Who Will Benefit from the IMF Bailout?

By Edwin Gozal

The IMF rescue package, first signed in late October, was supposed to restore economic stability in Indonesia. But in reality, it represents the interests of foreign industrial and finance capitalist which want a stronger hold on the Indonesia market. The IMF packages will force Indonesia's door open wider to foreign imports and investment.

Meanwhile, Suharto and his children are turning up the nationalist rhetoric against IMF package, saying the IMF will introduce "liberalism" and violate the constitution. The rhetoric about "national dignity", disguises the real issues and helps forge a false sense of unity between classes.

Conversely, the Suharto government is still trying to give the impression that they are committed to implementing the IMF package. When Foreign Minister Ali Alatas was interviewed by the ABC regarding the Indonesian position towards the IMF, he said "we never intended to reject the IMF package, what we need is the IMF without the negatives". Meanwhile, vice-president B.J. Habibie, was quoted in the March 17 Straits Times, as saying he had told the Japanese that Jakarta may be able to implement 48 of the 50 provisions of the IMF loan agreement.

Suharto knows that the imperialist countries still need him to contain social unrest and therefore he believes he can come to an agreement with imperialist countries to protect his interests.

Interests of imperialism
On March 8, the Miami Herald reported that Samuel L. Maury, president of the business round-table, a coalition of around 200 of America's biggest corporations, who said "Lack of action will endanger the economy. We urge the Congress to move quickly".

On February 24, Reuters reported that The National Governors Association meeting in Washington, approved a resolution urging Congress to fund the international lending agency adequately to stabilise the troubled Asian economies. They said "if the IMF doesn't have adequate resources to promote stability now and in the future, American companies and workers involved in trade with Asian nations could suffer significant negative consequences".

According to US business and economic leaders, the US economy could "go up in smoke" if the IMF doesn't get more money fast to hose down Asia's new economic crisis. Former Commerce Secretary Peter G. Peterson, who spearhead a coalition of business leaders urging help for the IMF, stressed that US bankers got burnt as well. Asian losses led Citicorp to reduce pretax earnings by $US250 million, Chase Manhattan lost $US160 million and the Bank of America was forced to set aside $US1 billion to cover losses. The US Department of Agriculture's top economist said recently that the Asian crisis will result in a 3-6% percent decline in US farm exports. In 1997, the US exported $US57 billion in farm goods worldwide and if foreigners aren't buying, wheat prices will plunge at every grain elevator in America.

The New York Times reported that the US trade deficit for 1977 reached its highest level in nine years, the overall deficit in goods and services reaching $US113.7 billion, up from $US111 billion in 1996. Other countries such as Australia are also concerned. Foreign Minister Alexander Downer recently went to US to try to convince the IMF to be more "flexible" in implementing the package.

They have every reason to be worried, Australia's trade surplus with ASEAN nations is down 23%, to $719 million, while the surplus with APEC countries has fallen by 14%. Miles Armstrong, from the Australian Meat and Livestock Corporation, was reported in the February 21 Sydney Morning Herald as saying that in January last year, Australia shipped 31,300 head of cattle to Indonesia. This January there were no sales.

The `IMF trap'
The IMF agreement requires the immediate cancellation of 12 infrastructure projects, the removal of credit to the state aircraft company IPTN and the Timor "national car" project. It also requires an end to monopolies on sugar, flour, cement, paper and plywood as well as a substantial cut in tariffs on all agricultural products.

In the original loans agreement, tariffs were to be reduced on a number of items protected by the Indonesian government and non-tariff barriers were to be dismantled over the next three years. Although these measures will benefit foreign capital, they will not correct the structural weakness of the Indonesian economy. Neither will they guarantee price reductions to benefit the poor who have already been sneezed hard by the slide of Rupiah. In many cases however, the Suharto government has found funding from other sources or simply replaced previous monopolies with new ones.

