Fwd (GLW): INDONESIA: Wahid surrenders sovereignty to IMF

Alan Bradley alanb at SPAMelf.brisnet.org.au
Sun Jan 28 07:23:45 MST 2001

The following article appears in the current issue of Green Left Weekly

INDONESIA: Wahid surrenders sovereignty to IMF

In an end of year ``state of the nation'' report, the central leadership
council of the Peoples Democratic Party (PRD) described economic
developments during 2000 under the government of President Abdurrahman
Wahid and Vice-President Megawati Sukarnoputri as the subjugation of
Indonesia to the neo-liberal policy dictates of the Washington-based
International Monetary Fund (IMF).

According to the PRD report, this subjugation has been manifested in the
Wahid-Megawati government's neo-liberal program of cuts to public subsidies
on fuel prices, and the privatisation of state enterprises,

Prices rises

The PRD report noted that while the “Wahid-Megawati government was forced
to back down on an April 2000 planned rise in fuel prices agreed to with
the IMF”, it introduced the agreed rise in electricity prices. “The prices
rises, imposed on enterprises consuming more than 9000 watts per month,
flowed on in general price increases. The textile and steel industries were
also forced to make lay-offs as a result. Despite these effects, the
government proceeded, supported by all the parties in the parliament, with
the fuel price rises later in the year on October 1, 2000.”

In the week leading up to the increases the price of basic goods rose by
5-10% and in a number of places the supply of kerosene shrank and its price
shot up before the official increases. Cement factories increased their
prices by 25%, house prices increase by around 15%. Taxi fares rose by as
much as 46% and public transport fares increased in a number of cities.
Furthermore, at the beginning of September 2000, the government increased
train and ferry fares by as much as 70%.

“The subsidy cuts also impacted on the education sector”, the PRD report
noted. “A number of universities such as the Gajah Mada University, the
University of Airlingga, the Bandung Institute of Technology, the Bogor
Agricultural Institute and the University of Indonesia are pilot projects
which are being forced to become financially autonomous. As a result the
campus bureaucrats increased fees by 50-100%.”

Similarly, farmers had earlier had to swallow the bitter pill of
neo-liberal policies during the government of former president Habibie,
i.e., an increase in the price of fertilisers of around 100% as a result of
subsidy cuts.


In the 2000-01 central government budget, the report observed, the sale of
state enterprises is estimated to contribute a massive 6.5 trillion rupiah.
The IMF has a target of 10 years to shift more than 60 state enterprises to
private hands. “In fact, these will shift mainly to foreign owners as they
are the most financially prepared. In the midst of a major crisis and the
collapse of the rupiah, the government has been ‘forced' to sell these
assets at a cheap price.”

Connected also to the policy of cutting subsidies, the government appears
also to be preparing the State Electricity Company and the state oil
company, Pertamina, to enter the private market, “where profit and not
public service is the main motive”.

The PRD report cites a number of examples of the loss of jobs resulting
from the privatisation of state enterprises. “The sale of Pelindo II port
facilities at Tanjung Priok in Jakarta has caused concerns because the new
investor plans to sack 20% of the workers. The State Electricity Company,
in a similar vein, is sacking 6000 employees and Telkom is sacking 13,000.”

The privatisation of the public sector is clearly causing more
unemployment. The privatisation of these public enterprises is also
contributing to an increase in the costs of many basic services.

Trade liberalisation

“When tariffs on agricultural imports were reduced (initially they were
actually eliminated), imported rice and sugar poured into Indonesia. The
result was the destruction of the national sugar industry and big losses
for rice farmers. Rice farmers faced huge rises in fertiliser costs, while
the government was unable to guarantee decent prices for paddy”, the PRD
report stated.

“The influx of general imports has also increased the flow of foreign
exchange out of the country. Furthermore many of the imports make no
contribution to the welfare of the people. One example has been the
liberalisation of the importation of luxury cars. The import of luxury cars
between January and September 2000 increased 27.18% compared to the same
period last year — worth a total of US$22.56 billion.”

According to the report, current trade liberalisation and privatisation are
contributing to the weakening — even the destruction — of national
productive capacity. As a result, there has been a huge increase in the
number of impoverished people in Indonesia. The report notes that “more
than 136.8 million people now live below the international poverty standard
of US$2 per day, more than in Bangladesh or India”.

Foreign debt

One achievement of the last year of the Wahid-Megawati government, the
report notes, has been another increase in Indonesia's foreign debt. The
total foreign debt now is about US$150 billion, with US$80 billion of this
owed by the government.

In the 2000 budget 37% of government expenditure will go to debt servicing
and repayments. In 2001 debt repayments will increase to 60 trillion
rupiah. In fact, the report observes, “it will probably go over this as the
government takes on new loans. It is no wonder, therefore, that the budget
deficit increases every year because of the increase in the government debt

“Where does the money come from to pay these debts?”, the report asks.
“From the sale of state enterprises, the sale of other state assets, taking
on new loans, profits from state enterprises and the taxes collected by the
government all go towards these debt repayments. Even the windfall profits
from the sudden rocketing of oil prices are being chased by the IMF for
debt repayment. The development budget gets smaller and smaller because it
is not considered a priority by the IMF.”

The PRD report argues that there should be “no obligation upon the
Indonesian people to pay” for most of the country's foreign debt, since it
was accumulated during the corrupt Suharto military dictatorship, with the
willing compliance of the IMF, the World Bank and foreign donor
governments. “But the [Wahid-Megawati] government just accepts the IMF's
myth that the demand for the cancellation of the debt will harm the
recovery of the economy.”

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