Repost on Indonesia from Reuters:
Some useful nos. in there to remember: debt and so.
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FOCUS-Indonesia starts painful reform process
Reuters Story - January 16, 1998 06:55
(Adds markets close, taxi driver's comments <g>)
By Raju Gopalakrishnan
JAKARTA, Jan 16 (Reuters) - Indonesia began the arduous trek
back from the brink of economic disaster on Friday, with much
pain ahead before the benefits of reforms agreed with the IMF
kick in and few early signs that they would.
President Suharto predicted zero growth and 20 percent
inflation in fiscal 1998/99 while announcing the reforms on
Thursday, figures which sent a shiver of dread across corporate
Indonesia and raised the spectre of civil unrest in the nation
of 200 million people.
Dozens of people, angered by rising prices, attacked shops
in a town in East Java on Thursday, police said, although they
added that there were no immediate reports of tension on Friday.
Financial analysts were worried that the far-reaching
reforms package had failed to boost the battered rupiah
currency, which had fallen past 10,000 to the dollar last week
-- a loss of about 75 percent from 2,400 in July.
The rupiah was at around 8,500 in late Jakarta trade,
marginally stronger than the opening of 8,800.
The stock market spurted 6.89 percent to 413.92 points by
the close on gains in the region and rises in key shares, but
brokers said the bounce masked what would be a long period of
depression as hugely indebted companies struggle to cope.
"The fact the government has put an official stamp on the
severity of the recession has worried people," said Anthony
Duckworth, the head of research for ABN-Amro Hoare Govett Asia
in Jakarta.
"But it's still an optimistic forecast," he added, noting
that many economists had predicted the economy would contract.
An impending rise in petrol prices on April 1, following the
government's promise to slash fuel subsidies, and Suharto's
comments that no help was forthcoming to indebted companies
spread more gloom.
Indonesian companies hold at least an estimated $65 billion
in debt and the precipitous fall in the rupiah has put debt
servicing out of reach for many.
About 260 of the 282 companies listed in Jakarta are already
technically bankrupt, analysts have said.
Still, the reforms were seen as necessary.
In Kuala Lumpur on Friday, IMF Managing Director Michel
Camdessus said Suharto deserved international support and that
Indonesia should see high growth by 2000.
U.S. President Bill Clinton also lauded the moves in a
telephone call to Suharto and local newspapers said Indonesia
had no chance but to take tough steps to arrest the country's
slide into financial disaster.
U.S. Deputy Treasury Secretary Lawrence Summers told
reporters in Seoul that the Jakarta government's commitment to
the reforms would be crucial.
"I think that Indonesia's efforts in conjunction with the
IMF have brought a degree of stability that was lacking a week
ago," said Summers, who visited Jakarta earlier in the week.
"What will be crucial is the way the Indonesians carry their
economic policy through."
"Reform now or collapse," said the Jakarta Post, Indonesia's
leading English daily.
"The most severe pains will be wreaked on the common people
as food, fuel and electricity prices will be raised within the
next few weeks," it said in an editorial.
"The immediate questions though are: Will all these pains
and bitter medicines be effective in leading the nation out of
the economic crisis without causing widespread social riots and
threatening political stability?"
In the Balong district of East Java, people in a motorcycle
convoy attacked shops selling food and other essentials on
Thursday and set their wares on fire, police said.
Other towns in East Java, one of the areas badly affected by
a crippling drought last year, were hit by similar disturbances
earlier in the week.
Indonesia's powerful military has said it will charge food
hoarders with subversion, a crime punishable by death, and take
all the steps it can to maintain stability.
Many Indonesians were angered by what they saw as a lack of
sensitivity from Suharto on their plight.
"I saw Suharto on TV when he said prices of fuel may rise,"
said Muhar, a Jakarta taxi driver. "He said it as if he was only
reading a newspaper, there was no emotion at all. People are
already suffering a lot here. We need rice, we need food."
Others have criticised the pervasive hold Suharto's family
and friends have on the country's economy.
Indonesia's reform package struck at the heart of some of
Suharto family businesses but analysts said the move was largely
symbolic since his kin have myriad interests across the economy.
Suharto said the reforms, agreed with Camdessus, would scrap
tax benefits under the national car project and end a clove
distribution monopoly, both of which currently favour his
youngest son.
A $1.77 billion power plant being planned by a joint venture
which includes his eldest daughter was scrapped. A plywood
cartel controlled by a close friend was also abolished.
The end of the national car tax breaks brought an immediate
response from General Motors . It said in a statement in
Singapore that the reform had changed the company's attitude
toward investment in Indonesia.
Economists praised the abolition of monopolies on major
commodities but said they still wanted to see the fresh reforms
implemented fully before confidence could be restored in the
leadership of Suharto's government.
Suharto, 76, on Thursday dispelled immediate doubts on his
health -- he appeared vigorous when announcing the reforms --
but his political future remains unclear and looms over efforts
to win back foreign money and investors.
He has continued to come under pressure to step down at the
end of his term in March and there have been unprecedented
questions openly expressed about his competence.
Suharto, who took power in 1965 and built his career on
stability and growth, is however widely expected to stand and be
re-elected.
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