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JANUARY 31, 2000 VOL. 155 NO. 4

Wahid Makes the Right Promises: Can He Keep Them?

Cover: Raging Inferno
All eyes are on the army as Indonesia tries to quell protests and save democracy
Interview: A top general speaks on the military's future
Catch-22: There can't be stability without economic recovery
Viewpoint: Wahid is reviving the national ideal

Energy: How High Will It Go?
OPEC's determination to push up the price of oil could derail Asia's fragile economic recovery

Agus Wirahadikusuma: 'I Don't See a Coup Scenario'
Online Exclusive: Maj.-General Agus Wirahadikusuma, a leading reformer in Indonesia's military, spoke with TIME about President Abdurrahman Wahid's relationship with the army and rumors of a possible coup

Indonesia: Calm Before the Storm
Religious differences have turned the Moluccas into a battlefield, filled with hate and the prospect of more violence

Indonesia: Chaos in the Islands
As clashes between Muslims and Christians escalate in the far-flung Moluccas, many wonder if anyone's in charge in Jakarta

Photo Essay
The streets of Jakarta in the hours leading up to the selection of Wahid and Megawati

Breaking news from Southeast Asia

Cry for a Holy War
Jakarta feels the reverberations from Ambon

Dita Alangkara/Pool-AP
Summers, distributing rice in Jakarta, told Indonesia that financial aid depends on reforms.

The seeds of the separatist movements raging across Indonesia were sown over five decades, as Jakarta systematically exploited its resource-rich provinces without giving much in return. In his first annual budget, announced on Thursday, President Abdurrahman Wahid sought to reverse the trend by committing to a 25% increase in central funding to the most restive provinces. But it might be too little, too late. For one thing, Wahid has yet to deliver on his promise to allow provinces to keep 75% of their revenues. For another, "one cannot appease the people in the provinces with just money," says Reza Yamora Siregar, assistant professor of economics at the National University of Singapore.

Still, Indonesia desperately needs a degree of economic stability before it can hope to defuse its social tensions, and Wahid has made some positive moves in that direction. He secured a new loan from the International Monetary Fund and a commitment from the United States to help Indonesia reschedule payments on some $80 billion in sovereign debt. In the budget, Jakarta says the economy will grow 3.8% from April to December 2000, (up from no growth the previous year), inflation will be brought down to 4.8% and the rupiah will be stabilized at 7,000 to the U.S. dollar. To help make those things happen, the IMF has pledged to lend Indonesia up to $5 billion over three years. U.S. Treasury Secretary Lawrence Summers, on a one-day visit to Jakarta last week, hinted that billions more were in the pipeline from the Consultative Group for Indonesia--which comprises 32 donor nations and institutions--if progress is made in the critical areas of banking and corporate restructuring.

But pushing through hard reforms could prove difficult with a cabinet that has yet to show signs of cohesive policy-making. Rifts between the Minister of Investment and State Enterprises Laksamana Sukardi and Finance Minister Bambang Sudibyo have broken out over the control of revenues from state-owned enterprises and in dealing with high-profile cases of corruption. "The government will have to overcome personal conflicts in the cabinet and solve many institutional problems," says University of Indonesia economist Sri Mulyani Indrawati.

Hopes of recovery rest heavily on the performance of the Indonesian Bank Restructuring Agency (IBRA), which controls more than $70 billion in assets taken over from ailing banks and businesses. IBRA's first big test is set for the end of March, when it must raise $2.4 billion for the budget from the sale of assets. The question is whether daily reports of violence from the provinces will scare off potential buyers.

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