LAINE BERMAN sheds a tear for the late great Indonesian comic.
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Magic on fire
The fires are merely adding to the pressure on East Kalimantan's only national park. But ALEX RYAN also finds that nature lovers have won some battles to protect its beauty.
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Villagers keep the seas alive
Coastal villagers will protect reefs if they know it is in their interest. IAN DUTTON and BRIAN CRAWFORD report on an international project that goes to the cutting edge.
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Capital offence
Indonesia's crisis was caused by global 'market forces', transforming nation-states into commodities. MARK BEESON explains.
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In this issue
Some solidarity please!
The day Suharto resigned, May the 21st 1998, will be for ever inscribed in the history books. It marked the end of a dictatorial era, and the birth of new possibilities. It also marked the end of solid economic growth, even if it had been unequally distributed.
In this edition of Inside Indonesia we celebrate the transition. Quite a few authors reflect on the renewing energy of the peoples movements that brought down the curtain on Suharto. We look forward to the first democratic elections in 44 years.
But we are also holding our breaths for the dark days to come. Not since the revolution of 1945 have the Indonesian people faced such an uncertain future. While the rich pile up more debt, the weak suffer the most. Communalism threatens to rise like a stench from the decaying economy.
The world must now be generous to the Indonesia people. They are being visited by great evils. Some come from outside, as we have pointed out in previous editions of this magazine. But even if they come from within, the Indonesian people deserve our solidarity.
Inside Indonesia exists to show how worthwhile that solidarity can be. Now is the time for people in schools and universities, non-government organisations, unions, churches, the legal profession, to respond compassionately. I like to think we are part of a movement within Australian civil society prepared to look beyond its own problems, urgent as these appear to be, to the truly life and death issues now emerging in a society that lies only just beyond our horizon.
Speaking of Inside Indonesia, we're fifteen! To help celebrate, we asked Helena Spyrou (our multi-talented promotions person) to design a new look for the magazine. We like it. Do you? Drop us a note, on this or anything else.
Gerry van Klinken
Editor
Inside Indonesia 56: Oct-Dec 1998
'They just want love...'
Disasters and greed threaten the orangutan in Kalimantan. But WILLIE SMITS and his team of Indonesian carers are giving hundreds a new start.
Willie Smits
On Monday, April 26, early in the morning our team leaves for Samarinda, 100 kilometres to the north. A convoy of four cars, consisting of one hired truck with heavy cages, two four wheel drive vehicles we received from WWF, loaded with light aluminum cages and other equipment, and one other normal car. We call at the Samarinda nature conservation office to pick up two forestry policemen and the necessary legal papers to do orangutan confiscations.
In Samarinda a lady with scared looks opens the door. When she realises what the police have come for she starts weeping. A tiny male orangutan baby shows up, about 15 months old. She has had it for two weeks. Her husband bought it in Sebulu for Rp 150,000 or less than US$20.
In a corner of the room hiding behind her we discover a baby gibbon as well. After signing the confiscation papers it is time to go. The lady cries and hugs and kisses her baby for the last time, tears rolling over her cheeks all the time.
It is easy to understand why people want these little orangutans so much. They just want love and give it so easily themselves. We have to pull the two loose and leave with a bad feeling in our stomachs.
On the way to Sebulu we pass through a blackened brownish landscape. There is hardly any green colour left to see. The wind blows up dust, as do the passing cars with water tanks. Yes we did have some rain during the last three days but it will take many weeks of constant rain to help the trees and to return a flow of water to the streams and the wells of the people. This is normally the end of the rainy season and in a few weeks the regular dry season will start.
Billy
When we arrive in Sebulu we stop at a house where we caught several orangutans who were attacking the last green trees there. Robby and some people that already know our cars show up. Robby is a contractor for the local timber estate and very concerned with the wildlife that is suffering. Nobody is home and together we walk to the back of the house to see the tree where we rescued Billy.
I still shiver when I think of the sight two weeks ago on this very branch of this jackfruit tree. An orangutan with bloated face, no eyes visible anymore, breathing with difficulty, blood and saliva dripping from his mouth and a harpoon sticking through his right arm. His throat pouch had a deep hole just under his chin and a disgusting smell of rotten meat overwhelmed anyone coming near.
Using an old saw and under a light anaesthetic I managed to remove the hooks of the harpoon and pull them out the other side of the arm. Immediately upon arrival at Wanariset, Billy's neck wound was operated on.
Then we discovered that his jaw was broken, a terrible ordeal. We tried to find a surgeon in the nearby town of Balikpapan, but to no avail. Finally Dr Heriyanto and Dr Amir of our project pulled the jaw together and connected it with wires as good as they could.
Amazingly, just before we left on this trip, Billy was eating, climbing and his face looked normal again. He even reacted in an almost friendly way to the technicians, and that after all that people had done to him. He had come in between the people's houses looking for a single green tree left there. They beat him almost to death using wooden clubs as well as machetes and a harpoon.
