John McBeth with Fanny Lioe in Jakarta – On October 10, two days after Indonesia announced it was going to seek the International Monetary Fund's help in salvaging its economy, Jakarta newspapers carried pictures of a smiling President Suharto playing golf with his industrialist friend, Muhammad "Bob" Hasan. Two weeks previously, when the currency crisis was reaching its peak, the 76-year-old president was shown riding a motorcycle.
Most of Suharto's countrymen are in no mood for games or joyrides. Across Indonesia, the man in the street is beginning to feel the impact of the currency crisis and the inflation and unemployment that is arriving in its wake. Taxi drivers, those barometers of street sentiment, tell bitter tales of hardship. In Jakarta, cabbie Mantar says he can't afford to pay his children's school fees because the economic uncertainty has forced his regular customers to use cheaper modes of transport. A couple of months ago, he was earning around $25 a day. Now, it's closer to $5. "How can I feed my four children if this goes on?" he asks, plaintively.
It isn't a rhetorical question. The knock on effects of the rupiah's slump, in addition to speculation and hoarding, have sent food prices spiralling. Over the past month, the price of rice has shot up as much as 40% on outlying islands like Kalimantan (but only 1%-2% in Jakarta). Vegetable prices have soared 10% -25% in some places; cooking oil is up 40%.
If prices stay high or climb further, the public mood could turn rebellious. Political analysts warn that a protracted economic crisis on top of a prolonged drought that's already hurting rural Indonesians could lead to social unrest. For the authorities, that will be especially unwelcome in the run-up to the meeting next March of the People's Consultative Assembly, which is expected to endorse Suharto's seventh five-year term.
"If this goes on much longer we could see a lot more political dissatisfaction," says Dewi Fortuna Anwar, a senior researcher at the Indonesian Institute of Sciences.
Or worse. Economic crises in Indonesia tend to reopen age-old ethnic animosities – often leading to communal friction. Street interviews conducted by the REVIEW reveal that many Indonesians blame politically well-connected ethnic-Chinese businessmen for the rupiah's slide. "Any slowdown in job creation has social consequences," frets Alex Erskine, chief economist for Citibank in Singapore. "That is in the back of everybody's mind."
At the moment, it's hard to see where and how jobs can be created. Manufacturers are struggling to cope with the twin blows of reduced domestic demand and more-expensive imports. Wilson Nababan, president-director of business-research firm CISI Raya Utama, says the economic downturn has in particular hurt medium-sized companies involved in garments, shoes, plastic ware and metal working; local demand for these products has sagged. Meanwhile, the rupiah's slide has wounded import-dependent businesses for example, pharmaceutical firms, which rely on overseas suppliers for 95% of their raw materials.
As a result, companies are being forced to lay off workers and cut back on production. Simon Hunt, a London-based copper-industry analyst who visited Indonesia in early October, says some companies have gone from three shifts, five days a week, to one shift every two or three days. Firms with cash balances could be sorely tempted to close factories and earn 30% interest at the bank.
Things look just as bad in the construction sector. The rescheduling of many property projects has already led to 150,000 workers being laid off in Jakarta according to the Union of Construction Businessmen, and many more could follow as property firms take stock of their positions. Businesses serving the construction industry like makers of cement, iron rods and ceramics also face a crunch.
"Even low-cost housing, which is supposed to be recession-resistant, has been hit hard," says a senior executive at a property company in Jakarta. "We're going ahead with projects that are under construction or those that have already been financed, but the others are under review. Anybody would be lying if they told you I they were going ahead with all their projects."
Even the hotel industry is reporting a 15 per cent downturn in occupancy as postponed projects and general uncertainty force business travellers to reschedule their visits. Small-businessmen and traders aren't I doing much better. "My income is going down because the purchasing power of my customers is going down," says Basri, a rice trader in eastern Jakarta's Pulogadung market. "They used to buy 10 kilograms each time, now they're only buying five kilograms."
A nearby jeweller says his business has fallen off 50% in the past two months. "I haven't had one customer in the past two days," he complains. "If this condition continues I'll be forced to close my business. "
The man in the street, meanwhile, is groaning under the weight of inflation particularly in basic commodities. Worse may follow. Although the government hasn't yet raised fuel prices, Finance Minister Mar'ie Muhammad hinted at it in a rare press conference on October 10, when he said the government was committed to abolishing petroleum subsidies. It's not clear whether this would include subsidies on kerosene, the principal cooking fuel in rural Indonesia.