BY MAURICE WILLIAMS
Demonstrations and food riots are breaking out across Indonesia, as the deepening economic crisis there sharpens tensions between the capitalist rulers in Indonesia and their imperial masters in the United States, Germany, and Japan. President Suharto discharged Sudradjad Djiwandono, the head of the central bank, February 17 in a step toward setting up a currency board to halt further devaluations of the rupiah, the country's currency.

Such a move would aim to strengthen the rupiah in order to reduce rising costs of imported goods that sparked protests throughout the country. The Clinton administration and International Monetary Fund (IMF) officials are opposed to establishing a currency board there and threatened to yank the $40 billion "rescue" package negotiated last November. "There is a very real risk that everything could unravel," said an unnamed White House official responding to the termination of Sudradjad Djiwandono.

Meanwhile, thousands of people protested rising food prices in four towns February 13. Some 2,000 students rallied on the islands of Sulawesi and Lombok over the weekend of February 14 - 15, and in Jakarta 300 people chanted "lower the prices" at a February 11 rally outside the Attorney General's office. Food riots have been spreading across the country as well, with demonstrations exploding in at least 15 cities in the past two months.

Some of the protesters have attacked small merchants who are ethnic Chinese, scapegoating them for the economic turmoil engulfing the country. About 3 percent of the 200 million people in Indonesia are of Chinese descent. Tens of thousands of Chinese were among those massacred in 1965 when Gen. Suharto took power under the pretext of putting down a supposed Communist Party coup. Between 500,000 and 1 million people died in the blood bath.

Today, the regime has stepped up its military presence in cities throughout the island nation. Two giant Tactica armored water cannons have been deployed in Surabaya, Indonesia's second-largest city. Surabaya is also known as the "City of Heroes" because of a 1945 rebellion that helped topple the Dutch colonialists who ruled Indonesia for 300 years.

"Surabaya is one of the barometers of Indonesia," a taxi driver told the New York Times. "Everyone knows if Surabaya explodes, it all goes."

Anticipating such social unrest, military officials announced 35,000 troops will be deployed in the capital city Jakarta. Cops have deported several hundred men who authorities claim cannot prove their residency or prospects for employment in the city. With political instability escalating, the government organized a mock protest in Jakarta involving 25,000 cops and soldiers during a three-day training session on riot control February 5 - 7. Hundreds of people have already been arrested, including 140 at the February 11 protest in the capital.

"The political temperature is rising," said Indonesian president Suharto at a military conference February 12. He exhorted his military leaders to "take stern action" against the demonstrations.

Price explosion prompts food crisis
The rupiah has fallen by as much as 80 percent since last summer. With a devalued currency, "Jakarta faces a triple digit price explosion for imported food staples within weeks," the Wall Street Journal reported February 9. The price of such basics as sugar, wheat flour, and soybeans could jump 250 - 500 percent if the government eliminates partial subsidies on these items. Officials of the International Monetary Fund have mandated that the regime abolish the state monopolies that provide the subsidies.

Shortages have already led to the tripling of prices on goods ranging from kerosene to syringes. In the poultry industry, meat and egg production have stopped because companies can't afford to buy imported feed. "In 60 days time, we'll have a scary situation," said a chief executive in the Indonesian food industry. "Things may be available, but they won't be affordable."

The Suharto regime had agreed to end the monopolies as part of the $43 billion IMF "bailout" scheme imposed last November and renegotiated January 15. The government said it would open the country's markets in sugar, wheat, and soybeans to foreign competition on February 1. But Jakarta has so far balked at eliminating the food subsidies in the face of protest actions across the country.

With the rupiah plummeting in value since last July, many Indonesian companies cannot make payments on $137.4 billion owed to foreign investors. The regime is floating the idea of establishing a currency board to stabilize the rupiah, halt further devaluations, and salvage the wealth of a layer of Indonesia's rulers.

"We must quickly fix our currencies at a certain rate to allow our industries to calculate [their accounts] precisely," declared Suharto at a February 9 meeting with members of the Indonesian Council of Muslim scholars. The Suharto family, among the wealthiest of Indonesia's capitalists, are the driving force behind the currency board scheme, which would peg the rupiah at around 5,500 to the U.S. dollar - about twice its current exchange rate.

