Louise Williams, Jakarta – The massive bailout package for Indonesia goes some way to addressing economic distortions such as nepotism, favouritism and politically connected monopolies, but analysts say they are awaiting further details as well as the reaction of stock and money markets when trading opens today.
The announcement at the weekend of the liquidation of 16 banks was the first concrete step in a series of reforms promised by the Soeharto Government under the IMF rescue package, worth up to $US40 billion ($57 billion), and the first test of its political will to administer to the business elite, like everyone else, the bitter pill of austerity and restructuring.
Given the close links between political power and business here, analysts are looking for a clear signal that those who have enjoyed privileged access to the nation's resources are willing to share the pain with the tens of millions of ordinary Indonesians who have been hit by rising prices, unemployment and spiralling interest rates on car and home loans.
In Palembang, a major industrial city in Sumatra, police were called in on Saturday as scores of depositors tried to break into a bank after news of the bank liquidations were broadcast nationwide.
In Bandung, south of Jakarta, depositors flocked to branches of closed banks, but were turned back by police.
Kompass newspaper said hundreds of frustrated depositors had telephoned demanding the Government publish the names of the bank's directors so they could be prevented from leaving the country.
A clothing industry subcontractor who said she employed 60 machinists said: "My business has gone bankrupt because of the liquidations. I have lost everything. I will have to close because I cannot pay my workers."
The maximum payout for small depositors is set at 20 million rupiah ($7,900).
A vegetable vendor said he was ruined. "I have hundreds of millions saved in Bank Industri for almost 28 years of selling vegetables," he said. "I don't know how I can pay the salaries of my staff."
Earlier announcements said monopolies on wheat and flour, soybean and garlic would be scrapped, controls on cement prices removed, a range of import tariffs cut, fuel subsidies phased out and an austerity program imposed to cut government spending.
A further announcement is scheduled for this morning.
Details released so far indicate the three-year program touches some of Indonesia's most powerful and politically connected business personalities but leaves others unscathed.
A political analyst, Ms Dewi Fortuna Anwar, gave a cautious welcome. "The reforms are a good sign the Government is ready to bite the bullet. These programs coincide with demands for reforms. Now the Government has more money to bear the burden it will be willing to take harsh measures."
However, she did not think the measures adequately addressed nepotism. "I am afraid that once confidence is restored it could be business as usual," she said, referring to political favouritism in contracts and access to credits, markets and resources.
The abolition of the wheat and wheat-flour monopoly will affect Mr Liem Sioe Liong, Indonesia's richest man and a close friend of President Soeharto, as well as President Soeharto's daughter, Siti "Tutut" Hardyanti Rukmana.
The wheat monopoly has allowed the Government to sell subsidised wheat to Mr Liem's Salim group for milling and then to buy it back at a 30 per cent mark-up, handing the profits to Mr Salim and passing the price increase on to consumers.
Four of the banks liquidated are also linked to the political elite. However, notably absent from the list of monopolies to be abolished were cloves, controlled by President Soeharto's son, Hutomo "Tommy" Mandala Putra.
Cloves are the major ingredient in Indonesia's most popular cigarette brand, and through the clove monopoly Tommy Soeharto can dictate clove prices, which, critics say, has resulted in lower returns to farmers and higher prices to consumers.
The fate of the controversial national car program, also controlled by Tommy Soeharto, remains unclear. Last year the Soeharto Government introduced new legislation to hand exclusive tax and tariff concessions to a company controlled by Tommy Soeharto to produce a national car.
The project has been challenged in the World Trade Organisation by Japan, the United States and the European Union, alleging unfair trading.
The Government has said incentives will be phased out by 2000, and the national car is expected to be partly shifted to Astra, a company controlled by President Soeharto's golf partner, the timber baron Mr Bob Hasan.