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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Help From Next Door

Singapore and Malaysia broaden the options

By Santha Oorjitham / Kuala Lumpur


When the word went out, help flooded in. Indonesia's pleas for aid to stabilize the rupiah were answered by Singapore and Malaysia, which offered $10 billion and $1 billion, respectively. Malaysian Deputy Prime Minister Anwar Ibrahim termed the help "the spirit of regionalism."

The $11 billion is separate from an International Monetary Fund (IMF) rescue package scheduled to be finalized within days. That could amount to more than $10 billion. But, unlike the bilateral funds, the IMF bailout will likely come with provisions, such as strict austerity measures.

The speculation: Indonesian President Suharto may take his neighbors' money but not the IMF's. The result: He could escape the international agency's politically damaging conditions. The president hinted as much last week, when he said Indonesia wanted only the IMF's financial expertise. Moody's Investors Service was unimpressed. It announced it intended to downgrade Indonesia's credit as a sovereign borrower.

The IMF would likely target the banking industry and some monopolies. Says a Jakarta-based analyst: "I hope the conditions will be as rigid as they can be, introducing significant fiscal prudence, keeping the monetary policy tight, accelerating transparency and drop-kicking as many mega-projects -- including the national car and plane -- as possible."

Leonard Sebastian, a Fellow at the Institute of Southeast Asian Studies in Singapore, believes the IMF will insist that underperforming banks merge or close. However, some of these institutions are owned by figures close to the president, notes another analyst. "The governor of the Bank of Indonesia will have to navigate a lot of political minefields," says Sebastian.

So will the government. The IMF is also expected to demand an end to control over key commodities such as rice, flour and fuel by the state agency Bulog. This could result in price increases at a time when unemployment is also expected to rise. Suharto has to make some delicate calls. And global investors are watching.


This edition's table of contents | Asiaweek home

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