Max Lane – In an end of year "state of the nation" report, the central leadership council of the Peoples Democratic Party (PRD) described economic developments during 2000 under the government of President Abdurrahman Wahid and Vice-President Megawati Sukarnoputri as the subjugation of Indonesia to the neo-liberal policy dictates of the Washington-based International Monetary Fund (IMF).

According to the PRD report, this subjugation has been manifested in the Wahid-Megawati government's neo-liberal program of cuts to public subsidies on fuel prices, and the privatisation of state enterprises,

Prices rises

The PRD report noted that while the "Wahid-Megawati government was forced to back down on an April 2000 planned rise in fuel prices agreed to with the IMF", it introduced the agreed rise in electricity prices. "The prices rises, imposed on enterprises consuming more than 9000 watts per month, flowed on in general price increases. The textile and steel industries were also forced to make lay-offs as a result. Despite these effects, the government proceeded, supported by all the parties in the parliament, with the fuel price rises later in the year on October 1, 2000."

In the week leading up to the increases the price of basic goods rose by 5-10% and in a number of places the supply of kerosene shrank and its price shot up before the official increases. Cement factories increased their prices by 25%, house prices increase by around 15%. Taxi fares rose by as much as 46% and public transport fares increased in a number of cities. Furthermore, at the beginning of September 2000, the government increased train and ferry fares by as much as 70%.

"The subsidy cuts also impacted on the education sector", the PRD report noted. "A number of universities such as the Gajah Mada University, the University of Airlingga, the Bandung Institute of Technology, the Bogor Agricultural Institute and the University of Indonesia are pilot projects which are being forced to become financially autonomous. As a result the campus bureaucrats increased fees by 50-100%."

Similarly, farmers had earlier had to swallow the bitter pill of neo-liberal policies during the government of former president Habibie, i.e., an increase in the price of fertilisers of around 100% as a result of subsidy cuts.

Privatisation

In the 2000-01 central government budget, the report observed, the sale of state enterprises is estimated to contribute a massive 6.5 trillion rupiah. The IMF has a target of 10 years to shift more than 60 state enterprises to private hands. "In fact, these will shift mainly to foreign owners as they are the most financially prepared. In the midst of a major crisis and the collapse of the rupiah, the government has been 'forced' to sell these assets at a cheap price."

Connected also to the policy of cutting subsidies, the government appears also to be preparing the State Electricity Company and the state oil company, Pertamina, to enter the private market, "where profit and not public service is the main motive".

The PRD report cites a number of examples of the loss of jobs resulting from the privatisation of state enterprises. "The sale of Pelindo II port facilities at Tanjung Priok in Jakarta has caused concerns because the new investor plans to sack 20% of the workers. The State Electricity Company, in a similar vein, is sacking 6000 employees and Telkom is sacking 13,000."

The privatisation of the public sector is clearly causing more unemployment. The privatisation of these public enterprises is also contributing to an increase in the costs of many basic services.

Trade liberalisation

"When tariffs on agricultural imports were reduced (initially they were actually eliminated), imported rice and sugar poured into Indonesia. The result was the destruction of the national sugar industry and big losses for rice farmers. Rice farmers faced huge rises in fertiliser costs, while the government was unable to guarantee decent prices for paddy", the PRD report stated.

"The influx of general imports has also increased the flow of foreign exchange out of the country. Furthermore many of the imports make no contribution to the welfare of the people. One example has been the liberalisation of the importation of luxury cars. The import of luxury cars between January and September 2000 increased 27.18% compared to the same period last year worth a total of US$22.56 billion."

According to the report, current trade liberalisation and privatisation are contributing to the weakening even the destruction of national productive capacity. As a result, there has been a huge increase in the number of impoverished people in Indonesia. The report notes that "more than 136.8 million people now live below the international poverty standard of US$2 per day, more than in Bangladesh or India".

Foreign debt

One achievement of the last year of the Wahid-Megawati government, the report notes, has been another increase in Indonesia's foreign debt. The total foreign debt now is about US$150 billion, with US$80 billion of this owed by the government. In the 2000 budget 37% of government expenditure will go to debt servicing and repayments. In 2001 debt repayments will increase to 60 trillion rupiah. In fact, the report observes, "it will probably go over this as the government takes on new loans. It is no wonder, therefore, that the budget deficit increases every year because of the increase in the government debt burden".

"Where does the money come from to pay these debts?", the report asks.

"From the sale of state enterprises, the sale of other state assets, taking on new loans, profits from state enterprises and the taxes collected by the government all go towards these debt repayments. Even the windfall profits from the sudden rocketing of oil prices are being chased by the IMF for debt repayment. The development budget gets smaller and smaller because it is not considered a priority by the IMF."

The PRD report argues that there should be "no obligation upon the Indonesian people to pay" for most of the country's foreign debt, since it was accumulated during the corrupt Suharto military dictatorship, with the willing compliance of the IMF, the World Bank and foreign donor governments. "But the [Wahid-Megawati] government just accepts the IMF's myth that the demand for the cancellation of the debt will harm the recovery of the economy."