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Indonesia braces for economic
battle
By Tony Sitathan
JAKARTA - This Thursday is a day of reckoning
for Iraq, when its 48-hour ultimatum issued by the
president of the United States, George W Bush, expires.
The ultimatum demands that Iraq expel its president,
Saddam Hussein, and send him and his family into
permanent exile or face the wrath of more than 250,000
troops ready for action and positioned in neighboring
countries.
For Indonesia this is certainly not
welcome news. With 90 percent of its approximately 230
million population Muslim, Indonesia both politically
and economically stands to lose if the US and its allies
bomb Baghdad.
President Megawati Sukarnoputri
made her first address on the Iraq crisis when she spoke
before the Non-Aligned Movement summit in Kuala Lumpur
last month. She made it clear that Indonesia would not
support any US-backed initiatives for war. She went on
to say that Indonesia was firm in its rejection of war
as a solution and supported the United Nations
resolution for peaceful disarmament of Iraq instead.
But time is running out. The departure from
Baghdad of the last of the UN weapons inspectors
signaled the end of diplomacy and the start of anti-war
protests and anti-American rhetoric by students as well
as by Muslim-dominated political and religious groups in
Indonesia. "We see a sudden emergence of
anti-Americanism similar to the anti-capitalist and
anti-imperial messages of the Sukarno era already being
flashed across the media," said Theodore Rasimun, a
former economics lecturer turned businessman based in
East Java. "Recently there was a massive demonstration
of students from the State Institute of Islamic Studies
[STIAN] outside a Kentucky Fried Chicken [KFC] outlet in
central Sulawesi."
He was worried that such
forced closures of US food outlets and franchises would
have a negative impact on foreign investors, especially
now as Indonesia needs much foreign investment. The
situation may also be worrying for foreign nationals
working in Indonesia. "There are close to 3,000 foreign
expats working in Jakarta alone. And carrying out such
mass demonstrations, although peaceful at first, may
draw political clout from political parties that are
looking to drive a wedge between the people and the
current government," he said.
The bigger
question is, with anti-American and anti-British
sentiments sweeping across Indonesia, how will Megawati
live up to her promise of balancing US and British
interests with the popular anti-war movement building up
in the country? Already several Islamic-based parties,
including the largest Muslim organization Nadhlatul
Ulama, have mobilized close to a million Muslims who
held a mass prayer for world peace in Surabaya, East
Java. And several other Islamic splinter groups that are
more vocal in their demonstrations have even called for
a freeze of US-based assets around Indonesia, including
the largest mine in Papua under Freeport, as well as a
total boycott of US-based products, including popular
fast-food outlets such as McDonald's and Pizza Hut.
"There is a fear that innocent people and
businesses will be held hostage by people that claim to
be propagating peace," remarked the manager of Sizzler,
an upmarket steak and seafood eatery in an exclusive
mall in South Jakarta. "Their peaceful intentions might
be carried forward into threats and extortions as well
as even violence." His fears are not unfounded. Already
some of the electronic retailers based in Glodok and
Harco Mangga Dua are considering switching some of their
product lines from US brands to those of other
countries. "We are dealing with IBM and Hewlett-Packard
computers and spare parts including telephony products
from the United States. Since our products are also sold
to corporate customers as well as retail customers, we
have noticed a slight dip in retail sales for our
desktop IBMs and Hewlett-Packard computers that were our
fastest-selling items so far," said Hock Guan, the sales
manager of Toko Data-Kontrol in Harco Mangga Dua. "Now
we are considering carrying other lines like Fujitsu and
Acer as well as other OEM [original equipment
manufacturer] brands assembled in Indonesia."
With the war with Iraq in sight, there are also
predictions that the prices of basic food items and
grain commodities, including sugar and rice, will go up,
since these foods are mostly imported. Indonesians have
already started stocking up on basic commodities,
including cooking oil and rice. A visit to one of the
many outlets in Jakarta for the French hypermarket
Carrefour reveals brisk sales and long stretches of
people at checkout payment counters. Feby Juliana, a
housewife who manages a family of six, visits Carrefour
regularly. She said sales during the past two weeks have
been relatively good judging from her experience. "You
see shelves empty and people buying more than they
require. Many of them stock up on basic goods, including
myself. Even toilet rolls are hot sellers," she said.
The longer the war drags on, the more damage it
will do to Indonesia as well as to its relations with
the United States and certain countries in Europe. Also
the war will place a dampening effect on Indonesia's
capital market, including its banking and financial
institutions. There has been recent talk of lowering the
central bank's interest rates further and accelerating
capital flow into the financial markets. However, this
is something that has to be done carefully, remarked
Andrei Seow, a principal broker with Trimegah Securities
in Indonesia. "We have to be careful not to create too
much liquidity in the marketplace, with too much
borrowing. Hence there is a need to regulate exchange
rates and interests rates carefully with the current
prevailing world economy," he said.
Should there
be a prolonged encounter with Iraq lasting more than a
month, for instance, there would be sizable problems
with how to adjust to the price differentiations caused
by the fluctuation of imported commodities, including
crude oil, and the exchange rates of the rupiah to the
US dollar.
So far the US greenback has been
favored as the ideal rate of exchange by moneychangers
as well as banks. The US dollar and the rupiah have been
intertwined as legal exchange currencies for a long
time. Perhaps later the euro currency would be an
alternative closer to home and nearer to the heart of
Indonesians than the US dollar. At that time Indonesia
might be dancing to the beat of Europe and her allies
instead of its stoutest Western ally and major investor,
the United States of America.
Perhaps by that
time the words of George Bush will have taken a new
twist. And instead of a war cry, they might then be a
peace bugle - but at that time who among the businessmen
and the politicians in Indonesia will be willing to lend
their ears?
(©2003 Asia Times Online Co, Ltd.
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