BY MAURICE WILLIAMS
A detachment of cops armed with automatic weapons guarded the Indonesian Bank Harapan Santosa from hundreds of depositors who came to looking for their money after it was shut down November 1. "You might as well all go home, we have no more announcements to make," a bank security guard told them through a bullhorn. The regime carried out similar actions at branches of 16 banks in other cities. Just three days earlier, police attacked 200 students in Bandung who were protesting Indonesian president Suharto's candidacy for reelection in 1998.

In Thailand, Prime Minister Chavalit Yongchaiyudh announced his resignation November 3, after weeks of mass protests and political pressure. He had just met with Hubert Neiss, director of the International Monetary Fund's (IMF) Asian-Pacific department, to discuss how to implement the conditions for a $17.2 billion economic "rescue package" set up by the IMF in August. All 48 ministers had earlier resigned from the Chavalit administration as mass protests forced the regime to rescind a new oil tax urged by the IMF as a means to pay off international investors. Similar demonstrations brought down the military government there in May 1992.

These events highlight mounting explosive pressures as regimes in Southeast Asia attempt to impose IMF-sponsored "bailouts" in response to a deepening currency crisis. A wave of currency devaluations has exacerbated an unfolding banking crisis, with bad bank debts totaling nearly $1 trillion around the region. The currency devaluations will make it more expensive for these governments to pay back the loans and compounded interest on them.

The regime in Jakarta closed down 16 ailing banks over the weekend of November 1 in a move that affected tens of thousands of people. The closures are part of a "reform program" pushed by the IMF in return for more than $37 billion in new loans to the government. The Indonesia rupiah has lost about 35 percent of its value against the U.S. dollar since July.

Between 1980 and 1995, the country's foreign debt quintupled to more than $107 billion, according to the World Bank, as it was being touted as one of the promising "emerging markets" where rapid capitalist expansion was possible. The Asian Development Bank estimates that $10-$15 billion in private loans must be repaid or rolled over in the next six months.

Expressing the capitalist rulers' nervousness over the "political risks" that regimes in the region must be prepared to take, a commentary in London's Financial Times November 3 remarked, "The IMF deal may indicate that the Jakarta government is committed, and politically strong enough, to enforce some painful measures."

Indonesia is the world's fourth-largest country, with a population of more than 200 million people. Suharto recently chopped $13 billion worth of infrastructure projects laying off thousands of workers; thousands more have lost their jobs as unofficial estimates of underemployment increase up to 40 percent. Earlier in October, some 10,000 aerospace workers went on strike at the IPTN aircraft factory in Bandung protesting wages that had been frozen for a year.

The regime plans to implement other measures demanded by IMF officials, including ending state monopolies on imports of wheat, garlic, and soybeans; reducing import tariffs on chemicals, metal products, and fish; and opening distribution and wholesale markets to foreign companies manufacturing in Indonesia. These steps will open up the economy to greater penetration and domination by the imperialist powers, at the expense of the national bourgeoisie.

Bambang Trihadmodjo, Suharto's son, has threatened to go to court over the shutdown of Bank 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 colleagues own 75 percent of the plant, which was shielded from foreign competition by the import tariffs.

Asian fund rejected by Washington
In an attempt to shore up the rupiah, several central Asian banks - Bank Indonesia, the Bank of Japan, and the Monetary Authority of Singapore - purchased an estimated $500 million of the Indonesian currency. The central banks in Singapore and Japan pledged $5 billion each in "standby" loans to Indonesia. Japan's finance ministry and some regimes in Southeast Asia have been pushing to create a $100 billion Asian Monetary Fund. This proposal was dismissed by Washington at recent IMF and World Bank meetings in Hong Kong.

The Malaysian government, which also pledged $1 billion to the Indonesian bailout package, had been blocked by the U.S. government from launching an Asian economic trade pact called the East Asia Economic Caucus. Prime Minister Mahathir Mohamad announced September 3 that his administration was setting up a $20 billion support fund. Mahathir called foreign investors "racists" who are "not happy to see us prosper." Using anti- Semitic demagogy, he claimed Malaysia's economic troubles were caused by Jews who "robbed the Palestinians of everything, but in Malaysia they could not do so, hence they do this, depress the ringgit."

The Malaysian ringgit has lost some 30 percent of its value since the avalanche of currency devaluations that began when Thailand government officials released the Thai baht's peg with the U.S. dollar on July 2.