His neck wound needed restitching two times, but now it seems that he is going to make it back to the forest after all. Every time again I am amazed at their strength to overcome injuries.
Rescued
Next is a long trip up the river system behind Samarinda. Often the river is covered with smog and we see the red glow of fires all along the river banks for hours and hours as we travel through the night. We give up and decide to sleep on the wooden deck of a boat whose captain is so friendly to offer this spot. Just before we do there is another little shriek.
I jump off and indeed in the light of small lamps we find that another cage is hidden behind a makeshift eating place. A very aggressive little orangutan hoots at us. A lot of people wake up and come to see us. We have to be careful how to bring up the subject of confiscation in this lonely place in the middle of nowhere.
The woman claiming to own the orangutan shows up. She says she has had the orangutan for two weeks now. When we ask her how she got this three year old a lot of people start talking. They all point to the other side of the river. The fire came to the water's edge and the orangutan and its mother were completely trapped between the fire and the river.
The little orangutan dropped itself into the water when the flames touched it. It almost drowned, but the woman's husband managed to pull it out of the water into the boat with which he had rushed to the scene. While he rescued the little one, the mother was burned alive, without making a sound. The body is still there at the place where she died in the flames. This fourth confiscation of today does not make us any happier either.
When we explain to the woman, who has nine children, about the dangers of the orangutan she realises what her smallest daughter Laura might suffer. Six-year old Laura was the only person the orangutan, aptly named Krisis (Crisis), trusted. Only she could bathe her and feed her. We give Laura some parasite treatment. When Laura's father arrives out of nowhere around 1 o'clock late that night the confiscation documents are signed without further problems. This poor man and woman will not be called to court. They neither killed a mother orangutan nor wanted to sell the baby.
Bitter
We reach a camp where a small river has been dammed by the workers and some brown water is left in small pools. Immediately we spot the wide-spread hanging silhouette of an orangutan. We run towards the orangutan, eating the bark of the planted Acacia trees. I let some of the visitors taste it and it is disgustingly bitter. Nevertheless this is the only food these orangutans have left.
Years ago their forests were converted to these plantations, and they were left with small pockets of forest on steep slopes. These are now completely burned out, and the only thing left to eat is the bark of these Acacia mangium trees. If you look at the number of trees damaged you can understand that the company that planted the trees cannot be very happy either.
On the way, Zainal suddenly calls over the radio, an orangutan. A female with a baby alongside the road. We go for it immediately. The female is running over the ground into the forest. When we get near she goes up a tree, but a branch breaks off and she falls back down, onto a black tree stump. She climbs up again and we notice the head of a tiny baby shaking as if it is going to fall off.
The mother starts grunting and hooting, making the characteristic aggressive kissing sounds with her stretched lips while breaking off and throwing branches. After three expensive darts miss their target Udin finally gets a dart in at her back. We must be extremely careful not to hit the baby, her head or her belly.
The poor female desperately swings from one tree to another while the baby's head rocks dangerously backward and forward. A green slurry of excrement rains on us standing ready with the net. It even still smells like the bitter Acacia bark. How could she survive for so long on this terrible diet? Then the female stops and hooks herself in two tree tops that she keeps together.
Nothing can move her and through the binoculars we see that she is unconscious but her hands are locked around the branches. Shaking also has no result. Odom shinnies up the tree and tries to shake her loose. No result. We have to cut the top she is holding on to. Odom cuts the one top and suddenly it comes down. But because the female is holding on to it the second top now also breaks off under her weight. Fortunately the tree top comes down first, breaking the fall. We rush to the fallen female and try to turn her around because her little baby is underneath, only a tiny skinny hand visible. When we turn her we see what looks like a dead baby hanging on to a completely dry nipple.
We take the seemingly lifeless little body off her and rush the mother to the road, where the truck and cages are waiting. At the road side the baby starts to shriek and move a little. Immediately we try to get some water into her mouth. She has blue lips, sunken eyes and is only skin and bones with a disproportionately large head, typical starvation and dehydration symptoms.
She is barely conscious but starts to swallow the water greedily. Then we give her some quickly prepared milk. Half an hour later she regains some strength. The mothers' belly completely collapses as if a balloon is being emptied. Her vagina is still reddish from giving birth a short while ago to the baby.
I would never have imagined the drought and the fires could lead to this. If we do not rescue the surviving orangutans from the burned area in the next two months the orangutans of East Kalimantan could face extinction. How many can we still save ? How can we build enough cages? How can we get enough food for some 200 orangutans already at the centre while people are lacking food as well? How can we.... I hope some of you who read this can help us solve some of those questions.
That Wednesday night I sleep five restless hours. Tomorrow the team will leave again, now to Bontang where today some five orangutans were reported to be attacking some houses of villagers. I will have to go to Jakarta to meet the Minister tomorrow and will try to catch up with a loaded mailbox again.
Dr Willie Smits directs the Orangutan Reintroduction Centre at Wanariset in East Kalimantan. Send donations to support his work to BOS-USA Inc (a non-profit NGO), PO Box 2113, Aptos CA 95001-2113, USA. Email: Michael Sowards @sprynet.com>.
