Seth Mydans, Jakarta – As a decision nears on whether to infuse billions of dollars in international aid into Indonesia, a close look at President Suharto's performance shows a pattern of evasions and half-measures on the economic reforms he agreed to recently.
From cars to cloves to banks to plywood, the painful austerity measures Suharto promised in return for the aid made brief appearances. But many have disappeared again in a haze of missed deadlines, quick name changes and fiscal shuffling, according to Indonesian and foreign businessmen and economists.
Tax breaks for a "national car" were removed, only to reappear in a new form. Cartels controlled by Suharto's close friends in cloves and plywood seem to have been dismantled, only to rise again, the experts said.
Banking reform, probably the most critical step in regaining financial stability, appears to have been slowed by the financial interests of the country's elite.
The removal of subsidies for basic commodities has been announced several times, only to be delayed as food riots have flared around the country.
Officials of the United States and the International Monetary Fund warn that unless quick action is taken on reforms, a $43 billion rescue package could be suspended later this month, further deepening Indonesia's crisis and threatening economic fallout throughout the region.
For both the United States and the IMF, the stakes go beyond Indonesia itself. With its falling currency and huge foreign debt, Indonesia has become the epicenter of Asia's economic turmoil.
If the rescue effort fails in the world's fourth-largest nation, the damage could spread around the world. If Suharto successfully defies the IMF, U.S. and IMF officials worry that other countries would then feel free to ignore the fund's requirements for economic reform.
But Suharto, whose word has been law for 32 years, is resisting this formula, which would cut deeply into the interests of his wealthy children, his friends and favored businessmen.
And so, when the IMF demanded in January that he cut loose the tax breaks that allowed one of his sons to make money on a "national car," the president said yes, but soon found a loophole.
The car, called the Timor, was one of the most striking examples of Suharto family favoritism.
Under the control of a son, Hutomo Mandela Putra, it was made entirely in South Korea but was exempt from payment of import and luxury taxes. This allowed the Timor to undercut the prices of its Japanese and other competitors in Indonesia.
These exemptions were removed in the January agreement. But there seems to be some fine print. As of January, 39,000 Timor cars had been imported, of which 24,000 had been sold. Last month, the government decided that the remaining 15,000 cars could maintain their tax exemptions.
In the current slow-moving market, industry analysts estimate it will take two years to sell them – by which time the tax exemption law would have expired anyway.