Zeev,
The Indonesian situation is very different from Korea's. Indonesia has US$40 bil assets of which US$20 bil is in Treasury and cash. The govt loans (mostly long-term and medium-term) account about US$60 bil. Indonesia is thus in a very strong position.
The Indonesian govt stopped defending Rp because they did not want to deplete their reserves and a short-term depreciation in Rp was not an immediate concern. Unlike Korea, Indonesia has ample exportable natural resources and is a net-exporter of oil and natural gas (it is a member of the OPEC), agricultural products like palm oil, paper and pulp.
After the currency run in November 1997, Indonesia simply abandoned the IMF plan -- they did not formally announce, though, about an abandonment. US, Germany, Japan, Australia (among others) made frantic calls to Indonesia because (IMO) the latter was in a much stronger position than (say) Korea. While the importance of Indonesia went up, a highly corrupt Suharto also gained importance, unfortunately. US and other countries have no choice (but to kowtow Suharto) because a political change cannot be foisted upon the Indonesian people. At least, the IMF imposed on Suharto to change some of his corrupt habits; there is no guarantee, though, that Suharto will abide by the IMF plan; I feel he will simply to survive politically.
The problem in Indonesia is more political than economical, IMO. But, I believe that when the dust settles, Rp will rise at least 100% from its current value, which would still be a 50% discount from the July 1997 value.
Sankar |
