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Aircraft staff down tools over IMF plan

Sydney Morning Herald - October 14, 1997

Louise Williams, Jakarta – Thousands of workers from Indonesia's state aircraft manufacturer held mass demonstrations yesterday, following rumours of impending lay-offs, as an International Monetary Fund team continued talks on rescuing Indonesia's ailing currency.

About 16,000 workers refused a direction to return to work at Pesawat Terbang Nusantara (IPTN) in the West Java city of Bandung, one of several controversial industries likely to be targeted by the IMF due to the heavy losses suffered by the enterprise.

Aircraft manufacturing is the pet project of the Technology Minister, Dr Jusuf Habibie, a protege of President Soeharto. Dr Habibie wants to develop an Indonesian passenger jet.

Critics of IPTN have long argued that Indonesia cannot afford the multi-billion dollar investment when tens of millions still live in poverty.

The recent currency crisis has sharpened the focus on wasteful enterprises, as well as corruption and nepotism in the management of the country's Budget.

Dr Habibie has appointed one of his sons to a top management position, and some of the funding for IPTN has been diverted from the reforestation fund, a tax on timber companies intended to protect the environment.

The workers demonstrating yesterday said they believed at least 20 per cent of the 16,000 IPTN staff would be laid off. Others returned to work but refused to pick up their tools.

Their demands include a salary increase, which they say they have not received for 10 years, and an end to nepotism and corruption within the enterprise.

They also want assurances on redundancy pay.

Witnesses said the noisy protesters tore up pamphlets from Dr Habibie directing a return to work. The strike began last week after it was announced the IMF would help Jakarta in managing the currency crisis and there were mass demonstrations at IPTN.

Yesterday's protests came as the Indonesian currency, the rupiah, plunged again following news that the United States debt-rating firm Standard and Poor's had downgraded Indonesia's long-term debt-rating over the weekend.

It said it was concerned about "steep rises in corporate external indebtedness, which could pressure the Government to provide financial assistance, given the linkages between the public and private sector". It also pointed to the "potentially sizable recapitalisation needs of the financial sector" as well as slower economic growth which would exacerbate existing political tensions in the lead-up to presidential elections early next year.

After recovering moderately last week on news that the Soeharto Government had called for IMF help, the rupiah lost almost 8 per cent early yesterday, pulling other regional currencies down with it.

In London, the Financial Times newspaper said Western diplomats were urging the IMF to co-ordinate a financial rescue package for Indonesia worth $US12 billion ($16.3 billion).

The report said the package would be much larger than the estimated $US4 billion originally expected, and suggested Indonesia's exposure on US dollar debt might be more serious than previously thought.