The Clinton administration announced October 30 it would contribute $3 billion toward the Indonesian bailout, to be used only if the main IMF package fails to restore stability. Even then, they stressed that the regime could not use the money unless it had more currency reserves on hand than it was borrowing from Washington. "Financial security round the world is critical to the national interests of the United States," declared U.S. treasury secretary Robert Rubin on October 30.

The three-year IMF deal includes the loans from the Central Asian banks and was the largest "rescue" since the $50 billion loan package foisted on the Mexican government in 1995 to guarantee imperialist investments there in the wake of the collapse of the peso.

The IMF deal was criticized as "the wrong medicine for Asia" by Jeffrey Sachs, director of the Harvard Institute for International Development and an economic advisor to governments in Asia. "The package could do more harm than good, transforming a currency crisis into a rip-roaring economic downturn," he asserted." Citing the depression of the 1930s, Sachs compared the IMF measures to moves by the Federal Reserve in 1933, which "tightened credit, as financial orthodoxy prescribed. Confidence sank, and the banking system collapsed."

Capitalists anxious to impose austerity
Meanwhile, capitalist investors are anxious to press austerity programs in Southeast Asia. "Foreign lenders are horrified that Bangkok still has not produced a detailed recovery plan," chided the November 10 issue of Business Week. "The global fund [IMF] should insist that Thailand and Indonesia shelve pet projects and balance budgets," the big- business magazine added.

Kim Mahn-je, chairman of Pohang Iron & Steel Co. in south Korea, declared, "The government has to adopt a ruthless policy of restructuring." He had slashed the workforce there by more than 20 percent to less than 20,000 workers over the past four years.

Elsewhere in south Korea, some 20,000 auto workers at Kia Motors Corp. returned to work November 3 after walking off the job on October 21 protesting the company's plans to file for bankruptcy. The company has debts totaling $12.9 billion.

Bad debts for the nation's banks are escalating as corporate bankruptcies increase. According to the Economist of London, eight large conglomerates that owe a combined $18.2 trillion worth of loans have stopped making payments to banks this year. Moody's Investor Service, the U.S. credit rating agency, downgraded the credit ratings for four of south Korea's six main commercial banks October 31. Also hit by the economic turmoil engulfing the region, the south Korean currency has plummeted by 13 percent this year.

Capitalists in the United States and other imperialist countries are nervous about the impact if the currency devaluations spread to Latin America, especially Brazil, which has a population of 160 million people. Brazil's foreign debt soared from $71 billion in 1980 to nearly $160 billion in 1995.

"Remember the Baht and Defend the Real," warned an article in the October 31 Wall Street Journal. If the Brazilian real succumbed to the same fate of the currencies in Southeast Asia, "the fallout in Latin America would be devastating," the article stated. The currency is reportedly overvalued by as much as 30 percent. The government spent up to $10 billion during the last week of October to prop up the real.

Fears of deflation and overcapacity
The Dow Jones industrial average climbed 232 points on November 3, brining it within just 41 points of where it was before the 554 point nosedive a week earlier. That plunge registered the largest one-day point lost in its history.

Despite the recovery, business investors expressed concerns about "some real potential problems" that remain unresolved.

Bank stocks plunged October 31 and most banks refuse to report any losses in the so-called emerging markets in Asia, Russia, and Latin America, particularly Brazil, according to the New York Times.

Banks in Japan have extended some $265 billion in Asian loans and bank deposits, which could vanish if there is a prolonged economic downtown in the region. Around $87 billion from Japanese banks is at risk in Hong Kong alone, where inflated property values threaten to go bust.

The financial tornado in Southeast Asia has provoked commentary in the bourgeois press expressing fears of deflation and excess capacity - the ability to produce more commodities than capitalists can sell at a high enough profit to justify expanding their productive plant and equipment.

"Production everywhere is running ahead of consumption," complained Business Week. "There is a worldwide overcapacity in industries, from semiconductors to autos. And the excess supply will get even worse as Asia tries to export its way out of trouble."

The article noted that "overcapacity" and "downward price pressure is clear in the auto industry." Worldwide capacity has reached 70 million vehicles - 32 percent more than consumers are now buying, according to the consulting group Coopers & Lybrand LLP Autofacts division.

Auto sales in Thailand collapsed by 77 percent from a year ago. In the United States, prices on passenger cars have dropped by 2.1 percent over the past year, according to the Bureau of Labor Statistics.

Despite the falling demand in the region, General Motors and Ford Motor are constructing huge assembly plants in Thailand and preparing to build five more factories in Southeast Asia and China. South Korean conglomerate Samsung is investing $4.5 billion in a factory that will produce 80,000 cars in the first production year.  
 
 
Front page (for this issue) | Home | Text-version home