Inside Indonesia 56: Oct-Dec 1998
Worshipping cancer sticks
The tobacco industry keeps the government afloat, but at a huge cost in ordinary lives.
Catherine Reynolds
One of the most evocative scents of Indonesia is the smell of kretek clove cigarettes. But behind the smoke haze of this rich sensory aroma few people contemplate the economics of Indonesia's tobacco industry. It is the government's largest source of revenue after oil, gas and timber, a reliable internal revenue, unlikely to suffer from external market fluctuations. This revenue recouped a staggering Rp 4.49 trillion in excise in 1997/98. That's over AU$ 2 billion at pre-crash exchange rates.
Amazingly, the tobacco industry is also the second largest employer after government. Employment estimates range from 4 - 17 million workers, in areas such as farming, trading, transportation and advertising, as well as those actually involved in producing cigarettes. The Indonesian government is critically dependent on the industry. As a result, opposition to it is discouraged and cigarette advertisers have free rein. In 1996 for instance, Indonesia's Health Minister confirmed that 'the government had no intention of trying to regulate smoking through legislation'.
PT Sampoerna is one of the largest Indonesian tobacco companies. They confidently noted in their 1995 Annual Report:
'Being such an important economic component, and the fact that the industry and the government have, all in all, a good working relationship with each other in the past, make it doubtful that the government will radically change (for the worse) its current policies towards the industry as a whole.'
In light of this situation it is interesting to note that the Suharto family and their business associates control a substantial proportion of the advertising media, including billboards, television and cinema.
Young smokers
Any short visit to Indonesia will reveal the huge number of Indonesians, particularly men, who smoke. Estimates of participation rates range from 50% to 85%.
Indonesians are now also smoking at a younger age than ever before. A 1985 Jakarta study found that 49% of boys and 9% of girls aged 10 - 14 were daily smokers. Today the Indonesian Health Department, perhaps conservatively, estimates that 22.9% of urban ten year olds, and 24.8% of rural ten year olds smoke.
The dangers of smoking are not well known in Indonesia. Warnings that 'smoking can harm your health' were introduced on cigarette packets in 1991. But they are small and ineffective as deterrents. Meanwhile, the saturation levels of advertising together with the lack of health information about kreteks even extends to active misinformation. As recently as 1989 Adam Schwarz noted an article in Business News magazine which stated that kreteks could prevent heart disease and cancer. Katherine Frith, writing about advertising in Indonesia, observed that the packaging on another brand claims the cigarette increases longevity and improves health.
In reality, most kretek clove cigarettes contain around four times as much nicotine and tar as the strongest Marlboros. Tests on the clove oil, eugenol, have shown that it causes extensive lung damage when smoked.
The earlier people start to smoke, the more likely they are to maintain the habit throughout life. Unless people start smoking by the time they are twenty, they usually never do. As more than 50% of the population is under 24 years old, the potential market (to use the current euphemism for a trade in lethal drugs) is huge. Tobacco companies covet this 'market' because they must recruit new smokers in order to maintain their profits, replacing those who die or quit.
The teenage years are the time when people are more focussed on their image and identity, and are particularly vulnerable to cigarette advertising. As people get older and become more secure in their identity, the advertised 'attributes' of cigarettes are no longer such a lure. Habit and addiction take their place.
Billionaires
In contrast to the tobacco industry in other countries, Indonesia's industry is not dominated by multinationals, but by four ethnic-Chinese Indonesian companies. There are at least 155 tobacco companies in Indonesia, but the four major producers, Gudang Garam, Djarum Kudus, HM Sampoerna and Bentoel, control about 85% of the market share.
In 1997, Geoff Hiscock, Asia editor of The Australian, noted that of the seven Indonesian US dollar billionaires, three were tobacco barons:
Rachman Halim and his Wonowidjojo family (Gudang Garam) were worth US$4.9 billion in November 1997, after the drop in the rupiah;
Budi Hartono and family (Djarum) were worth US$1 billion with 20% market share of kreteks in early 1997;
Putera Sampoerna and family (Dji Sam Soe A King, A Mild, A International) were worth US$1 billion in November 1997.
Three multinationals vie for the remaining market share: Philip Morris, BAT Indonesia and Rothmans. The Indonesian market is enormously attractive for multinational tobacco companies because they can safely engage in marketing practices they sanctimoniously decry elsewhere, in the process obtaining far less troublesome profits. For as Sampoerna's 1995 Annual Report smugly states: 'The culture of Indonesia is not litigatious in nature, and therefore the industry here does not expect the same exposure to litigation and potential lawsuits as do their American counterparts'.
In order to increase their share of these trouble free profits promised by the fourth largest market in the world, the three multinationals navigate Indonesia's corrupt business environment with a variety of tactics.
