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Habibie in the hot seat

Asia Inc - January 13, 1999

It's late on Saturday afternoon, but the man who runs the fourth-largest nation on earth isn't anticipating any weekend relaxation. I have the mentality of a bicycle, says President Bacharuddin Jusuf Habibie of Indonesia. If I stop, I fall.

Recently, the Presidential bicycle has been tottering wildly following the brutal military response to student anti-government riots. And the small and dapper Habibie displays an almost frenetic manner as he fields wide-ranging questions from Asia Inc.

Habibie is only the third person in 53 years to sit behind the Presidential desk in Jakarta's magnificent whitewashed colonial-era Merdeka Palace. The first, Sukarno, was 44 when he took office and kept the job for 22 years. The second, Suharto, moved in when he was 46 and stayed for three decades until being forced out last May.

Now, at age 62, Habibie has been thrust into the hot seat knowing he has no hope of coming close to such a lengthy period in office. Some think he will have done well to last until the mid- 1999 elections. Although, as an Asian ambassador put it: He's done better than most people thought.

Singapore Prime Minister Goh Chok Tong described Habibie's job as the toughest in the world. And give or take running Russia, he is probably right. Habibie has had to battle inflation nudging 80 percent, unemployment topping 20 million and an economy shrinking by 15 percent a year. Jakarta's Chinatown still bears the blackened scars of last May's riots. As Asia Inc went to press, political and social unrest continued to simmer dangerously. On top of all that, the former research and technology minister labors under the burden of being the discredited Suharto's chosen heir, having resisted until late in the year demands for a proper investigation into how Suharto acquired his fortune.

Yet during a 90-minute interview with Asia Inc Editor-in-Chief William Mellor and Managing Editor Peter Comparelli, Habibie appeared surprisingly confident. Excerpts:

Asia Inc: There has been much talk of the ethnic Chinese who have fled Indonesia, taking their money with them. Yet you seem ambivalent about them coming back. Why?

Habibie: I am a democrat. For me there is no Chinese society in my country. They are all Indonesian. We are more than 400 ethnic groups. One of these ethnic groups is the Chinese descendants here. Maybe 7 million people out of 210 million. That's only 3.5 percent. They cannot read Chinese. They cannot speak Chinese. They do not even feel Chinese. If people talk like that, there would be no America, no Australia. If you are a Canadian of Italian descent, you will never feel comfortable if people treat you as an Italian. You are proud of your country, Canada. Why should people suddenly in this case make my nation into many nations?

Asia Inc: But is it fair to say that some Indonesians have left because they feared for their security and are staying away because the people who started the riots have still not been punished?

Habibie: No. No. No. No. The people who make the criminal thing are criminal and I condemn them. Any criminal action ... has to be punished. That is for sure. If you are not going to do that, my goodness, anarchy will blossom.

Asia Inc: And the Chinese capital flight?

Habibie: There are many [types of] Indonesian capital gone out, not only from the ethnic Chinese. Maybe ethnic Sumatran, Javanese or Buginese. I do not care. It is their business. Aburizal Bakrie [chairman of the Indonesian Chamber of Commerce and Industry] told me he had such questions in Hong Kong. There are 7 million Chinese in Indonesia. Maybe there are 170,000 who went out. But there are more than 3 million Indonesians who are working outside the country and there is a lot of capital flow in and out because we have an open banking system. If that is the case, 170,000 out of 7 million is nothing. I cannot say it is the end of the world. Asia Inc: The economic situation appears grim. How will you attract investors back?

Habibie: What is happening today is not because of something I decided yesterday. What happens today is still based on decisions that were done 6 months before. The first thing I have done as president of Indonesia is to separate the Bank of Indonesia from the cabinet. [Also] multinational companies are coming to this country for investment. Over $4 billion is in the pipeline in the last four months from three oil companies alone, upstream and downstream activities, $2.4 billion of it in Java, $1 billion in Irian Jaya and $600 million in Natuna for gas to Singapore. So the factors are in the right direction and all these decisions are starting to blossom after a lead time of six months.

Asia Inc: You sound confident.

Habibie: Of course. Agribusiness is booming because of the low rupiah, coffee, cocoa, fisheries, furniture. The problem we have is in the cities, mostly caused by overbuilding by the construction companies. What we are facing is not an Indonesian crisis. The world today, 40 percent of the GDP of the world, is facing a kind of crisis. Look at Japan. The GDP is decreasing. Look at Russia. Look at South America. Look at some Asian countries. Out of that 40 percent, the GDP of Indonesia is just 1.2 or 1.3 percent. So I should not dramatize the situation.

Asia Inc: We have heard that people in the country are looting fields for crops because they are hungry.

Habibie: Not true. I have just had a case in the cabinet where a minister said, I would like to report that a child of nine years old has been taken to the hospital because of a sickness that is the beginning of starvation. I asked him how many children in the village were affected. He said only one. Are you crazy? Do they not think that maybe the parents do not take care of the child. You cannot make a conclusion if one thing happened in that village and that village has half a million people. What kind of scientific approach is that?

Asia Inc: So they have enough to eat?

Habibie: Of course. You know, the country people have never been better off than they are today. Why? For the first time, they are free to adjust to the market price to sell their crops. Before, the price was regulated and that pushed down the price to the farmer. Now they are free to sell their crops to attract the best price. And more than 50 percent of Indonesians are still farmers.

Asia Inc: A number of big Indonesian corporations are on the brink of bankruptcy. As a proponent of free markets, will you let those companies go under? Habibie: I will do everything to prevent that. But I have to play based on the rules of the game of the market-oriented economy. I advised all those companies in June, Please, you have money, hire US lawyers, US specialists, and give them one instruction: to find out whether your company will survive in the United States, yes or not. If the answer is you could not survive because it is not according to the rules of the game of a market-oriented economy, where there are anti-monopoly and anti-trust laws and other things, you'd better put the second question: What do you suggest I do to survive? And you'd better follow [the advice]. Why? Because another six months from now, I will have that American system, a market-oriented economy.

Asia Inc: Would you like to run for a second term?

Habibie: I solemnly believe that the first president and the second president were surrounded by brokers. The first president was surrounded by political brokers. The second president was surrounded by political and economic brokers. And both sets of brokers contributed to their fall because they distorted information. Because of that I am going to create for Indonesia a system in which the power will not be in the hands of one man. I am going to create the supremacy of the law. This power will protect every human being in this country. There will be no brokers around the president. And we will take care that any president only serves two terms, like in the US, and there will be a balance of power between the president and the parliament.

Asia Inc: The World Bank has estimated that 20 percent of its funding to Indonesia has disappeared as a result of corruption.

Habibie: I really don't know. I never had a letter from the World Bank.

Asia Inc: Do you agree there's corruption in the system?

Habibie: There's corruption in any system, even in Japan or the UK or any society. Since the first days of the human race there has always been corruption. We are going to fight against this corruption. It's not possible to make the whole country free of corruption. But we are going to make the supremacy of law.

Asia Inc: So there are no new cronies?

Habibie: No. I have two sons in Germany. One is 35, the other 32. The younger one of my sons runs a small civil engineering company. He tried to tender for business in Indonesia. He lost.