Tony Sitathan, Jakarta – This Thursday is a day of reckoning for Iraq, when its 48-hour ultimatum issued by the president of the United States, George W Bush, expires. The ultimatum demands that Iraq expel its president, Saddam Hussein, and send him and his family into permanent exile or face the wrath of more than 250,000 troops ready for action and positioned in neighboring countries.

For Indonesia this is certainly not welcome news. With 90 percent of its approximately 230 million population Muslim, Indonesia both politically and economically stands to lose if the US and its allies bomb Baghdad.

President Megawati Sukarnoputri made her first address on the Iraq crisis when she spoke before the Non-Aligned Movement summit in Kuala Lumpur last month. She made it clear that Indonesia would not support any US-backed initiatives for war. She went on to say that Indonesia was firm in its rejection of war as a solution and supported the United Nations resolution for peaceful disarmament of Iraq instead.

But time is running out. The departure from Baghdad of the last of the UN weapons inspectors signaled the end of diplomacy and the start of anti-war protests and anti-American rhetoric by students as well as by Muslim-dominated political and religious groups in Indonesia. "We see a sudden emergence of anti-Americanism similar to the anti-capitalist and anti-imperial messages of the Sukarno era already being flashed across the media," said Theodore Rasimun, a former economics lecturer turned businessman based in East Java. "Recently there was a massive demonstration of students from the State Institute of Islamic Studies [STIAN] outside a Kentucky Fried Chicken [KFC] outlet in central Sulawesi."

He was worried that such forced closures of US food outlets and franchises would have a negative impact on foreign investors, especially now as Indonesia needs much foreign investment. The situation may also be worrying for foreign nationals working in Indonesia. "There are close to 3,000 foreign expats working in Jakarta alone. And carrying out such mass demonstrations, although peaceful at first, may draw political clout from political parties that are looking to drive a wedge between the people and the current government," he said.

The bigger question is, with anti-American and anti-British sentiments sweeping across Indonesia, how will Megawati live up to her promise of balancing US and British interests with the popular anti-war movement building up in the country? Already several Islamic-based parties, including the largest Muslim organization Nadhlatul Ulama, have mobilized close to a million Muslims who held a mass prayer for world peace in Surabaya, East Java. And several other Islamic splinter groups that are more vocal in their demonstrations have even called for a freeze of US-based assets around Indonesia, including the largest mine in Papua under Freeport, as well as a total boycott of US-based products, including popular fast-food outlets such as McDonald's and Pizza Hut.

"There is a fear that innocent people and businesses will be held hostage by people that claim to be propagating peace," remarked the manager of Sizzler, an upmarket steak and seafood eatery in an exclusive mall in South Jakarta. "Their peaceful intentions might be carried forward into threats and extortions as well as even violence." His fears are not unfounded. Already some of the electronic retailers based in Glodok and Harco Mangga Dua are considering switching some of their product lines from US brands to those of other countries. "We are dealing with IBM and Hewlett-Packard computers and spare parts including telephony products from the United States. Since our products are also sold to corporate customers as well as retail customers, we have noticed a slight dip in retail sales for our desktop IBMs and Hewlett-Packard computers that were our fastest-selling items so far," said Hock Guan, the sales manager of Toko Data-Kontrol in Harco Mangga Dua. "Now we are considering carrying other lines like Fujitsu and Acer as well as other OEM [original equipment manufacturer] brands assembled in Indonesia."

With the war with Iraq in sight, there are also predictions that the prices of basic food items and grain commodities, including sugar and rice, will go up, since these foods are mostly imported. Indonesians have already started stocking up on basic commodities, including cooking oil and rice. A visit to one of the many outlets in Jakarta for the French hypermarket Carrefour reveals brisk sales and long stretches of people at checkout payment counters. Feby Juliana, a housewife who manages a family of six, visits Carrefour regularly. She said sales during the past two weeks have been relatively good judging from her experience. "You see shelves empty and people buying more than they require. Many of them stock up on basic goods, including myself. Even toilet rolls are hot sellers," she said.

The longer the war drags on, the more damage it will do to Indonesia as well as to its relations with the United States and certain countries in Europe. Also the war will place a dampening effect on Indonesia's capital market, including its banking and financial institutions. There has been recent talk of lowering the central bank's interest rates further and accelerating capital flow into the financial markets. However, this is something that has to be done carefully, remarked Andrei Seow, a principal broker with Trimegah Securities in Indonesia. "We have to be careful not to create too much liquidity in the marketplace, with too much borrowing. Hence there is a need to regulate exchange rates and interests rates carefully with the current prevailing world economy," he said.

Should there be a prolonged encounter with Iraq lasting more than a month, for instance, there would be sizable problems with how to adjust to the price differentiations caused by the fluctuation of imported commodities, including crude oil, and the exchange rates of the rupiah to the US dollar.

So far the US greenback has been favored as the ideal rate of exchange by moneychangers as well as banks. The US dollar and the rupiah have been intertwined as legal exchange currencies for a long time. Perhaps later the euro currency would be an alternative closer to home and nearer to the heart of Indonesians than the US dollar. At that time Indonesia might be dancing to the beat of Europe and her allies instead of its stoutest Western ally and major investor, the United States of America.

Perhaps by that time the words of George Bush will have taken a new twist. And instead of a war cry, they might then be a peace bugle – but at that time who among the businessmen and the politicians in Indonesia will be willing to lend their ears?