WTO Ministerial Section • Volume 2 • Number 18 • 18th May 1998
Suharto Resigns, Indonesia’s Future Unclear
Indonesia’s President Suharto last week resigned from office amid anti-government protests and suspension of the International Monetary Fund’s (IMF) $43 billion aid program. Indonesian protestors occupied the parliament building last week demanding Suharto’s resignation and an end to a regime characterized by corruption and nepotism. Vice President Bacharuddin Jusuf Habibie took over for Suharto last Thursday, although it is unclear if he will complete Suharto’s term to expire in 2003 amid calls for political reform. Mr. Habibie immediately removed Suharto family members from his cabinet, along with Suharto’s most blatant cronies. Mr. Habibie’s position as president is precarious as momentum grows for dramatic political and economic reform in Indonesia.
With the political and economic situation evolving daily in Indonesia, it is difficult to know if and when the IMF will make its next loan disbursement. The IMF implemented a monthly review of Indonesia’s progress toward prescribed economic reform tied to IMF bailout assistance, for which June 2 would be the next scheduled review date.
The World Bank last week said it was postponing “until the situation is clearer” consideration of US$1.22 billion in loans to Indonesia. This includes a US$1 billion structural adjustment loan targeted at economic reform programs including social safety net programs for Indonesian’s hardest hit by the countries devastating financial crisis. The remainder of the loan, US$225 million, was to support rural poverty reduction. The Japanese government last week froze US$385 million in official development assistance to Indonesia.
The IMF has come under fire for its reform programs including that underway in Indonesia. Critics charge that the Asian financial crises could have been avoided had international financial institutions like the IMF and World Bank been more wary than awe struck by the financial goings-on in Southeast Asian economies. Critics argue that private-sector over-borrowing brought on the Asian crises and subsequent IMF bailout packages merely serve to rescue international banks at the expense of ordinary people. In Indonesia, the IMF reform program could result in a precipitous increase in the number of people living under the poverty line to 22 percent of the population, or 118.5 million people. In Korea, also working under an IMF reform program, unemployment is expected to exceed nine percent of the workforce by the end of 1998, or two million people.
“Too early to link IMF aid to Indonesian reforms, official says,” INTERNATIONAL TRADE REPORTER, May 20, 1998; “Indonesia’s Suharto resigns; successor pledges clean government,” ASSOCIATED PRESS, May 21, 1998; “IMF more hindrance than help in Asian currency crises,” THE GUARDIAN, May 12, 1998; “Asia markets close higher Thursday on ‘wave of exports,’” THE AMERICAN REPORTER, May 21, 1998.