Fiscal Turmoil Puts Indonesia Leader at Risk

This country’s economic crisis is threatening to spiral into a political disaster for long-ruling President Suharto, whose seeming reluctance to tackle Indonesia’s currency turmoil is suddenly being criticized and second-guessed both at home and abroad.

Breaking the usual deferential silence about their leader, critics are calling for Suharto to step aside to restore international confidence in Indonesia’s faltering economy.

Indonesia’s next presidential election is in March. The plunge by the rupiah, Indonesia’s currency, to an all-time low this week spooked investors and consumers and caused international lenders and U.S. officials to rush to Jakarta to backseat-drive the economy back to health, causing many in the capital to wonder if this may be the moment that breaks the president’s 32-year grip on power.

“There is no confidence in the government, and there is growing sentiment against the president,” said a company chairman in Jakarta who asked not to be named. “The feeling has been simmering for some time, but it has just burst into the open this week.”

Suddenly, in a shower of open dissent, a former Cabinet minister, opposition party members, retired generals and student protesters all criticized the government’s handling of the economy this week and indirectly called for Suharto to step down.

“The existing government must be replaced,” wrote former Cabinet minister Mohammed Sadli in an unusual article on the front page of the Jakarta Post, Indonesia’s largest English-language daily. In an adjacent article, political scientist Arbi Sanit also urged Suharto, who has been advised by his doctors to rest after an illness in December, to end his three decades of rule.

“We need a president who is in good health,” he said. “Because we are facing a serious economic problem, the new president must have a good reputation and credibility, be well-experienced in the government system, be widely supported by the people and capable of mending the country’s political and economic systems.”

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Suharto, a five-star general who took office after quashing a Communist coup in 1965, is the longest-ruling leader in Asia and has consolidated his power by overseeing Indonesia’s economic boom while quelling dissent. He has been “reelected” every five years by assent of the 1,000-member People’s Consultative Assembly but has never faced a formal vote.

Since December, rumblings that the 76-year-old leader is getting too old and sick for the task of massive economic restructuring have intensified, but Suharto has not designated a successor and is said to retain the crucial backing of the military. The vice presidency has traditionally gone to an army official, and analysts worry that a political vacuum could quickly turn into an outright military takeover. The current vice president, retired Gen. Try Sutrisno, is not considered a strong political figure and could be challenged for the top spot by other aspiring military leaders.

During his speech unveiling the 1998 budget earlier this week, Suharto reaffirmed that, to him, social stability comes before economic stability. Despite International Monetary Fund recommendations to cut government spending and reform the banking sector, his fiscal plan instead added social programs and increased military spending.

But his attempts to maintain business as usual in the face of spiraling turmoil have heightened unease rather than prevented it, analysts say. U.S. officials warned that if Indonesia ignores the stringent reforms that accompany the IMF’s $43-billion rescue package, the country might not get any money. Those warnings sparked a run on the nation’s currency and worries that the damage might spread to other countries.

President Clinton urged Suharto in a 20-minute phone call from aboard Air Force One late Thursday to stick to the IMF reform program. After the conversation, Indonesian State Secretariat Minister Murdiono told reporters that Suharto “is serious about carrying out the plan.”

In an attempt to keep the Asian rescue program on track, a team of U.S. and IMF officials will arrive in Jakarta this weekend to discuss Indonesia’s next steps. A group led by Deputy Secretary of the Treasury Lawrence Summers was to leave Washington this morning for Jakarta in a bid to persuade Suharto to carry out the IMF’s demands for policy reforms.

The group, which also includes officials from the State Department and the National Security Council, will spend a week in the region, also traveling to Singapore, Thailand, Malaysia, China, South Korea and Japan to discuss the regionwide economic situation.

Summers’ group will be in the area at the same time as the IMF’s two top officials, Managing Director Michel Camdessus and his deputy, Stanley Fischer. They too are planning to meet with Suharto and other Asian leaders.

Fischer hinted that if Suharto is indeed serious about sticking to the reforms, the group could “accelerate and strengthen” the bailout.

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With that news and help from Indonesia’s central bank, the battered rupiah bounced back Friday to 8,150, up from Thursday’s record low of 10,550 to the dollar. Just six months ago, before Asian currencies began to drop like dominoes, $1 equaled about 2,500 rupiahs.

But investors and consumers remained wary. The stock market dropped another 1.2% to 342.97--a total of nearly 14% in two days--and analysts warned that at current exchange rates, only a handful of companies on the index are technically solvent and that many companies may have to default on foreign-exchange loans.

Frantic shoppers fearing sharp price rises and riots continued to throng markets to stockpile staple foods. At the Sogo supermarket in central Jakarta, shoppers lined up 15 deep at cashiers’ counters with carts piled high with rice, baby food, cooking oil and other basics. “Yesterday, there were even more people, but we’re sold out of some things,” said supervisor Lucie Ratnawati, who on Friday stocked up on milk, soup and rice for her own family. “I have children. They must be fed no matter what.”

Indonesians are severely shaken by the rupiah’s plunge, which comes after half a year of the currency’s steady decline, a massive drought that is expected to cause food prices to go up, and rising unemployment that will worsen as hard-hit neighboring countries send Indonesian laborers home to create job openings for their own people. Analysts warn that the number of jobless could swell to a new height of 6.5 million in this country of 200 million, sparking unrest.

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Times staff writer Art Pine in Washington contributed to this report.

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Profile / President Suharto of Indonesia

Personal

Born: June 8, 1921, in Kemusu on the island of Java.

Family: Married to Raden Ayu Hartinah from 1947 until her death in April 1996. Three sons, three daughters.

Career

1940: Joins army

1946-1965: Rises from battalion commander to major general.

Oct. 1, 1965: After attempted Communist coup, seizes power in countercoup.

1965-66: Hundreds of thousands of suspected Communists are killed.

1968: Elected president.

1973-93: Reelected president five times, facing no opposition.

1975: Orders invasion and later annexation of East Timor, prompting protests from United States and human rights groups.

1989: Wins U.N. award for efforts in controlling Indonesian population.