BY NAOMI CRAINE
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`Militant' editor Naomi Craine is on a reporting team to Indonesia. Firsthand coverage will begin in the next issue.
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In the week since Indonesian president Suharto resigned under pressure, protests demanding democratic rights and the release of political prisoners have grown. About 400 workers demonstrated outside the labor ministry May 27 calling for an end to restrictions on labor unions, the Associated Press reported. The day before 1,000 rallied outside the Cipinang Prison in the capital, Jakarta, demanding freedom for all political prisoners, including Jose Alexandre Gusmao, known as Xanana, a leader of the struggle for independence in East Timor.
Jusef Habibie, the former vice president who assumed Suharto's seat, has made some concessions to try to gain political stability. Muchtar Pakpahan, chairperson of the illegal Indonesian Prosperous Labor Union, and former legislator Sri Bintang Pamungkas were released from Cipinang May 26. Habibie announced he will review the laws that ban most political parties and unions and promised to call elections within a year.
Meanwhile, Indonesian officials met with Hubert Neiss, Asia-Pacific director of the International Monetary Fund (IMF), who represents the interests of the major imperialist investors in Indonesia, to negotiate the austerity conditions for resuming IMF loans.
The Suharto regime's attempt to impose such dictates was what touched off a wave of student protests over the last three months, which increasingly demanded that the president resign. When six student demonstrators were killed by police May 13, students, workers, and others poured into the streets of Jakarta and other cities in protest, including destroying many banks and stores. In face of this upsurge, Suharto hurriedly backed down from a 70 percent hike in fuel prices. These events convinced Washington and growing layers of the Indonesian bourgeoisie that the man who had served their interests as head of state of Indonesia for 32 years had become a liability.
Troops assault students in parliament
Suharto handed over the presidency to Habibie May 21.
The next night, soldiers moved in and cleared several
thousand students who had been occupying the parliament
building for most of the week demanding Suharto resign.
Careful not to use their guns, the troops beat many of the
youth with clubs, and the building was quickly emptied.
While students celebrated Suharto's departure, some pointed
to Habibie, a longtime crony of the president, as no better.
As part of trying to clean up the army's image, Defense Minister Gen. Wiranto removed Lt. Gen. Prabowo Subianto, a son-in-law of Suharto, as commander of the Kostrad, an elite army unit. Prabowo, who is often described as a rival of Wiranto, is being made to take the blame for the May 13 student deaths, along with other military officers.
Habibie named a new cabinet. Nearly half of these ministers served in Suharto's government. Military figures continue to play a prominent role. One of the new appointments is Bambang Subianto as finance minister. Bambang had previously been responsible for restructuring the country's banking system in line with IMF demands.
Hours before Suharto resigned, the IMF announced it was holding up payment of the next $1 billion installment of a $43 billion loan package. Neiss was dispatched to Jakarta a few days later to talk to Habibie's government about what it needed to do to get the loan reinstated. On his arrival May 26, the IMF official made clear the imperialists' lack of confidence in Habibie's ability to maintain control. Neiss called for "political stability," and said the loans wouldn't be available until "the support of foreign governments is obtained and market confidence is restored."
This was echoed the same day by U.S. treasury secretary Robert Rubin, who said it would be premature for the IMF to resume disbursements as long as the political situation remained unclear, according to the New York Times.
"The greatest fear is that we will have months of uncertainty," commented Indonesian economist Mari Pangestu.
No bottom to crisis in sight
There's no sign of the economic crisis turning around
soon. Most capitalist economists' projections - which often
have little basis besides hope - keep getting worse. The
estimates currently being quoted for 1998 include a 47
percent annual inflation rate, gross domestic product
shrinking between 10 and 25 percent; and the number of
people officially listed as living in poverty more than
doubling to 58 million, out of a population of about 200
million. Pangestu stated that unemployment will probably
rise to 15 million this year, nearly 20 percent of the
workforce.
Less than a year ago, Indonesia was regularly described as one of the budding "Asian tigers." Along with several other countries in the region, it was touted in the big- business press as alleged proof that capitalism can usher in substantial economic growth and prosperity in the Third World. Indonesia went through a rapid industrialization in the 1980s, with millions of toilers being drawn into the cities and manufacturing. Between 1991 and mid-1997, the gross domestic product in Indonesia, Malaysia, and Thailand rose by roughly 7-10 percent a year, a much higher rate than in the United States and other imperialist countries.
Capitalists from the United States, Japan, Australia, and other imperialist countries set up factories in semicolonial countries like Indonesia in search of higher profit rates than they can get at home, seeking to pay lower wages and have export platforms in Asia, Latin America, and the Middle East. Since the start of the 1990s they have also poured billions into the stock and bond markets of what they often call "emerging markets."
This has built up a speculative bubble that can't be sustained in the context of an overall decline in the capitalist system worldwide. The collapse of the peso in Mexico at the end of 1994 gave a picture on a smaller scale of what can happen when the bubble bursts. Fearing defaults on loans to U.S. banks after the peso dropped 40 percent against the dollar, Washington put together $50 billion in "loan guarantees." In exchange, the government of President Ernesto Zedillo agreed to deposit all revenues from the state-owned oil monopoly Pemex in an account at the Federal Reserve Bank of New York before being transferred to Mexico, to serve as a guarantee in case of default. The Mexican government also agreed to impose a series of austerity measures and allowed U.S. and other foreign capitalists to buy up more of the national patrimony. Real wages and living standards for working people were slashed.
Last July, the air started to whoosh out of the balloons holding up the "Asian tigers." First, the government of Thailand was forced to sharply devalue the national currency, the baht. Other countries in the region had to quickly follow suit, to stay competitive. This triggered a downward spiral. With some fluctuations, most currencies in the region have been falling since, with devastating effect on industry and banking, and especially on the living standards of workers and peasants.
The "bailout" packages foisted on the rulers of Indonesia, Thailand, and elsewhere in Asia have the same aims as the Mexican "rescue" - to ensure payment on the foreign debt, while extracting more profits from the labor of workers and farmers and forcing open the door for imperialist companies to buy up factories, banks, and land.
In Indonesia, the new government moved rapidly to assure that it would proceed with plans to sell off a dozen state- owned companies, including the long-distance phone service PT Telkom and the Indosat satellite operator, as well as review the Pertamina oil monopoly. The crisis makes it harder to find buyers, however. The May 26 Financial Times reported, "When PT Telkom was floated in 1995, with the sale of a 25 percent stake, it had a market capitalisation of almost $8.5bn. That has now fallen to less than $4bn."
Among the pressures that weigh down is the fact that governments and companies in these countries are now forced to try to repay in devalued currencies crushing debts that are denominated in dollars or yen. In the case of Indonesia, this comes to $137 billion, with the rupiah worth just one fifth of what it was a year ago. On May 27 Moody's, the U.S. investment rating agency, described Indonesia as facing a "broadly insolvent banking system."
The crisis in Asia has a huge impact on the Japanese economy, which was already the weakest among the major imperialist world powers. Japanese banks list as assets $23 billion in debts from private companies in Indonesia, for instance, which is not about to be paid quickly.
Back in September 1996, commenting approvingly on the outcome of the currency crisis in Mexico at that time, New York Times columnist Thomas Friedman wrote, "To pay for the bailout, Mexico cut the standard of living for most of its people by 20 percent. There should have been a revolution, but there was barely a demonstration."
But in Indonesia today, there have been big demonstrations. It's three years further into a world capitalist economic crisis in which working people find the catastrophe bearing down on them increasingly unacceptable.