Sharon Ayling – Under extreme duress, Indonesia agreed June 25 to accept terms dictated by the International Monetary Fund as a condition for receiving outstanding payments on a $43 billion loan.
Like so many countries oppressed by centuries of colonialism and imperialism, Indonesia has fallen deeply into debt. In the 1990s, the international banks participated in a lending frenzy to Indonesia to the tune of $130 billion. While the prosperity lasted, the imperialist lenders garnered huge profits off the sweat of millions of low-paid workers.
Now, as the Indonesian economy plummets in a general capitalist crisis in Asia, the IMF has stepped in to take over.
The IMF-Indonesian agreement is a clear example of how the imperialist banks, with the IMF acting on their behalf, have become the main vehicle for the exploitation of the oppressed countries.
The agreement, which amounts to a direct takeover of the Indonesian economy by foreign capital, is the result of six months of arm-twisting negotiations. The 17-page document issued June 24 by the IMF, called a "Memorandum of Economic and Financial Policies," details point by point how this takeover is to be accomplished.
IMF forces Indonesian economic surrender
The purpose of many of the IMF dictates is to pave the way for future debt rescheduling agreements between Indonesia's heavily indebted companies and the foreign banks. The banks restructure their loans in exchange for equity ownership in the firms.
Under its "investment and deregulation" section, the agreement removes a 49 percent limit on foreign investment in companies listed on the Indonesian stock exchange. The list of activities closed to foreign investors is reduced, restrictions on foreign investment in retail and wholesale trade are lifted, and restrictions are eliminated on the importation and sale of wheat, wheat flour, soybeans, sugar and garlic.
Under "monetary and banking issues," the agreement eliminates all restrictions on foreign ownership of banks and their branches. It dictates international audits of all banks, the privatization of state banks, the closing of nonviable banks, and the transfer of weak banks to a restructuring agency controlled by "teams of foreign bankers."
The "privatization and public enterprises" section dictates that a review be conducted with the help of the World Bank of all 164 public enterprises in preparation for their privatization. The first 12 to be privatized include two telecommunications firms, two mining companies and a cement company.
Under "fiscal issues," the agreement raises prices and eliminates subsidies on rice, sugar, wheat flour, corn, soybean meal and fishmeal, cancels 12 government-funded infrastructure projects, discontinues government support for the national car and aircraft industry, and phases out restrictions on imported motor vehicles.
Under "foreign trade," tariffs are reduced or eliminated on all food items and nonfood agricultural products, import restrictions are abolished on all new and used ships, and export taxes are reduced on raw materials such as logs, rattan and minerals.
Economy still heading for disaster
The signing of the IMF agreement has not allayed the fears of US investors. The July 5 Washington Post warned that the Indonesian "economy is heading for a disaster. Commerce has come to a virtual halt. The banking industry is hardly functioning. The IMF is still struggling to find a remedy for the loss of 80 percent of the value of the currency."
With an inflation rate of 80 percent, food prices are skyrocketing. Many poor families are down to one meal a day. What is the government doing about it? On July 5, B.J. Habibie, the long-time crony of former dictator General Suharto who was installed as president in May by the military with US blessing, made an emergency appeal asking the people to fast twice a week. Habibie has pledged to fully cooperate with the IMF takeover.
The number of people living below the poverty line has increased to nearly 80 million, according to a July 3 report from Indonesia's Central Bureau of Statistics. This is nearly 40 percent of the population, up from 11 percent last year. The poverty line is set at 52,470 rupiah ($3.50) a month for individuals. The World Bank predicts Indonesia's unemployment will quadruple to 20 million this year, not counting more than 50 million under-employed.
Indonesian workers fight back
Indonesian workers are fighting back against these assaults, with hundreds of strikes and thousands marching daily in all the major cities. In Surabaya, the country's second-largest city, 5,000 dock workers at the Tanjung Perak port refused to load ships for five days in June. They won a pay raise. The dock workers are now paid about 63 cents per day, up from 47 cents. However, that's not enough to buy even a pound of dry milk powder. In Bekasi, just east of Jakarta, at least 26 striking steelworkers were wounded June 30 when soldiers opened fire with rubber bullets.
An article in the June 28 New York Times Magazine entitled "Bottom-Fishing Time?" warned US investors that "Indonesia's troubles run deep, and what looks like an opportunity today may become a disaster in the not-too-distant future.
"Indonesia could well be in the early moments of a two-stage revolution. ...Czarist Russia was a promising emerging market and a friend of the United States before its October Revolution. Indonesia could yet emerge as a world-class foreign-policy and economic headache."