Rothmans recently formed a partnership with then-president Suharto's cousin, Sudwikatmono. In their 1997 Annual Report they were optimistic about increasing their share of the Indonesian market with the aid of what then seemed a judicious alliance. In addition to his ties with Suharto, Sudwikatmono also controls the import and distribution of overseas films. No doubt this ensures Rothmans easy access to advertising in cinemas.
Philip Morris, an enormously powerful company in its own right, also has powerful connections. Rupert Murdoch, recently voted fourth most powerful man in Asia by Asiaweek, is a director of Philip Morris. He also owns Star TV Indonesia. This access to advertising, plus the political influence devolving from Murdoch's ownership of such a powerful medium, ensures that Philip Morris is strategically positioned to increase its market share through its liaison with Bentoel's subsidiary PT Tresno, which produces Marlboro cigarettes.
Health
Little research has been carried out on employment conditions in the industry. Inside Indonesia featured an article by Melody Kemp in 1993 highlighting appalling working conditions in industry as a whole. In 1995 Tanzer, another researcher, writing about the traditional hand rolled technology of the industry, noted that women, who make up the bulk of the workforce, are expected to roll 'at least 325 cigarettes an hour - one every ten seconds on average'. It has also been recorded that child labour is used in the industry.
Indonesia's tobacco industry begs critical attention. For as the World Health Organisation (WHO) notes, reliable data regarding the number of Indonesian's who die from cancer is 'not available'. However WHO also estimates that 57,000 Indonesians die each year as a result of tobacco use. Certainly the Indonesian Health Department acknowledges there are 200,000 new cases of cancer each year. But only 3.2% of these people ever receive hospital care. Obviously the degree to which this cancer is tobacco related requires further study. But it is clear that by condoning the tobacco industry the government is effectively murdering far more Indonesians than they ever could by mere bullets.
Despite Suharto's political demise, Indonesia is still not a democracy, and Indonesian anti-tobacco activists still face an uphill battle against the industry. They desperately need increasing publicity and international pressure.
The recent substantial tiered price increases on cigarettes (determined by each company's production levels) have signalled at least a step in the right direction, but it is not enough. This move by the government suggests fiscal expediency rather than a desire to address the huge mortality rate from tobacco. Certainly industry analysts predict that the large tobacco companies will only benefit from this increase, with larger profit margins.
The big tobacco companies will also benefit from the removal of Tommy Suharto's lucrative BPPC clove monopoly, one of the 'reforms' the IMF has required. Certainly ending the Suharto family's profiteering can only be beneficial. But who gains otherwise? Surely not the clove farmers? They are unlikely to be paid the price for cloves which the tobacco barons paid to Tommy Suharto. Once again, it is more likely that the tobacco barons will be the recipients of this new, 'free' market.
No matter what political reform takes place elsewhere it is unlikely to affect the tobacco industry. The government's first priority is to resuscitate the economy. The tobacco industry is strategically important, and it is doubtful that the political and legislative actions being taken against the industry in Western countries will be implemented in Indonesia, at least in the short term.
Yet at the very least this is an opportune moment to increase taxes on cigarettes. This could further support subsidies on other more crucial consumer items. Certainly the industry can bear an increased tax burden and any loss of income.
In 1980, as Anthony Reid noted, Indonesian households 'spent more on tobacco than they did on clothing and footwear, on meat, or on medical and educational needs combined, and twice as much as they spent on festivals. The poorest households spent more on tobacco than they did on fish, meat, and eggs combined'.
If this pattern of expenditure has continued to this day it is not feasible to argue that Indonesian people are gaining economically simply by being employed by the industry. Their income could be more fruitfully directed towards building other more worthwhile sectors of the economy. Instead, Indonesians are paying for the tobacco industry with their lives, simply sustaining the billionaires who exploit them.
Addressing the injustices represented by the Indonesian tobacco industry offers a strategic opportunity for President Habibie to demonstrate his commitment to reform and to the health of his people.
Catherine Reynolds recently completed an Honours degree (First Class) in sociology at the University of New South Wales.
Inside Indonesia 56: Oct-Dec 1998
Women do it tough
The economic crisis affects women badly. They are laid off first, yet have more responsibilities at home.
Charlene Darmadi
World Bank President James Wolfensohn has said: 'The Indonesian economic crisis has reached a point of life and death'. The impact of the crisis is greatest for those at the bottom. Women, the poorest of the poor, feel its influence everywhere: as workers, as consumers, as wives and mothers. If the known crisis has caused anxiety, how much more the unknown crisis still ahead.
Women workers were among the first to feel the crisis. Textile and garment factories, shoe factories, and the construction industry have been among the worst affected. With the exception of construction, most workers in these industries are female. Most workers laid off by factories unable to carry on are women. Even those not laid off are working shorter shifts, getting no overtime, and are getting paid late.
Vital
For a woman, losing her job has big consequences for herself and her family. For though people often consider women's wages to be secondary income compared with that of men, in reality their income is vital for the poorer households. The perception that women's wages are secondary and men are the main breadwinners is so common it actually influences factory managers to lay off the women before the men, especially if they engage in 'selective' lay-offs.
