Raju Gopalakrishnan, Jakarta – President Suharto accused unnamed groups on Thursday of using Indonesia's economic crisis to undermine his government as the country announced the appointment of a new armed forces chief.
"We are currently facing economic and monetary turmoil...There is even a hope that this economic and monetary turmoil will lead to a crisis against the government," Suharto, a former army general, told the country's military elite.
Meanwhile, signals that Suharto's close confidant Research and Technology Minister Jusuf Habibie could be the country's new vice-president in indirect presidential elections in March unsettled financial markets.
Habibie is considered by economic analysts as an financial maverick and the rupiah currency plunged to a historic low of 17,000 to the dollar when hints first surfaced last month that he may become vice-president and the potential successor to the 76- year-old Suharto.
Currency market dealers said the rupiah dropped to a low of 7,800 to the dollar from a 7,700/800 open on news that the ruling Golkar party had nominated Habibie and party chairman Harmoko as its choices for the vice-presidency.
However, the currency regained ground on hopes Indonesia would soon announce a fixed peg for the rupiah under a currency board system, the dealers said.
Jakarta's plummeting stock index was down over nine percent in early afternoon trade with most shares under strong selling pressure, on turnover estimated at 367 billion rupiah ($50.27 million), brokers said.
The embattled composite index stood at 443.705 at 0715 GMT, down 44 points, on continued fears about the country's political and economic direction. "The market was really, really bad today," a head dealer said. "Foreigners looked so concerned over the currency board system.
Brokers said foreign investors led selling on various concerns – possible unrest over price hikes, the currency board proposal and the choice of Habibie as potential successor to 76- year-old President Suharto.
An announcement that another strong candidate for vice-president, chief of army staff General Wiranto, was being promoted to armed forces chief was also a sign that Habibie had become the front-runner, political analysts said. Other analysts suggested that the move in fact strengthened Wiranto's chances of being Suharto's running mate, although the former presidential adjutant was possibly of more value as armed forces commander.
The military, which is guaranteed a political role under the constitution, is one of the most powerful organisations in Indonesia and its commander is one of the country's most high-profile leaders. In announcing his replacement next week by Wiranto, a Javanese Moslem, outgoing armed forces commander General Feisal Tanjung avoided naming the military's preferred candidate for vice-president.
Analysts also said Golkar's naming of Harmoko as one of the potential candidates was in case opposition to Habibie mounted from within the ruling elite. Current Vice-President Try Sutrisno is also in the running for re-nomination and analysts said intense jockeying continued behind the scenes for the post.
Suharto, who is basically assured of a seventh five-year term in indirect elections next month, told the military that unnamed groups were trying to take advantage of the country's economic crisis to destabilise the government.
He said Indonesia would experience zero economic growth in the 1998/99 fiscal year, which would be a great barrier to social and economic development. "In this kind of situation, there are signs that certain groups are using the chance to achieve their political goals, which they have failed to reach through democratic and constitutional means," he said.
He told the officers that the armed forces needed to be on the alert because the nation was entering a tense period ahead of the March elections. "Take stern action against those who violate (the law) and carry out unconstitutional actions, especially those which lead to national disintegration," he said. "We need national stability, especially when our nation is preparing itself to carry out the tasks which will determine our future," said Suharto without elaborating.
Meanwhile, the United States called for caution on Indonesia's plans to race ahead with a fixed-peg currency regime. Treasury Secretary Robert Rubin said Indonesia needed to strengthen its banks and reaffirm its commitment to reforms before introducing a currency board, an inflexible system which glues the domestic currency to a convertible one and ties cash in circulation to central bank reserves. "There are a lot of issues that need to be worked through before you get to the question of whether or not you have a currency board," Rubin told reporters.