Foes Push Indonesia’s Suharto to Act or Quit

As Indonesia’s economic crisis emerges as the most serious threat to the troubled region’s stability, critics called Saturday for President Suharto to take serious action or step aside.

Indonesia’s most popular opposition leader demanded Saturday that Suharto end his 32 years of rule--a move reportedly supported by the president’s family members--while teams of international financial experts descend on Jakarta this week to discuss steps to salvage the teetering economy.

The International Monetary Fund’s first deputy managing director, Stanley Fischer, who arrived in Jakarta today, had said Thursday that, with Indonesia on the brink of defaulting on $133 billion in foreign debt, he considers the country’s economic problems “more worrisome” than South Korea’s.

Opposition leader Megawati Sukarnoputri broke a long silence--and risked being arrested for criticizing the president--to blame Suharto for the country’s economic woes.

Indonesia’s currency, the rupiah, plunged last week amid worry that the nation’s $43-billion international bailout was threatened by Suharto’s apparent unwillingness to adhere to strict austerity measures in the rescue package.

Indonesians stripped supermarket shelves bare in the past three days as the country’s currency lost nearly a quarter of its value in one day. Panicked residents stockpiled essential items in fear of further price increases and job losses.

Speaking from her residence on the outskirts of Jakarta to hundreds of supporters crowded in her garden, Megawati said people had lost faith in the government’s ability to cope with the country’s worst economic crisis in decades.

“Suharto’s rule as president for 32 years is quite enough,” she said. “Efforts to renominate Gen. Suharto as the sole presidential nominee for a seventh term will only add to the crisis of confidence among international investors.”

She offered herself as a candidate to replace him if other potential leaders “have no guts.”

Suharto, a former general who retains the crucial support of the military, has ruled unchallenged since he took power after replacing Megawati’s father, Indonesia’s founding President Sukarno, in 1965. Unless the 76-year-old leader voluntarily steps down, he is expected to be rubber-stamped back into office by Indonesia’s 1,000-member National Assembly in the country’s presidential elections in March.

Suharto’s half-brother, Probosutedjo, was quoted in the Kompas daily newspaper on Saturday as saying the leader wants to retire but will only do so when he is assured that a successor is able to shoulder the responsibilities of leadership. “I am sure he has no intention of remaining the national leader forever,” the newspaper quoted Probosutedjo as saying.

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The task of guiding the country out of its current economic turmoil, and the simmering social unrest created by it, is ominous.

The panic caused by the currency’s free fall has quieted after the rupiah regained some of its value Friday and price controls were put on such staples as rice, flour and cooking oil. But in the capital, the military remains on low-level alert in case resentment over evaporating salaries and jobs erupts into riots.

Ethnic Chinese, who make up just 3% of the population but control the majority of the nation’s wealth, have been targets of violence, and many are lying low. The U.S. Embassy has issued a warning for American citizens to avoid “crowd situations,” and many expatriates are quietly preparing for chaos.

One American director of a local joint venture company said he and his friends have each stockpiled more than 130 pounds of rice and prepared exit visas and open tickets out of the country.

“The initial panic has abated, but people are preparing to get out of here if they have to,” he said today. “I’ll leave when I start seeing the military on the streets. There’s no sense in having your family in danger.”

The country’s problems, which analysts call the most serious in a series of interrelated economic crises in the region, have rattled the world financial community as well.

Stock markets around the world have tumbled on fears that Indonesia might fail to repay billions in foreign debt, resulting in a domino effect in neighboring countries.

Economists worry that a default could spread to Thailand, damage Japan’s delicate banking system and upset an agreement for South Korea’s repayment of its short-term debts. Already, Indonesia’s plunging currency is causing deep problems for foreign companies with investments in the country.

Among those, Hong Kong’s highflying investment bank Peregrine Investment Holdings Ltd. was fighting for its life Friday after reports that an Indonesian company linked to Suharto’s oldest daughter owed it as much as $270 million--a debt equal to nearly one-third of Peregrine’s shareholder funds.

The expected arrival of IMF and U.S. government officials has done much to keep rising tensions in check and may take pressure off the government, which has been the target of open and daring criticism recently--a surprising development in a country where it is illegal to publicly attack the president.

“We are in a very crucial and critical moment,” said Amien Rais, a political scientist and opposition figure. “The trust of the people is completely gone, and the legitimacy, moral and political, of the regime is fading away. It is a good time to have a new regime with new ideas.”

Suharto seems to have backed down from a defiant effort to avoid painful economic reforms mandated by the IMF that would hurt his family’s sprawling business interests and potentially spark social unrest.

After intense criticism of Suharto’s expansionary budget, unveiled Tuesday, and warnings that Indonesia could lose a $43-billion bailout package, Suharto agreed to follow IMF suggestions to restructure the economy.

In a demonstration of its earnest intent to comply, the government announced Saturday it would postpone 15 large projects to save billions in badly needed foreign currency.

IMF Chairman Michel Camdessus will follow his deputy to Jakarta on Wednesday to push reforms that include reducing high tariffs and government regulation, breaking up cartels--many of which are partly controlled by Suharto family members--and ending costly subsidies.

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Among the expected American arrivals in the region today, U.S. Defense Secretary William S. Cohen’s is aimed at reassuring leaders of Indonesia, Malaysia and Thailand that the U.S. government remains their partner--not only in the economic and political arenas but also as a weapon supplier.

Indonesia’s relations with Washington have been strained over a failed F-16 fighter deal. Indonesia canceled the deal in June and backed out of a military training program because of criticism in Congress of Jakarta’s human rights record.

Cohen “is not going over there to pretend he’s the secretary of the Treasury,” said Kenneth Bacon, Cohen’s chief spokesman, although a Treasury official was added to his entourage as an advisor.

The White House dispatched its point man on the Asian crisis, Deputy Treasury Secretary Lawrence Summers, on a separate tour of the region this weekend.