Even before the crisis, the wages women took home were barely enough to survive on. One study of women factory workers in North Jakarta showed that in mid-1997 many could only survive by going into debt. A 1994 study on women workers in the handcraft industry in Tasikmalaya, West Java, showed that most of the 304 respondents only earned Rp 250-500 (20 cents or so) a day. Sixty six percent of them used all their income to satisfy family needs, such as buying food and sending kids to school. If even in normal times women have difficulty meeting basic needs on the minimum wage, how will they manage in this crisis?
The government has responded to growing unemployment with big labour-intensive projects to provide a temporary job for those laid off. According to then-Labour Minister Abdul Latief, the program was urgent because the unemployed were likely to run out of savings within 3-6 months. But the projects usually involved heavy work designed for men, such as cleaning out storm drains in Jakarta, and so were of no help to women.
In Indonesia, household problems are a woman's problems. She holds the sole responsibility for the household budget and how to make it go the distance. That is why women were the first to feel the crisis when it erupted in January. As prices leapt up, baby milk powder among them, a group of mothers were among the first to take to the streets to protest in Jakarta. Karlina Leksono, a well-known woman who led the group 'Concerned Mothers' (Ibu Perduli) said that for impoverished kampung mothers the price increases were 'a critical matter of life and death'.
Medicines
Inflation in January alone reached 6.88%. In cities like Surabaya and Denpasar it reached 9%. The crisis also touched pharmaceuticals. Since November 1997 the price of prescription drugs, both imported and local, has gone up between 75% and 200%. The popular traditional Chinese medicines have on average gone up 300%. Most worrying for the poor is that medicines in government community health centres may run out soon. The price rises are already enough to cause household stress, but if we remember that many households have a reduced income or have lost it altogether then the situation is even more critical.
More expensive medicines and a tendency to visit the doctor less often means that many people now have less access to health services. When this happens, increased health care tasks usually fall to the woman as wife and mother.
Women can of course apply various strategies to compensate for a reduced household income, for example by making food portions smaller. In Indonesia the woman often eats last, taking the left- overs after her husband and children have eaten. Such strategies may help the food to go around, but they have a direct effect on women's health.
When access to health services declines, those who suffer most are the poor, especially children and pregnant and breast-feeding mothers.
Contraceptives
In general the correlation between fertility and women's employment is negative, which means that women who work have fewer children. The reverse is also true, so that during a crisis such as this when many women are unemployed, the birth rate will increase. The problem is made worse by the rising cost of contraceptives: up to five times or more.
Whereas the Bandung family planning clinic has been able to keep prices down somewhat, the situation is worse elsewhere. In Indramayu in West Java, for example, thousands of women have been forced to drop their family planning program because of the rising cost of contraceptives.
The Indramayu clinic head advises those unable to pay to use cheaper methods of contraceptives, such as coitus interruptus or condoms. These methods are certainly cheap but they are less reliable. They also take contraception out of the control of women and hand it over to men. The high price of contraceptives and high female unemployment could very well destroy the progress that family planning has made the last decade.
The picture looks even more worrying when we imagine the increased number of pregnant women who are not getting enough nutrition, and who have reduced access to affordable medical care. Such a situation will force up the mortality rate of babies and of mothers at childbirth. At the very least more babies will be born unhealthy.
According to the researcher Shiva: 'Complications due to pregnancy, premature birth, low birth weight and reduced life expectancy will occur if mothers do not get enough to eat. Anemia, the first consequence of malnutrition, will directly cause a rise in the percentage of women who die during pregnancy and childbirth'.
Will we see a rise in the number of uneducated and unhealthy children in the coming years as a result of this crisis?
Stress
What will be the effects of increased stress in the household? Since women control the household budget, it is to be expected that they might also become the focus of increased stress in the home. According to some scholars, the allocation of money is a prime cause of domestic conflict.
The women's activist Nadia has shown that there is a kind of vicious cycle in which the wife, who runs the household, continually asks for money from her husband, who may then become angry and bash her. Sometimes this cycle of violence can result in murder, as happened recently in Bandung where, as a result of a conflict over money, a husband stabbed his wife to death. Similar incidents have been reported elsewhere.
Unfortunately statistics on domestic violence are difficult to obtain in Indonesia, because the matter is not separated from other crimes and also because rape in marriage is not formally recognised.
Like it or not, women are expected to run the household and provide for its needs. In extreme circumstances women have been known to go into prostitution in order to be able to fulfill their domestic responsibilities.
Although the number of female sexual workers at Bandung's best known brothel area of Saritem has not increased as yet, very few of them now go home to their villages after work, because the number of customers at the brothels has declined to about 60%. In other words, although the number of prostitutes has apparently not increased, they are working longer hours.
Action
This picture of the negative impact of the economic crisis on women demands urgent action from the government. Increased fertility, increased mortality rates for mothers and infants, decreased nutritional levels, and decreased access to education, all have national consequences. From a purely economic point of view, a healthy nation will save reserves by having to import less medicine.
The government ought urgently to:
Plan programs to provide temporary work for women as well as men.
