Once a Stable Giant, Indonesia Feels a Tremor

For 30 years, two things were certain in Indonesia: The tropical rains sweep across this 17,000 island archipelago in October and wages go up in December.

Suddenly neither one of these certainties holds true. The resulting political and economic ripples could force change and confusion well beyond the borders of this small South East Asian nation, even as far away as Washington and Wall Street, analysts say.

There has barely been a drop of rain so far this rainy season, and some meteorologists predict Indonesia may go without a serious downpour for much of the winter. Without rain, farmers cannot plant, let alone harvest, the rice that is this country's staple food.

Downturn in wages?

And after 30 years of rapid economic growth and rising welfare, many of Indonesia's 200 million people fear that they may be fortunate to get any wages this winter, let alone a raise.

"It's brewing in the countryside," says one labor activist, who like many Indonesians fears to say anything if his name is used. "Prices are going up and wages are as miserable as ever."

The crash of the country's stock market and the currency in recent months mattered little to most Indonesians, who are too poor to own shares or a business larger than a food stand.

But that is changing because although they may not own shares, their debt-ridden employers do. In addition, employers depend on bank loans which became prohibitively expensive when interest rates topped 30 per cent. Many of these businesses are at risk of going under in the coming months, while others will have to raise the price of their products to make a profit.

"Only after a few months will the devastating impact of the monetary crisis be felt by society at large," says Abdurrahman Wahid, leader of Nahdlatul Ulama, one of Indonesia's two leading Muslim organizations. "People will be angry."

Suharto up for reelection

"The anger will come, and it will come precisely around the time the consultative Assembly meets," Abdurrahman predicts, referring to a hand-picked gathering that is expected to reelect President Suharto, a former general who has run Indonesia ever since 1967.

"The president is a stubborn man. He will cling to power, perhaps taking drastic measures against possible competitors, including more restrictions on political life," he adds.

Indonesia may not be a world power, but it is the fourth most populated country and the largest Muslim nation in the world. Without stability in Indonesia, Southeast Asia is not secure.

In addition, Japan, Singapore, and Hong Kong have invested heavily in Indonesia and the recent downturn here and in neighboring Thailand has pulled down their stock markets as well and temporarily dragged down Wall Street with it.

That is one reason the United States has been a strong supporter of Mr. Suharto. Congress has threatened sanctions against his government because of human rights violations, but Suharto has also guaranteed stability in his country and kept tensions with neighbors from escalating into wars.

US offers $3 billion

The Clinton administration offered $3 billion in stand-by credits to Indonesia earlier this month, as part of a $38 billion aid package of the International Monetary Fund and other lenders.

In return, Indonesia had to pledge radical economic reforms and austerity measures that will only squeeze the economy in the shortrun. None of this money is meant to bail out companies, even for paying wages.

"Work stoppages are taking place because factory owners don't know any more how to calculate their cost [and fail to pay wages]," Abdurrahman says. "Workers are being laid off. More importantly, a shortage of goods will take place because imports will become unaffordable. Shop owners are complaining that they can't raise prices any longer because people won't buy. "

There are some signs that Abdurrahman's dire predictions are coming true. Fifty large enterprises this month asked the government for permission, which is obligatory by law, to lay off 10,000 workers.

Construction companies, which have been badly hit by the monetary crisis, have already told thousands of day laborers that they do not have to come back.

In Jakarta, officials say unemployment rose from 4 percent in 1996 to 6 percent in October of this year. Unemployment statistics understate the problem; by some estimates, 30 percent of the population was underemployed even before the currency crisis set in.

Prices rose 1.99 percent in October, with food prices rising even faster. In response, workers have gone on strike to demand wage increases at some of Indonesia's largest factories, such as the Gudang Garam cigarette factory in east Java which employs 40,000 people. They have walked out of textile and shoe factories that account for much of Indonesia's nonoil exports.

"The real reaction of the workers will come in December and January," predicts Teten Masduki, a lawyer who defends workers in labor conflicts.

"Even when there is no monetary crisis, prices rise in these months. It is the time of Ramadan [the Muslim month of fasting], and that is when companies usually pay a special bonus," he says. "Normally, many companies do not want to pay the bonus and that is when workers strike. Thirty percent of all strikes occur during Ramadan. This year it will be much worse."

Students have also become more active, linking demands for a freeze on food prices and emergency aid for starving villagers in Irian Jaya to calls for a more powerful parliament, and end to corruption and, in some cases, a new and younger president.

So far police have been restrained, beating up some students but limiting punishment to fines. Last year, some activists were handed prison terms of up to 13 years for leading demonstrations.

But Abdurrahman and many others fear that the police and the military may not be so restrained if protests get out of hand.

"If there are any unconstitutional actions, then we will not hesitate to use our force to defend democracy," Abdurrahman warns gravely. "We can bring 2 million people to the streets of Jakarta alone. That is my warning."

This is tough talk, but in practice Abdurrahman has been more active in restraining his potential force than in unleashing it. He is wary of stirring trouble in a country where the last serious political unrest left half a million people dead in 1965.

Another Muslim leader, Amien Rais, has been more blunt, criticizing government corruption and even toying with running for president.

With a degree in political science from University of Chicago, Mr. Amien combines plain talk with a consistent call for democracy.

He is very popular with students, but even his admirers admit he does not control Muhammadiyah, the organization he heads.

"If he talks politics, he speaks only for himself," says Hajriyanto Thohari, president of Muhammadiyah's youth branch and a member of parliament. "If he speaks for Muhammadiyah, he has to consult them first, and that rarely leads to much. Some want to get rid of him because they feel he is too blunt."

"That's the trouble with Indonesia," Mr. Hajriyanto adds. "All the organizations have been completely depoliticized. The students are looking for a leader, but there isn't one."

Few believe, therefore, that the economic downturn could muster mass support for any rival presidential candidate. Suharto has left little doubt he will run for a seventh five-year term.

But opposition leaders and sympathizers alike predict that public unrest would undercut his stature in the military and prevent him from hand-picking a successor.

Analysts say that even the current vice president, Try Sutrisno, was foisted on Suharto by the Army, and that was in better days.

"It would be better if Suharto picked a successor, not a harmless vice president who is chosen because he will not pose a threat to his power," one government critic says. "But that's not the way Suharto thinks. He cannot imagine Indonesia without himself - in charge."