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COMMENTARY ON INDONESIA - Theodore Friend, cont.

IGGI, a consortium of North Atlantic donor nations plus Japan, came to the rescue of an Indonesia suffering from civil mayhem and enduring an average per capita income of $70 per year. It provided advice and channeled aid through a highly educated and motivated segment of the Indonesian upper bureaucracy, who guided long-range macro-economic policy. Growth in the Soeharto period, as a result, averaged seven percent for the twenty-five years through 1995. Recent financial upsets, however, have reduced immediate prospects to five percent, and declining.

Along with growth, Soeharto's Indonesian government stood for an effective drive toward more equitable distribution of income. Since 1990, however, that success has tapered off, and it is further threatened by present economic turmoil. In recent years, furthermore, aid from advanced industrial economies has been accompanied by moral preachments. Indonesia has not tolerated them well.

When the Netherlands withheld financial aid over human rights questions in East Timor in 1992, President Soeharto withdrew Indonesia from the Dutch-chaired IGGI. A less concerted consortium of the World Bank replaced it. The military's bloody mishandling of a demonstration in Dili led the American Congress to tie IMET to conditions of human rights. Later Indonesia effectively terminated the program. The USA, for several years since, has not had training contacts with promising young Indonesian military leaders -- the very kind of professionals who could contend against human rights abuses by the armed forces.

Then last spring the U.S. Congress, in abundant righteousness, passed a resolution connecting critique of oppression in East Timor with the potential sale of F-16's to Indonesia. Soeharto predictably declined the offer of purchase, and Indonesia bought Russian Sukhoi fighters instead. Thus a further cooperative link in the regional military operations is severed.

In this bilateral political void, over the summer, the major islands of Sumatra and Kalimantan burst into massive brush and forest fires whose smog blew west and north. Based on satellite imagery, estimates of affected areas are as high as two and a half million acres. President Soeharto apologized for exporting smoke to his Southeast Asian neighbors. That of course could not end the smoke, lessen the severity of the El Niño drought, or address systematic carelessness in massive clearing of plantations for palm oil. Now dry provinces everywhere sit in grey-blue haze awaiting overdue monsoons. The United States, like other nations, has tried to help. Indonesian newspapers showed front-page pictures of C-130's dropping water bombs on brush fires in East Java. But crops, health, tourist income, and biodiversity all remain endangered until central policy and local practices change.

Even as the forests shot up in flames, the rupiah began to melt down. The Thai currency shocks of July continue to spread elsewhere in Asia, revealing financial flaws and unraveling confidence. By October 31st, monetary rout and investment flight had brought the value of the Indonesian stock market down by fully one-half in dollar terms.

Indonesia had by then accepted neighbors' and international aid potentially reaching 40 billion dollars -- the largest rescue since Mexico. An IMF team completed strenuous negotiations that involved Indonesian élites. Hard reckonings:
  • one of President Soeharto's sons and his brother-in-law are to have their bank closed;
  • one of his cronies is to have exclusive licensing curtailed;
  • another son has to yield up presidency of the national car enterprise.
Many ambitious national projects are put on hold, while Indonesia returns to macro-economic discipline and attempts to correct micro-economic distortions.

Indonesian leadership is well aware that hunger (from failed grain and livestock harvests) and high prices (already felt regionally in several staples) can lead to a growing inflammation of the society. In the last year and a half there have been
- riots of labor in Tangerang;

- riots of ethnic-religious complexion in Surabaya, Rengasdenklok, Situbondo, Tasikmalaya, and Ujung Pandang (Chinese Christians the chief sufferers);

- riots of intra-ethnic hatred on Kalimantan (Dyak vs. Madurese); and

- riots of overtly political character in Pekalongan, Banjarmasin, Jakarta and other places.

Indeed all of the riots may be called political, insofar as they arise from heightened expectations, relative deprivations, and long pent-up frustrations. In these conditions, and on its own terms, IMF aid to Indonesia is not a bailout of the undeserving. It works towards correction of distortions and an alleviation of social pain.


[Gazebo in Indonesia]How does it play, then, that the U.S. Congress goes home for its holidays while holding the IMF package hostage to American domestic politics on abortion? It looks bizarre and provincial.

It could get worse. We are still capable of shooting ourselves in both feet so that we can limp symmetrically. But it might be better to rebuild links with a major nation of 200 million people. The Senate in the Fall of 1996 and the House in the Spring of 1997 held hearings on policy towards Indonesia, signifying at last that Congress is laying the groundwork of information necessary to serious bilateral relations.

As Indonesian presidential elections near in March 1998 -- and with them the critical designation of a vice-president - - the U.S. must regain the policy poise required to manage the relationship through five more Soeharto years. We should expect the issues to be as trying as with China in the last years of Deng Xiaoping's power. We must give them the attention appropriate to a nation whose population equals that of Thailand, the Philippines, Vietnam, and Singapore combined (throw in Malaysia to top it). We know how to profit from Indonesia and how to lecture its leaders. More respect is in order for its depth of history and acuteness of problems.

America's role is not to be the healer, far less the savior of Indonesia. We are not even its chief trading partner, investor or lender. But in reshaping our transpacific and global policies for the present age, the world's greatest power should not appear to be a tower of ignorance. Congress, on its return, should act to restore the 3.5 billion dollar special emergency fund the administration seeks for IMF needs.

Indonesian smoke blows westward toward the Asian mainland, but the virus of financial infection travels everywhere. The IMF package may have some inoculative power. And a positive act by Congress toward Indonesia might clear the air to renew our bilateral relationship.

Return to Indonesia Commentaries, part one


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