From the Far East Economic Review:=
Unlucky Country
As Indonesia's financial crisis bites the cities, a brutal drought in the
countryside is leaving the unemployed with no place to turn. Expect a
winter of discontent.
By Margot Cohen in Banjarjo, Java
December 25, 1997
I n mid-October, 21-year-old Sugiyanto was still swinging a shovel at a
Jakarta construction site, building a dormitory for Muslim pilgrims on their
way to Mecca. Six months earlier he had made a personal pilgrimage of
another sort--by overnight bus to the capital from the village of Banjarjo in
central Java. "On TV, it looked so easy to make money in Jakarta," he says
ruefully.
The money, however, has since dried up. Indonesia's financial crisis has
brought many construction projects to a halt. With the dormitory
completed and new jobs scarce, Sugiyanto slunk home to Banjarjo in early
November--only to find that his father's rice paddies had dried up too.
Months of dry weather have turned the fields into a parched brown
expanse. An intermittent drizzle and sporadic episodes of heavier rain have
yet to make them fertile again.
No work, no monsoon, no escape. For Sugiyanto, there's nothing to do all
day but slump over a motorcycle, hoping to cadge a few faded bills in
return for offering lifts. There are few takers. Villagers would rather spend
their money on water. "It's tough to make even 100 rupiah [1.6 U.S. cents]
around here," grouses Sugiyanto. "I want to take a bath, and there's no
water. I want to buy it, but I don't have the money." Staring at the floor, he
blurts: "I don't belong in the village. I want to go back to Jakarta, but I'm
afraid."
Fear is spreading rapidly throughout the Indonesian archipelago as people
face the twin calamities of drought and devaluation. The value of the
rupiah has fallen 50% against the U.S. dollar since July--pushing up prices,
squeezing earnings, hitting hardest those who can least afford it. The sums
that city workers send to their folks in the village are shrinking just as rural
families are grappling with the worst drought in decades. Many face a
return to poverty and hunger; in remote regions, people have died of
starvation. It's a brutal combination of misfortunes that endangers both
economic and political stability in a nation already riven by income gaps,
ethnic differences and pockets of religious tension.
The drought is blamed on El Nino, a warm Pacific Ocean current that brings
dramatic changes to the world's weather every few years. Harvests have
been delayed or destroyed, with consequences that ripple through the
rural economy. Besides farmers, small tradesmen, travelling salesmen--even
itinerant entertainers like puppeteers--have seen their incomes slashed.
Some economists predict that millions of Indonesians will be dragged back
below the poverty line, reversing decades of progress. Malnutrition and
infant mortality are expected to rise, particularly in eastern Indonesia. In
Irian Jaya, Indonesia's easternmost province, famine and malaria have killed
about 800 people.
In both cities and villages, there is a bleak resignation to the drought and
economic downturn. But it is edged with tension. The unemployed of the
cities are swelling in number but are reluctant to return to their depressed
villages. Meanwhile, the traditional outlet for unemployed youth--jobs
overseas--is being constricted by crackdowns on illegal workers in Saudi
Arabia and Malaysia. Analysts in Jakarta fear that without these safety
valves, riots could lie ahead.
This mood of pessimism is reinforced by uncertainty about how badly next
year's rice crop will be hurt by the drought. Farmers in Sumatra and
Kalimantan have started planting: The rains finally came in November,
almost two months late. But parts of Java and eastern Indonesia are still
waiting for rain. The belated monsoon season is forecast to end two
months early, next March instead of May.
The government expects 1997's rice-production figures to show a 3.9%
decline, but some economists believe the drop may be twice that. In many
parts of central and east Java, irrigation systems aren't functioning because
dams are depleted. Lack of irrigation could lead to sparse harvests. In parts
of Kalimantan, lack of rain has led to no harvest at all. Farmers planted in
anticipation of a monsoon that didn't come and saw their seedlings shrivel
in the soil; when the rains eventually came, they had no more seedlings to
plant.
On the ground, life has become harder for people whose lives were already
a struggle. Even before the currency crunch, families at the lower end of
Indonesia's economic scale had precious little cash to spare. The bulk of
their income went for food; the rest was spent on clothes, school fees and
other essentials. Now, forced to borrow, or buy on credit, many are going
rapidly into debt. Private moneylenders include civil servants and village
headmen whose pockets are often lined with the development aid of years
past. Banks, perceived as overly bureaucratic, are seen as a last resort. The
nationwide network of government-run pawnshops is the preferred
alternative: Their interest rates run to 10%-15% for redeemed items,
compared with 30% for cash from moneylenders.
Witness the scene at one such pawnshop in the central Java city of Solo.
Indonesians of all ages crowd around the counter, seeking quick cash for
their possessions. An elderly woman carefully unties a bundle, removing
three bolts of fine batik cloth. A young woman in jeans drags in a
television set. A mustachioed man scoops a pair of gold earrings from his
pocket. A 30-year-old man called Suharto submits a battered black bicycle,
bereft of tail-lights. He had used it to take his six-year-old son to school.
Now, he is willing to relinquish it for 25,000 rupiah ($4.16). He needs the
money to pay for the immunization of his newborn daughter.
Suharto is not a farmer but his customers are: He goes from village to
village selling plastic toys. He usually makes 10,000 rupiah a day, but
business has been so bad lately that he has stopped peddling his wares.
"If I can't do business, where am I supposed to get money?" he worries.
