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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

Once a Castle in the Sand

The central banker is focused on rebuilding

SUDRADJAD JIWONDONO HAS BEEN in the eye of Indonesia's economic storm for the last seven months. As governor of Bank Indonesia, the nation's central bank, he has been on call for early morning meetings, late night strategy huddles and crisis management at all hours. The evening after he announced the government would guarantee all local bank debt and deposits, he spoke with Asiaweek's Jose Manuel Tesoro and Yenni Kwok in the bank's headquarters in Jakarta. Though obviously tired, he was animated. He was matter-of-fact, however, about the need for the reforms just announced to be embraced by both domestic and foreign markets.

Do you expect the reforms will restore confidence?

I hope so, but maybe it is hoping for too much. We can detect from money in circulation that demand for bank notes in Indonesia is increasing tremendously. People don't believe in the banking sector. The joke is that the biggest shortage in Indonesia today is in safes. Depositors withdraw their cash and put it in the safes.

Will reforms return liquidity to the capital and currency markets?

Depositors move their money from small banks to big banks, from domestic banks to foreign banks, from rupiahs to dollars. One big problem is the lack of confidence between banks. They have liquidity, but they don't dare to lend it. Then there is the lack of confidence in national banks because of the downgraded rating of debt by Moody's and Standard & Poor's. I have to say these ratings are getting crazier and crazier.

There is a lot of talk that the central bank would prefer to see banks in Indonesia, which number more than 200, down to 20 or fewer. True?

[He sighs] I have seen so many estimates, from 19 to 100. I've been saying over and over that the most important thing is to ensure that the banks we do have are healthy. I have been talking about mergers for more than two years. Now, the banking community thinks the number will have to be reduced. But we can't do it overnight.

There are significant amounts of Indonesian money stashed abroad. How can you entice that capital back?

It is very difficult to get even a rough estimate. We do know that a lot of money is parked abroad, but it has been the story for a long time. The best incentive [for its return] is our own stability. But our normal life should be different from what we've been doing the last several years. Maybe we got bigger than our own capabilities. In the 1970s and 1980s, the government was fiscally prudent. But then the role of the private sector increased. The role of foreign capital grew. We couldn't afford to have a growth rate of 7% to 8% every year, yet we did. It is sad because I have been part of the economic team. I thought we were building a prudent system. Nobody knew that, in one day, it could disappear. It is like you are building a sandcastle on the beach, and suddenly there is a big wave that wipes out everything.

The "pause" announced today in payments to foreign creditors -- is it actually a debt moratorium?

I am very pragmatic and can do anything to be accepted by the market. Give us a break to talk, that's what we're saying. Right now even having a discussion has been very difficult. A lot of our corporations are technically bankrupt -- or actually bankrupt.

In the future, do you expect Indonesia will be more strict about debt regulation?

I think so. We put a ceiling every year on how much could be borrowed. But many conglomerates and corporations that couldn't borrow from banks found their own way. So the debt mounted. I admit that we haven't had good statistics on corporate debt until recently. I started to find out last August about the real size of the problem.

How much of a boost would a clear political succession plan give to your efforts to stabilize the markets?

We know that the market is asking for two things: bank reorganization, and corporate debt restructuring. But what kind of arrangement will be accepted by the market? The International Monetary Fund only came lately in addressing the corporate debt. In the beginning, it was taboo. But I finally told them, look, if we are going to do anything, we need a resolution on private debt. Otherwise, the market will not buy. The IMF said the market will solve itself, private debt will solve itself.

Is President Suharto behind your efforts 100%?


What is your schedule for getting the banking system back to full health?

It will take time. I hope after two years we can have a normal kind of life. It seems like a long time.

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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