FINANCE-INDONESIA: Passing the Buck on Human Rights

By IPS Correspondents Reprint | | Print |

Abid Aslam

WASHINGTON, May 5 1998 (IPS) - In the late 1980s and early 1990s, the International Monetary Fund (IMF) backed political moves in Benin that saw the military dictatorship of Mathieu Kerekou replaced by a market-friendly government headed by former World Bank official Nicephore Soglo.

Nearly a decade later, however, the IMF shows no intention of advancing political reform in Indonesia, where the ‘New Order’ regime of President Suharto – a five-star general – has been in power for 32 years.

The Fund was able to flex its muscle in Benin – agreeing to pay the bankrupt country’s civil servants on condition Kerekou agreed to bow out gradually – because France, a major shareholder, had pushed the issue in the IMF’s executive board, said a veteran of that campaign.

In Indonesia’s case, he told IPS, there has been no “bilateral leadership” and, whereas Kerekou had been a “Marxist dictatorial killer”, the same could not be said of Suharto.

The role of the United States, always pivotal in IMF affairs, has been to urge Suharto to exercise restraint in clamping down on political opponents and the country’s restive students. But Washington has backed away from threats to cut off Indonesia’s 43- billion-dollar, IMF-led rescue package for fear such a move would increase the likelihood of bloodshed.

Debate over Indonesia’s bail-out programme mainly has revolved around financial conditions and the Suharto government’s track record on implementing promises to restructure the economy.

That prompted 27 members of Congress recently to ask President Bill Clinton in an open letter: “How is it that we can muster the indignation…to reverse an Indonesian governmet decision to implement a currency board, but we are unable to react similarly when fundamental human rights to religious, political and economic freedom are blatantly trampled by the Indonesian government?”

The answer, as revealed in numerous speeches by Administration officials and a recent Congressional report, is that Washington remains deeply worried about the possible regional ramifications of social turmoil in Indonesia.

Serious turmoil in the world’s fourth most populous nation could hurt investment in neighbouring countries even as it pushed new waves of refugees to seek shelter there, officials fear. The region’s fragile first steps toward recovery thus would be jeopardised. Civil strife also could threaten global commerce because Indonesia straddles strategic international sea lanes.

The bail-out therefore was revived here Monday, when the IMF’s 24 executive directors approved the first of three one-billion- dollar loan installments. They had been held up since mid-March over Suharto government plans to peg the Indonesian rupiah to the U.S. dollar – and reports the Indonesian leader had permitted his family and friends to reconstitute businesses which the government had promised to eliminate.

The World Bank and Asian Development Bank were expected to follow the IMF’s lead by clearing in coming weeks some three billion dollars in loans previously suspended, said Hubert Neiss, director of the Fund’s Asia-Pacific department.

The three-billion-dollar IMF loan originally was to have been disbursed in a single installment on Mar. 15. Instead, it will be released in three, closely-supervised monthly installments of one billion dollars each, said Stanley Fischer, the IMF’s No.2 official.

“We are under no illusions that everything will be smooth from now on,” Fischer told a news conference here. “We will follow (the programme) very closely. There really is not much room for slippage.”

Under the third compromise in six months struck by Indonesia and the IMF, Jakarta would end most monopolies controlled by those near and dear to Suharto and the IMF would allow the government to delay lifting some subsidies on basic foodstuffs. No commitments on human rights were urged or made.

Confrontations between troops and University students in particular have grown increasingly bloody in recent weeks, according to reports reaching here. At least 30 students were hospitalised in the cities of Medan and Palu following clashes with security forces last weekend.

The IMF board’s decision to proceed was unanimous. Some members, however, expressed reservations in formal statements – based on scepticism about the Suharto government’s latest promises to undertake financial reforms.

On human rights, Fischer told a news conference here, “every government that votes in the board of the IMF to support a loan like this is making a calculation of which way does more good.”

Board members could opt “to try to mitigate the economic hardship and work with the government (and) try to persuade them to improve their record, or to withdraw support and let the economic circumstances worsen and hope in that way to achieve improvements…That’s a tough call for anybody,” Fischer noted.

A number of other options existed, but were not considered, sources told IPS. “It’s better to go ahead (with the bail-out) but with some positive political pressure,” said Amien Rais, political scientist at Gadjah Mada University in Yogyakarta and leader of a Muslim organisation claiming 28 million members.

“The government must stop kidnapping,” he told IPS during a visit to Washington. “All innocent victims must be returned to their homes. I would be very unhappy and angry if the IMF goes forward with the loan and people were not released.”

On Monday, officials blithely sidestepped the question of whether such measures were discussed by the board. They rejected suggestions that the latest price increases would turn up the heat on Indonesia’s political pressure cooker. Inflation in March reached the equivalent of 39 percent per year, the highest rate in 23 years. “Down with prices, Down with Suharto” reportedly has become a popular slogan among protestors.

Subsidies, Neiss argued, were being cut in ways that placed the greatest burden on wealthy Indonesians, not the poor. The price of gasoline, used mostly by private motorists, would be raised by 71 percent; diesel, used in public transportation, by 58 percent; and kerosene, used by the poor for cooking and lighting, by 25 percent.

That was all the Fund could do to ease tensions in Indonesia, officials said. Anything else – especially pressure to enact specific political reforms or concessions on rights – would have to come from donor governments.