"Sooner or later, I won't have anything left at home to sell."
Likewise, many food-stall owners wonder how long they can hold out. As
members of the local community, they often feel a moral obligation to
provide goods on credit. Rather than close down--and risk losing all
repayments--they are starting to sell their livestock and other assets to
keep their stores running. In the central Java village of Ngestirojo, for
example, Tom Sugiyatno says he has extended 700,000 rupiah in credit to
30 families. That's a hefty sum for a business that claims to have capital of
only 1.3 million rupiah. "I can't force them to repay me. I know they don't
have any income," says the 40-year-old stallholder.
But altruism is often combined with self-preservation. People in a position
to provide loans, in cash or in kind, are fully aware that they may become
the target of envy unless they help out. There's nothing like a drought to
highlight the gap between the haves and have-nots. Who can afford to
drill a deeper well? Whose rice paddy shimmers green amidst a sea of
brown? Who pays for fresh water to be delivered, while neighbours queue
for hours before a stagnant pool?
Salip Hartimulyono is one of the envied residents of Cemani village, south
of Solo. He owns four water pumps: two to irrigate his four-hectare rice
paddy; the other two to rent out for 2,000 rupiah an hour. Salip, 53, admits
he has received many rental requests. He provides the pumps, on credit,
for night-time use, thus avoiding any decline in his daily profits. And he's
counting on a good profit from his harvest in January. By then, he
estimates, the price of the high-quality rice he grows will hit 2,000 rupiah a
kilogram--a figure that horrifies the villagers, who are already alarmed by a
recent 300-rupiah surge to 1,400 rupiah per kilogram.
(Government-subsidized rice, of lower quality, has been selling for 1,050
rupiah.)
In the nearby village of Combongan, no water gushes into 46-year-old
Sugiartono's baked field. Beneath the scorching midday sun, he and his
neighbours are building an irrigation channel. "For later, in case there's
water," he says drily. Their usual source, the Wonogiri dam, was closed
after the water dipped below critical levels. Beneath the wide brim of his
hat, Sugiartono's eyes flash. "The future holds chaos," he says. "If there's
no help from the government, I don't see how we can go on."
To provide for his family of five, he recently relinquished tilling rights to
7,000 square metres of his land for one year. He also sold his wife's 50-gram
gold necklace. He is not shy to show the resentment many villagers feel. "If
we just keep quiet, the only people who call the shots will be the rich,
powerful ones," he says.
A giant textile mill at the edge of the rice fields also provokes bitter
comment. It was built during the boom years when millions of hectares of
farmland were converted to industrial use. Many of the factories stirred
land disputes; now they're decried for their heavy consumption of water.
"Factories should not be allowed to take the farmers' water," says Wido
Supatmo, a tenant farmer. "It's not fair."
Like many farmers, Wido is not entirely dependent on the land for income.
His wife, Ngatinum, sells jamu, a traditional tonic of medicinal herbs, to
help provide for their seven children. She's typical of the millions of
low-income traders who are grappling with sudden inflation and shrunken
purchasing power. The rice and herbs she uses to make jamu have all risen
in price, but she can't pass this along to her customers. "If they can't even
afford to buy rice, they are certainly not going to buy expensive jamu," she
explains. By sticking to her price of 200 rupiah per glass, Ngatinum has
watched her monthly earnings dwindle by more than a third.
Such anecdotal evidence appears to support the argument that millions of
poor Indonesians are going to get poorer. At a November seminar in
Jakarta, economist Steven Tabor predicted that per-capita income in
Indonesia would tumble as low as $750 from $1,200. That means the
number of people classified as "absolute poor" could swell from 24 million
to 42 million--one in five Indonesians, says Tabor, who works for Economic
Management Services International, a Netherlands-based consultancy.
The government says there will be enough rice to feed the poor. To cover
the shortfall expected this year, it has so far ordered 300,000 tons to be
shipped from Thailand in December-January. In an attempt to stabilize
prices, the government had already injected almost 900,000 tons of
inexpensive rice into local markets by the end of November, compared to
404,000 tons last year.
The difficulty, says Tabor, will be identifying the most vulnerable groups
in the vastness of Indonesia and ensuring the supplies reach them. Local
officials may not report serious shortfalls in their districts because they see
it as an admission of failure. "It's a prestige problem," he says.
The problem is already evident. In Solo, the local chairman of the United
Development Party, Mudrick Setiawan, drew the wrath of government
officials for handing out rice to workers left jobless by the slump in the
city's textile and batik industries. "If I talk about hunger, the government
feels it has been dealt a blow," he says.
In the village of Bodag in east Java, Kardin, a primary-school headmaster
close to the ruling Golkar party, calmly tells a reporter that the food
situation is stable, with each family still maintaining a supply of rice. His
wife interrupts him: "Most people don't have a supply," she insists. "Only
the people who can afford it."
Local efforts to gloss over the problem can't hide its severity. The Suharto
government cannot afford to ignore the cries in the countryside--despite
the louder clamour from conglomerates in the capital. Ordinary Indonesians
have heard of the $33 billion bailout from the International Monetary Fund,
and they are waiting for some of it to trickle down to them. Hartono, a
60-year-old bookkeeper in Solo, is not alone in calling for funds to flow to
cottage industries and small traders. "If it ends up in the hands of big
companies, the situation could become even more serious," he warns.
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