A report by Reuters on March 8 noted that a $US2 billion project to develop the N2130 passenger aircraft by IPTN, which is headed up by Suharto crony and newly installed vice-president B.J. Habibie, was still going ahead. US aircraft maker Boeing has said it will help fund the development. According to a December 3 article in Media Indonesia, IPTN has also found a new partner to finance development of the N250 in a joint venture with the German companies Landesbank and Baden Wuerttember.

Decrees striping the state agency Bulog of the right to monopolise the import of wheat, flour, soybeans and garlic were issued in November. But it stipulated that Bulog still reserved the right to monopolise the import of rice, sugar and the distribution of flour. The monopoly on flour will be maintained for a period of three to five years. Bulog's flour monopoly directly benefits the Salim Group, which has close links with a number of Suharto family businesses. Bulog imports flower which is ground for instant noodle production by the Salim Group, then sold back to Bulog at a 30% markup.

The March 10 Australian Financial Review, reported that the Australian Export Finance and Insurance Corporation will provided 90& indemnity for about 1.7 million tonnes of wheat to Indonesia. The chairperson of the Australian Wheat Board, Trevor Flungge, said "the trade credit is significant since it would enable Australia to continue to compete in Indonesia against the credit package is being offered by Canada and US". By abolishing Bulog's monopolies, imperialist countries such as Australia, the US and Canada, want to establish new monopolies which they can control. But because of the Suharto family's control over many significant sectors of the Indonesian economy, multinational companies still have to deal with them.

According to the January 30 Far Eastern Economic Review, General Electric, which has three major manufacturing centres in Indonesia, has recently opened a $US20 million plant in Surabaya, East Java, to supply lighting products to the entire region. But in order to secure the deal, they had to do it through joint venture with PT Tricatra Buana Dirgantara, owned by Suharto's oldest daughter, Tutut, GE Capital Services, which owns a 47% share of PT Astra Sedaya Finance, was forced to work with car maker PT Astra International, which controlled by Bob Hasan, a long term Suharto crony who was appointed as Minister of Trade and industry in March. British Aerospace, is also working with a Suharto family company, PT Aero Dwiguna Witamaas, as the sole agent for its BaE 125-100 executive jets. The company is owned by Martina Sudwikatmono, daughter of Suharto's half brother Sudwikatmono.

One of the biggest US retailers, Wal-Mart, is working Multipolar which is owned by the Lippo group run by Mochtar Riady, who recently became a household name in the US because of his involvement in the "Asiagate" campaign contributions scandle. Multipolor is a majority shareholder in Matahari retail chain which has more than 50 outlets in Indonesia. But although the IMF reforms are largely designed to benefit the interests of imperialist countries, a large portion of the loans will be used to bail-out the large conglomerates with close political ties to the Suharto family.

Western hypocrisy
While Imperialist countries express concern over the economic crisis, at the same time they are taking full advantage of the weaker Rupiah to buy into Indonesian companies. Bob Bernstein, global emerging market director with Brinson Partners, told the February 20 Trubune Business News "While the risk is great, it's still a great time to buy inexpensive assets".

The Chairman of Miami-based CHS Electronics Inc, Claudio Osario, was quoted in the February 27 New York Times as saying "the prices of some companies has become so cheap, once Asia's economic bubble burst, that it was extremely attractive to snap them up". He referred to the rubble of Asia's crumbling financial empires a "huge opportunity".

Christopher Clark, president of Goodyear, which has been in Indonesia since 1935, told the February 23 Washington Times that "this crisis opens an opportunity for us to look at particular niches which we haven't been able to penetrate before". General Motor recently bought a 40% stake held by its Indonesian partner and is beginning to eye local manufacturers, most of which are bankrupt. It is clear that the main beneficiaries of the IMF bailout will be the imperialist countries and those businesses with political links to the Suharto family. Not the ordinary Indonesian people. Rejecting IMF intervention and nationalising all of the assets of the Suharto family and its hangers on should be the first step in overcoming the crisis.

From: PRD International
e-mail: prdint1@peg.apc.org

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