Apr 21, 2018 Last Updated 11:42 PM, Apr 19, 2018

How to love a country in a time of crisis

Published: Sep 29, 2007

I was brought up with a belief that 'Indonesia is inside you'. In other words, things that hurt the country also hurt you, at least psychologically. But this patriotic talk may sound bloated and empty to many, especially because often I forget to ask myself which Indonesia I am talking about.

Trying to figure out how to love the country in this time of anger and frustration, I gradually came to the conclusion that there is not one single Indonesia. The rupiah crash of 1998 is a testimony that what you see are actually two different countries, an Indonesia of dollar debtors and an Indonesia of the deprived. This is a point I would like to suggest, in response to nationalist flag-waving arguments against the virtue of inviting a foreign institution like the IMF to bail out Indonesia from its current mess.

Golf club

The 1998 crisis is a costly lesson of how not treat the country like a putting green. Someone told me that The Economist sees an analogy between the Asian way of managing national economies and the way people meet, play and do business with each other in a golf club. I never play golf, so I am not sure how apt is the description. But Indonesia's large foreign debt indicates that there is something 'clubby' in the manner Indonesia's major economic players circulate billions in currencies from one place to another.

To be sure, there are conflicting stories about Indonesia's foreign debt. One estimate says that more than half of the foreign borrowing belongs to the private sector. The Wall Street Journal gives a different picture. According to this newspaper, a closer examination of the composition of Indonesia's foreign debt shows that a much larger portion is owed by the government or guaranteed by the government for state-owned enterprises than previously thought.

Whatever the truth is, it is easy to imagine that there are no more than 200 people (out of 200 million) involved in the deal. They are a coterie of top government people and business leaders. Theirs is the Indonesia that is now being pressed to grab as many dollars as possible to service the debt. Accordingly, the dollar has been in high demand, and its exchange rate has climbed to a menacing height. The result is our current slump, sending millions of people down to the poverty line and insolvency.

Distant neighbours

Given the political format of the country, the other Indonesia - the Indonesia of the deprived - has no way to influence the course of events, although it is fast becoming a vast territory of victims. Apparently, the two Indonesias, one belonging to 200 people, and the other to the 200 millions, are like distant neighbours who hardly care for each other.

Not a very long time ago, the theory was that the 'Asian miracle' was due to what MIT's economist Lester Thurow described as 'communitarian capitalism' that was different from, and preferable to, US capitalism. He was speaking of the Japanese and Korean models. Today the Asian crisis suggests there is nothing 'communitarian' about the system. The clubby cooperation between private corporate groups and government institutions (with the support of open handed banks) breeds complacency at best - and the public, including shareholders, are kept in the dark. They are even intimidated not to ask questions. Sooner or later the next stage arrives, which is a corrupt system of crony capitalism.

Indonesia of the dollar debtors is precisely a system of this kind. It is a country where nobody seems to care about accountability. Bankers have lost their capacity for judgment and never call a loan; they even take bribes from borrowers, with the result that companies accumulate a large amount of bad debt. The Indonesia of the dollar debtors is also a country where project costs are marked up by up to 50% to make it possible for corporate executives to bring millions of illegitimate greenbacks to their personal account. At the end of the day, it is the national economy that bears the brunt. The first victims are always the weakest.

Unholy alliance

The trend is made worse because the 'unholy alliance', as senior economist Sumitro Djojohadikusumo calls it, goes further up, involving people close to the most powerful seat in the republic. Last year, for instance, there was high-powered pressure on both private and state banks to give loans to the 'national car' project, and the scared bankers followed the order without doing normal checks on the investment plan.

Today you read the story of Steady Safe, a taxi company that received a US$265 million loan from the once-prestigious Peregrine Investments Holdings Ltd in Hong Kong. Two years ago Yopie Wijaya, the taxi man, took Tutut, the First Daughter, as his business partner before he knocked at Peregrine's door for money. Today the Hong Kong-based company has collapsed; the loan is bad.

An economist friend once told me of the different impacts between two acts of embezzlement. One is when somebody takes money from the state treasury - he steals US$15 million and it is bad, but that's all. The other is when a powerful person sets up a monopoly-based company - he makes the same amount of money, but the result is a highly distorted market. This unchecked rent- seeking practice has grown to such a colossal proportion that it has made Indonesia a country financially bloated and institutionally damaged.

Obviously, this is not the Indonesia that I, for one, would care to defend. In fact, this is the Indonesia that many have been trying to do away with; it is the real culprit of our painful downturn. Regrettably, reform-minded people both inside and outside the government have no real power to get rid of it. Hence the significance of the IMF deal.

IMF

The IMF package agreed by President Suharto is no panacea for good governance. But the way I see it is that it is not only about US$43 billion in money. In itself it is not a promise of political reform, but it may lead to the weakening of political patronage.

To be sure, it is imposed by a foreign institution; it is also painful, and it is not perfect. But from the hardship it entails the people will have a better argument to urgently demand more symmetry of sacrifice from the powers that be. In short, the IMF deal is a sad, if not 'evil', necessity. To use nationalist rhetoric against the package may bring Indonesia back to the apologists of ersatz capitalism and its dubious achievements.

As a concluding note, let me draw an analogy from a more dramatic event in history. Following the defeat of 1945, the Japanese were put under an American-imposed constitution. Most Japanese took it as a chance to build a more democratic society, which was to them preferable to the nationalistic flag-waving 'Nippon'. The rest was their own determination to make the experiment a success.

Goenawan Mohamad is a senior journalist and a poet. He edited Tempo, the news weekly that was banned in 1994. This appeared in the Jakarta Post on 25 January 1998.

Inside Indonesia 54: Apr-Jun 1998

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