Citizens of Indonesia Pay the Price

Through the door of Ayumas Money Changer, a steady stream of people came Monday with their savings stuffed in shopping bags, waist pouches and bulging envelopes, to trade their rupiah for dollars--and to buy a little time.

One small woman carefully removed brick after brick of Indonesian money from a brown paper sack and stacked them as high as her chin. Six months ago, this neat pile was worth more than $17,000. Today it brought her $5,000. “It’s my life savings,” she told the teller, “and it’s disappearing.”

As economic experts converge on Jakarta, the capital, to help reverse Indonesia’s economic tailspin, and foreign tourists enjoy what has become, in effect, a nationwide 70%-off sale, the Indonesian people say they are paying the cost of their leaders’ negligence and obstinate pride. And they are unhappy about it. While their Asian neighbors are also suffering, Indonesians say the economic chaos in their country is spawning a political crisis that will make recovery all the more difficult.

The rupiah plunged Thursday after Indonesian President Suharto announced giant spending projects, flouting an austerity program recommended by the International Monetary Fund. Critics say he was sacrificing the country to protect his family’s entrenched business interests. When international lenders threatened to yank back a $43-billion bailout package, investors took the cue and pulled out of their Indonesian investments, sending the currency here into free fall.

After meeting with IMF and U.S. Treasury officials Monday, a chastened Suharto committed to stringent reforms, the rupiah gained modestly and Indonesia’s stock market climbed a bit in early trading, even as the rest of the region’s markets fell.

It was the first moment of cautious optimism in an anxious week. But the wild fluctuations have caused both pain and gain.

As panicked Jakarta residents thronged markets to buy staples before prices leapt Friday, highflying traveler Jimmy Mancham was enjoying a subsidized vacation in Bali. On the day he checked out, between the time he left for the bank to exchange U.S. dollars to pay his 32 million rupiah bill, and the time he got back to the hotel, the cost had dropped more than $2,000.

Arman, a once-flush 29-year-old entertainer who now can only afford to buy his cigarettes one at a time rather than by the pack, said: “Living here is like gambling. You don’t know what’s going to happen each morning when you wake up. You may not have a job, prices may be four times higher, and the government isn’t doing anything.”

While a few find ways to profit from the turmoil, most are on the losing side. Factories that must pay dollars for imported materials suddenly can’t meet their bills, as costs quadruple. The same goes for companies that took out U.S.-dollar loans that seemed too good to be true at 7% interest when local banks were charging 20%.

“Now these factories find that not only can they not pay back their loans, they can’t even pay the interest. They can’t even produce,” said Anton Supit, the head of the Indonesian Shoe Assn. “So they shut down and lay off their workers.”

At the end of the day’s shift at the Bata shoe factory in south Jakarta, workers filled the road in solemn groups, walking past vendors without stopping to buy roasting chicken on skewers or the bottled drinks as they once did.

Suparto Lukanan, a stocky 40-year-old distributor at the shoe factory, said he worries about the economy and the effects on his employer. Half a year ago, he made $167 a month delivering shoes; at today’s rate, his salary is worth only $47 and he concedes even Indonesian-made goods and foods are getting more expensive. “If this continues, it will be too hard for us. Something has to be done,” he said.

The frustration and potential social unrest that have come with the economic turmoil here constitute one of the most dangerous aspects of this crisis, analysts say. About 2.8 million workers have been laid off since July and 4 million more job losses are expected by March, said Teten Masduki, the head of the labor division at the Indonesian Legal Aid Foundation. He predicted that a round of protests and strikes could begin after the Ramadan holiday ends Jan. 29.

That makes February one of the most critical times for Indonesia and for Suharto, who oversaw this country’s economic development for three decades and is now seeing its fortunes--and his omnipotence--evaporate.

Presidential elections are scheduled in March, and for the first time, the leader who has ruled this country, unchallenged, for 32 years faces increasingly vocal opposition. The 76-year-old leader has just over a month to maintain power and rebuild his credibility. But he must do this while instituting unpopular reforms such as wage freezes and job cuts.

Suharto “has a very difficult balancing act ahead of him,” said Jusuf Wanandi, chairman of the Center for Strategic and International Studies in Jakarta. “There is great wariness and ambivalence toward this effort. People are asking themselves, ‘How much should we sacrifice for the leaders who got us into this mess? “

Indonesians had one of their first tests Monday, as the government called on people to turn in their U.S. dollars to help supply badly needed foreign currency. Most of those who showed up for the “Love the Rupiah” event, in front of TV cameras at the Bank of Indonesia, were prominent businesspeople or public figures.

But across town, at the tiny Ayumas Money Changer, Dewi Purbasary, 18, who sported large diamond earrings, turned $8,000 into rupiah. “I did it because my father taught me to love my country,” she said as she squeezed the bills into a large manila envelope. “If I don’t do it, then who will?”