Indonesia faces economic change If nation is to recover, Suharto must undertake painful reforms

January 18, 1998|By SAN JOSE MERCURY NEWS

JAKARTA, Indonesia -- After 32 years of unchallenged rule, President Suharto, Asia's longest lasting leader, still is in power but is struggling to retain control in a nation where many regard him as the problem, not the solution.

Although he is expected to be re-elected in March to a seventh five-year term, opponents are openly defying him and calling for his resignation. That is the first time that has happened since he seized power.

Yesterday, stores had reopened but police remained on the streets of a town in eastern Java, two days after riots erupted over increased food prices brought on by the nation's economic crisis.

Residents said the main street in Jember, about 500 miles east of Jakarta, was blocked off not far from where a shopping mall was burned during the unrest.

Dozens rioted and stormed stores Thursday, accusing owners of selling staples such as rice at inflated prices.

Today, the big questions inside and outside Indonesia are: Can Suharto be trusted to implement reforms that will hurt his family and friends? Will widespread corruption end? And can he keep the political and economic struggle from turning violent?

Aging, ailing and believed by many to have lost touch with his nation's 203 million citizens, "The Old Man," as he is called with more derision than affection, faces what looks like the greatest challenge of his career.

To rescue an economy that has been his life's work, an economy that has lifted millions from poverty through growth averaging more than 6 percent per year for nearly three decades, Suharto must carry out the sweeping reforms he has agreed to under pressure from world leaders and the International Monetary Fund.

But to do that, he must sacrifice the interests of family members and cronies who have made billions by controlling key economic sectors through influence peddling and back-room deals.

He also must keep a lid on the food riots and social unrest that have erupted in Jakarta's impoverished outlying areas and that can only worsen as the austerity measures slow growth, raise unemployment and push millions into destitution.

That's a tall order. And even if he succeeds, the 76-year-old general may have trouble restoring the investor confidence needed to revitalize Indonesia's battered economy because of his and his family's legacy of corruption.

"It's the end of an era -- you can feel it," said poet and dissident Mohamad Goenawan at a downtown restaurant.

Goenawan, founding editor of a popular news magazine closed by the government three years ago, fears that Indonesia will backslide into riots and repression.

"If the economy gets bad, I think people will take to the streets," he said. "If so, the government will react by being repressive. But for how long, I don't know -- there's a limit."

That the economy will get bad, at least for the near term, is the one thing on which almost everyone can agree. The austerity and reform measures Suharto announced Thursday are expected to lead to corporate consolidations, factory closings, large-scale layoffs, zero economic growth and 20 percent inflation.

Given that the average annual per capita income in Indonesia was only $900 U.S. even before the local currency, the rupiah, lost about 70 percent of its value, the pain for many will be severe. But, as one diplomat said, no one can yet answer how long the pain will last or how successfully it will be managed.

Pub Date: 1/18/98

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