But this is where politics and economics meet. It is impossible for Indonesia to reform in the way President Clinton, Tony Blair, Ryutaro Hashimoto, and the IMF have urged without reforming its politics too. Indonesia is a kleptocracy masquerading under a thin veneer of an ordinary market economy.

Don't be deceived by the diplo-babble of the politicians and businessmen. When they talk about greater transparency and stronger governance, they mean that chronic corruption and nepotism should end. Almost all Indonesia's big companies are run by President Suharto's family and his cronies No one knows, but many speculate, that the Suharto fortune now dwarfs even that of the late and little lamented President Mobutu of Zaire.

Mr Suharto has won six rigged elections. In March he'll win a seventh unless something cataclysmic happens between now and then. It is far from certain how much world leaders and the IMF can make him change his ways after 32 years in power. But the question of succession is now on everybody's lips. Perhaps the most that can be hoped for is that President Suharto, who's 76, can be leant on hard enough to appoint a successor who will prove rather less of a rogue.

For more than a decade it's been fashionable to argue that the East Asian economic miracle proves that prosperity and authoritarian politics can happily co-exist. I have shared beers in Far East bars with philosophers, in varying degrees of inebriation, who have told me that in the 21st century East Asia's economies, led by China, will overtake those of the West, and develop a new brand of politics based upon authoritarian government, dedicated to wealth creation.

In recent weeks this argument has taken a bit of a mauling. Many suspect that East Asia's economic crisis is now heading for China. If that proves to be the case millions more will suffer, and those who've argued all along that prosperity and democracy are indivisible, could be forgiven for feeling just a little smug.





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