ndonesian Collapse Less Severe Than Feared
January 25, 1999

The Washington Post

Keith B. Richburg

JAKARTA, Indonesia, Jan. 24—The effect of Indonesia's 14-month-long economic crisis has been less severe and less widespread than initially feared, according to a report issued by the World Bank. And evidence suggests that urban areas, particularly the capital, Jakarta, have been hardest-hit, while some agricultural areas have prospered.

The comprehensive report, which will be released at a meeting of Indonesia's international creditors on Monday, reveals some striking data about the effects of the country's financial meltdown.

The data suggest, among other things, that the crisis has affected the middle class greatly but that predictions of widespread unemployment, of children being pulled out of schools and of huge numbers of people falling below the poverty line were exaggerated.

"All of these data are coming back with quite a similar story; the crisis impact has been very different in different parts of the country," said Katherine Marshall, the World Bank's social-policy director, who spoke last week at a Bangkok conference on the regional impact of the economic crisis. "And there are some segments of society that are benefiting."

"Contrary to the very early cataclysmic expectation," Marshall said, "the very poorest segments of society may not have suffered the most." She added: "On the other hand, people in the cities are suffering a very serious body blow."

For example, Indonesian officials and some relief agencies have said that 40 percent of the population, or about 80 million people, lived below the poverty line in 1998, an increase of about 30 percentage points as a result of the crisis. But one report concludes that Indonesia's level of "absolute poverty" -- defined by income -- has only increased from 11 percent to 13.8 percent.

The statistics generally support anecdotal evidence from Indonesia's agricultural villages, which have benefited from higher prices for their commodities. The report says discrepancies between earlier, higher figures and the actual poverty figures may be a result of the huge number of news organizations now focusing on long-standing problems of poverty and homelessness, and a concentration of reporting in Jakarta, where the crisis has been most severe.

The greatest rise in poverty levels has been among the college-educated, while the least affected have been the least educated and the poorest of the poor, the new data show. That suggests the crisis's effects have been concentrated among those who were better off -- and more linked to the modern, corporate economy -- before the Indonesian currency collapsed in late 1997.

The report also takes aim at government projections that 20 million Indonesians would be jobless at the end of 1998. "These unemployment figures clearly do not hold up under analytical scrutiny," the report says. The data suggest that unemployment rates are up only slightly -- mainly because of jobs lost in such sectors as construction and industry -- and that new jobs have been created in other sectors, including agriculture.

Overall, the data are likely to stir controversy, even anger, as the Indonesian government asks international lenders to increase funds to allow more spending on a "social safety net" to alleviate the effect of the crisis.

© Copyright 1999 The Washington Post Company