Pay attention to the shortage of medicines at health clinics.
Subsidise medicines.
Recognise the seriousness of domestic violence, separate it from other crimes in the law, and recognise and punish rape in marriage.
Subsidise contraceptives and make them available to women at family planning clinics.
Not allow children to lose access to education. School fees need to be cut during the crisis.
Charlene Darmadi is a researcher at Akatiga, a non- government organisation dedicated to researching social conditions in Indonesia. This and other reports are available for purchase from Akatiga: Jalan Raden Patah 28, Bandung 40132, Indonesia, tel/fx 022-250 2622, email akatiga@melsa.net.id. This report was compiled in April 1998.
Young female workers
A young woman factory worker in Jakarta was sacked recently because she took part in a strike demanding better conditions. Since becoming unemployed she has used her savings to pay the rent on her room. Right now her savings are almost spent. Friends help her buy food.
Most women we interviewed who were still working said they had changed their consumption pattern. Tuti, who works in a garment factory in Jakarta, used to drink a glass of milk every morning. Not any more. Before the crisis she used to buy Rp 5,000 (AU$3) worth of cosmetics a month. Not now. Her friend Ning, who works in the same factory, used to eat fish or chicken twice a week. Now she eats tofu every day.
Field notes, 28 February, 1998.
Inside Indonesia 56: Oct-Dec 1998
Tommy's toys trashed
Suharto loved his son Tommy so much he helped him build an automobile industry. Blatant nepotism, that led to his own downfall. Is it now a thing of the past?
Ian Chalmers
One common target of the rioting mobs in May were the gleaming showrooms of the `Timor'. This new automobile was a joint venture between President Suharto's son Tommy and Korea's third-largest car maker, Kia Corporation. Clearly the attacks on Timor showrooms expressed popular outrage at the favouritism enjoyed by the president's children.
But the Timor case illustrates more than the struggle against the nepotism of the Suharto's years. The automotive industry in Indonesia has long been a proud symbol of economic nationalism. Tommy tapped into this nationalist sentiment when he sought support for the venture to produce a `National Car'.
He won some extraordinary privileges for his company. His business opponents complained loudly that the economy was run on connections to the powerful - economists called it patrimonialism - rather than on principles of economic efficiency. It could be that the collapse of the Timor venture will see the demise of this patrimonial pattern of state-business relations.
Elite industry
Cars are constantly growing in number and congest already crowded urban areas. Yet they are exorbitantly expensive in Indonesia, costing about three times what they would on the international market. Why, then, are there so many cars produced in this developing country?
One reason is that a great deal of prestige is associated with cars in Indonesia. The aspiring middle classes are quite prepared to go into debt to own this important status symbol.
Another is that it has been a standard bearer of economic nationalism. For almost half a century various governments have made strenuous efforts to promote an industry of little relevance to the mass of the population.
This basic policy orientation was set in the early years of independence. A major policy objective of political leaders in the 1950s and 1960s was to achieve economic self-reliance. Automobile production played a central part in this effort. This commitment persisted. During the 30 years of the New Order, dozens of decrees declared that soon there would be `a vehicle completely manufactured in Indonesia'.
These brave decrees would have been worthless, however, were they not supported by the private sector. The third and perhaps most compelling reason for the great interest in the industry is that it is highly profitable.
The list of those who have owned automobile importing agencies reads like a Who's Who of the modern business sector: Hasyim Ning, Liem Sioe Liong, Ibnu Sutowo, Willem Suryajaya, Probosutejo, Ang Kang Ho, Sjarnubi Said, Bob Hasan, and, more recently, President Suharto's children: Bambang, Tutut and Tommy.
These capitalists established a tight little club - an oligopoly that defended their interests and tried to prevent new entrants to the industry.
They also formed close ties with various government patrons, upon whom they came to rely for protection and access to valuable state contracts. As the industry expanded in the 1970s and 1980s this patrimonial pattern of government-business relations consolidated. Ironically, they frequently let fly with accusations of corruption and favouritism when capitalists new to the industry used political connections to gain a foothold.
Towards efficiency
During the 1990s the government introduced some important changes in industrial policy. It seemed the patrimonial pattern of state- business was in retreat. Declining oil revenues reduced the government's capacity, as patron, to provide for the needs of particular business clients. At the same time, the need to promote exports made the government more dependent on private sector initiatives.
A series of liberalisation decrees in the late 1980s reduced the protection offered to inefficient industries. In the automotive industry, policy orientation clearly shifted away from the nationalism of the past towards raising productive efficiency.
The Department of Industry came to rely on business for policy suggestions. The automotive producers associations, Gaikindo and Giamm, were centrally involved in drafting new decrees.
By the mid-1990s government automotive policy looked like it had made the transition from that typical of a patrimonial `soft state', subject to lobbying pressures by particular interest groups, to what political scientists call a `hard state', a state able to implement policies to benefit the economy generally despite opposition from certain pressure groups.