The heads of state in the major imperialist countries and IMF chief Michel Camdesseus have voiced opposition to the currency board plan. According to the New York Times, U.S. president William Clinton telephoned Suharto February 13 demanding he implement the IMF "reform" program. German chancellor Helmut Kohl and Japanese prime minister Ruytaro Hashimoto were reportedly expected to make similar moves.

IMF threats over currency board plan
Threatening to cancel the loan agreement if Jakarta sets up a currency board, Camdessus, the IMF fund manager, emphasized that his disapproval represented the U.S. capitalist rulers and other imperialist powers. If a currency board proposal were adopted, "we would not be able to recommend to the IMF Board the continuation of the present program because of the risks to the Indonesian economy," he declared.

A currency board would replace the central bank and establish a fixed exchange rate of the rupiah against the U.S. dollar. All the nation's cash would be convertible into dollars or other hard currency at the fixed exchange rate. The Indonesian government would not be able to set interest rates for loans, which instead would fluctuate with the U.S. dollar.

The country's 12-month interest rates are currently 61 percent. Some economists expect them to rise to triple digits. Under a currency board this would make borrowing nearly impossible, businesses would shut down, and inflation and unemployment would rise, bringing the economy to a halt.

Two of Suharto's children have pressed the Indonesian president to adopt the move. They, like other wealthy capitalists in the country who have debts in dollars and possess large amounts of the Indonesian currency, would benefit greatly from the plan and minimize their financial losses from the instability sweeping the nation. A higher rupiah would help the Suharto family - who have a fortune estimated at $30 billion - and their business associates to pay off foreign debts.

Bambang Triahadmodjo, Suharto's son, has been fighting to reopen the bank of Andromeda, where he holds a 25 percent stake. The bank lent him and two other shareholders $75 million, which they used to pay off some of the $1.37 billion debt of the Chandra Asri petrochemical plant. Bambang and other business partners own 75 percent of that plant, which was shielded from foreign competition by import tariffs.

Suharto's daughter, Siti Hardijanti Rukmana, enlisted the aid of Steve Hanke, an economist at John Hopkins University, to prepare for the currency board. Hanke is chairman of a currency trading firm that profited handsomely off the collapse of the rupiah and other Asian currencies. He cited currency boards established in Argentina, Estonia, and Bulgaria as models for Indonesia.

The economic crisis engulfing Indonesia and other countries in Asia began with a wave of currency devaluations triggered by the release of the Thai baht from a set relation with the U.S. dollar last July. Semicolonial countries in the region had been touted as "emerging markets," and imperialist investors foisted loans on these countries with the regimes agreeing to guarantee interest payments. In Thailand, the foreign debt grew from $8.2 billion in 1980 to $56.7 billion in 1995. In Indonesia, a foreign debt of $20.9 in 1980 ballooned to $107.8 billion in 1995. As capitalists in these countries faced diminishing earnings on exports, they were forced to devalue their currencies to cheapen exports, making them more competitive. Revenue from increased exports would help Asian businesses pay off investors.

Washington has engineered major "bailout" agreements with three Asia countries similar to the massive loans arranged to stabilize the Mexican economy after the peso collapsed at the end of 1994. The Mexican government acceded to the IMF austerity program to repay the loans and pay interest on the foreign debt.

That austerity program demanded cuts in spending for social programs, shutdowns of insolvent banks, the sell-off of state-owned enterprises, and allowed international investors to take over commercial banks and other financial institutions through mergers and acquisitions. Other measures included industrial restructuring that close down debt-ridden corporations, throwing thousands of workers into the streets.

Meanwhile, the U.S. rulers and other imperialists have moved to buy up the country's national patrimony. Since the devaluation of the peso, more than one-fifth of Mexico's banking system has been sold off to international investors, including Banca Confia - now owned by the U.S. giant Citibank. International capitalists are now pressing to buy up cheapened enterprises in Indonesia, Thailand, south Korea, and other countries in the region.  
 
 
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