Enter Tommy
Initially, this trend made it difficult for observers to understand what happened next. When he first moved into business as a young man in the 1980s, Hutomo Mandala Putra, better known as `Tommy' Suharto, soon found himself the happy beneficiary of a number of concessions. Best known among them was the ill- conceived national clove purchasing monopoly, BPPC. But this concession paled into insignificance after the National Car policy was announced in February 1996.
The immediate background to Presidential Instruction (Inpres) number 2, which outlined the new policy, was impatience with how little the industry had actually achieved. Despite dozens of decrees over three decades urging more local production, manufacturers were still far from producing a local car. Even Astra's best selling van, the Kijang, had achieved little more than 50% local content. Most sedans had less than 25%. By contrast, Malaysia's Proton-Saga was fully produced inside the country after only twenty years, and had even begun to find export markets.
Inpres 2 set ambitious but quite fanciful goals for local production of a so-called national car. It would meet a domestic content target of 20% within the first year, 40% in the second, and 60% by the end of the third year.
Special tax immunities were to be given to companies that produced these national cars. Whereas other producers were required to pay duties of up to 100%, components for the national car could be imported free of duties and other taxes during the first three years. The tax breaks would allow these cars to be sold at about half the price of their competitors.
Remarkably enough, only one company was granted national car status under the terms of the decree. That's right, it was PT Timor Putra Nasional (PT Timor for short), owned by Tommy Suharto. Many believe he named it after East Timor for 'patriotic' reasons.
Tommy is a fanatical car rally-driver. But he had no experience in the automotive industry, and analysts were sceptical of his business acumen. Scepticism deepened when PT Timor gained a series of further concessions.
The Timor had been obliged to reach a target of 20% local content within the first year, yet it had no local assembly operation. Not to worry. In June 1996 the government allowed PT Timor to produce Indonesia's `national cars' entirely in Korea! A common joke at the time was that the president had a secret agenda - to turn South Korea into Indonesia's 28th province.
But sales flagged. Thousands of unsold cars stood rusting in warehouses on the wharves. In May 1997 the government instructed state departments and other agencies to purchase Timor sedans. Pressure was also brought to bear on large business conglomerates.
The company enjoyed windfall profits of millions of dollars, for the cars made in Korea were sold in Indonesia for three times their production costs. PT Timor had initially intended to use these profits to finance construction of a factory at Cikampek near Jakarta. But after two years of fanfare, the site of the much-acclaimed factory remained an empty paddock.
Suharto then ordered three state banks and cajoled twelve private banks to form a consortium to help the ailing venture. In August 1997 they agreed to extend a further US$690 million loan to build the factory. It was rumoured at the time that this money was 'borrowed' from the Reforestation Fund.
The widespread scepticism within business circles about mobnas turned to open opposition. It was now commonly said that mobnas really stood for mobil na'as, `calamity car'.
Some lessons
What, then, are we to make of this extraordinary tale of nepotism? And what does it tell us about the future role of the government in the economy?
Most obviously, it illustrates how Indonesia's economic development has opened the economy to international pressures. Kia's rivals, especially the Japanese firms, challenged the mobnas policy in the World Trade Organisation. The Indonesian government was for the first time forced to defend national economic policy in a global forum. Indonesia's appeal to the WTO was defeated.
Second, the case exposed the shortcomings of patrimonialism in organising the economy. The venture's close association with the president lost it the wider support it needed to succeed. Most people in the industry sympathised with the hapless Minister for Industry, Tunky Ariwibowo, who was forced to do an about-face and support the sort of policy he had once consistently opposed.
Third, the case demonstrates the need to engage organised business in any future industrial development scheme. Large conglomerates like Astra and Liem's Indomobil Group had strongly supported general industry policy in the 1980s and 1990s. Naturally they strongly opposed the special privileges their new rival had won. It was their refusal to lease assembly facilities to the Timor which effectively derailed its production plans, leading to the `28th province' fiasco in Korea.
Finally, the public has become more aware of how political symbols have been manipulated to defend elite business interests. For all its faults, the newcomer PT Timor exposed the fact that a tight oligopoly dominates the industry and conspires to keep prices high. The new entrant was able to force a hurried drop in prices, which fell in some cases by as much as 50%.
A leaner, more efficient industry will emerge from the crisis, one less reliant on patrimonialism for special favours and on nationalist rhetoric for political legitimacy.
Ian Chalmers teaches at Curtin University of Technology, Perth. He is the author of a study on the automotive industry, 'Konglomerasi: Negara dan modal dalam industri otomotif Indonesia' (Gramedia, 1996).
Inside Indonesia 56: Oct-Dec 1998
Who murdered the rupiah?
Not currency speculators but Indonesian and especially foreign investors with a chronic craving for US dollars destroyed the national economy.
Sritua Arief
Indonesia has always experienced a current account deficit in its balance of payments. This means more money always leaves the country than enters it. Between 1979 and 1996 the shortfalls totalled US$ 43.4 billion. The two biggest reasons for the deficit are repatriating foreign investment profits, and paying interest on foreign debts. In other words, foreign interests are draining the surplus out of Indonesia.
The current account measures money moving in and out of the country. It incorporates all exports, imports, payments on foreign loans, foreign investors sending back their profits, and so on. Year in year out, it is in deficit. So it doesn't contribute at all to national savings or to our foreign currency reserves.
The following tables show the state of the current account in 1995/96 and 1996/97, just before the monetary crisis.
Sources and uses of foreign capital funds:
Sources of funds
1995/96 (US$billion)
1996/97 (US$billion)
Direct foreign investment
5.4
6.5
Other private capital
4.5
6.2
Government foreign debt (mid- to long term)
5.7
5.4
Total
15.6
18.1
Uses of funds
1995/96 (US$billion)
1996/97 (US$billion)
Financing current account deficit
7.0
8.1
Repaying foreign debt
5.9
6.1
Adding to foreign currency reserves
2.7
3.9
Total
15.6
18.1
When we look at the figures, several conclusions spring easily to mind.
First. Our foreign currency reserves are highly dependent on getting new foreign loans, because the deficit stops us from accumulating foreign reserves freely. This means our reserves are effectively borrowed, not free as we should expect in a healthy economy.
Second. Just as in a business, all payments (income versus expenditure) must be balanced. This means that adding to our foreign reserves by means of debt in this way in fact represents money leaving the country. We call this capital flight, which is a bad thing. In other words, the capital flight committed by private parties in Indonesia (better called economic criminals) is paid for by government foreign debt.
This is surely a case of extraordinary stupidity, not to mention complete inhumanity. Private wealth overseas grows at the expense of government debt, ultimately paid for by the ordinary people of Indonesia, who have no means of enjoying its benefits.
Now back to our question. What caused the collapse of the rupiah against the US dollar? It was caused by a gross imbalance between the value of total exports including oil and gas, and the value of total imports. Not only are imports larger, they have also been growing at a faster rate than exports. This is what causes the current account deficit.
Exporting supplies us with foreign currency, while importing demands it back again. Since both are normally done in US dollars, the excess of demand over supply makes the value of the US dollar grow against the value of the Indonesian rupiah.
Moreover, export and import practices in Indonesia are full of manipulative practices, in which exports are underinvoiced and imports are overinvoiced. The government has always overlooked such practices, because of the constant conspiracies between politics and business (remember the way Coordinating Minister Sudomo backed corrupt businessman Eddy Tansil?).
So who caused this excessive demand for foreign currency? They fall into three categories: * Importers (both foreign and national), foreign investors and foreign creditors. They want foreign currency to pay for their imports, to send their profits back overseas, and to pay the interest on (private and government) foreign debt. * Those who repay principal on their foreign debt. * Those committing capital flight - both businesses and individuals.
Ironically, all these people causing excessive demand for foreign currencies share the same perception of uncertainty, namely that the Republic of Indonesia may become financially insolvent due to its chronic current account deficit. Indeed the perception is strengthened by the reality that the government has always paid back old debts with new loans, whose value is less than that of the old. As a result, the Republic constantly transfers more money out of the country than enters it. Indonesia suffers from what is known as Fisher's Paradox, which says that the more foreign debt you repay, the bigger the debt you accumulate.
Add to that the political uncertainty. All these sources of uncertainty come from within the country, not from overseas. I can't see that there has been a conspiracy by foreign currency speculators such as George Soros, who simply have a good nose for opportunity. We should rather blame ourselves for mismanagement and immorality.
But there is a conspiracy, and a much more dangerous one than George Soros. That is the one concocted by foreign interests through the IMF and the World Bank who are, by the latest count, prepared to give us loans of up to US$49 billion. Most of this debt will be used to pay for the current account deficit. That is, most of it will be used to allow foreigners to import goods and services, repatriate their profits, and repay their foreign loans.
In other words, the debt will be enjoyed by people overseas, but the burden of it will be born by the people of Indonesia. The debt will be used once again to pay for our dependency on imports from overseas. It's truly absurd for us to say 'thank you very much' to the IMF, the World Bank, and other members of this plot.
The political conspiracy means that, first, overseas interests will now determine our economic and social policy and even our power structure. Second, control over our foreign currency reserves by foreigners will be even greater than before. Third, control over Indonesian economic resources by foreigners will become even more intensive.
This truly is national policy-making at its least heroic. We will be under the heel of foreigners as if we were a colony.
Allow me herewith to declare: heroism has died among the Indonesian power elite and the intellectuals who support them. We will now witness the collapse of the Indonesian nation state. The people will not forgive the power elite for this. Do not be surprised if in the near future a history book is published with the title: Indonesia, the fall of a nation.
Dr Sritua Arief is an Indonesian economist. He obtained his doctorate at Hull University in 1979, and presently teaches in the Management School of the University of Northern Malaysia.
Inside Indonesia 56: Oct-Dec 1998
More than six decades after being inspired as an undergraduate in Sydney, Ron Witton retraces his Indonesian language teacher's journey back to Suriname