Indonesia orders crackdown on riots over prices

JAKARTA, Indonesia (CNN) --Police in Indonesia said some 500 people protesting higher food prices went on a rampage in a West Java town Thursday, throwing rocks, burning Chinese-owned shops and damaging at least 30 other stores in the four-hour melee.

News of the rioting, combined with fears that the government would further damage the economy with its plan to fix an exchange rate for the rupiah, led to a drop of more than 9 percent in the already-battered Jakarta stock market index.

Following the riot, President Suharto ordered the military to crack down on protesters, accusing unnamed groups of stirring up turmoil. "Take stern action against those who violate (the law) and carry out unconstitutional actions, especially those which lead to national disintegration," he said.

Series of riots in recent weeks
The order came a day after police detained about 140 protesters in Jakarta's biggest anti-government demonstration since the crippling economic crisis hit Indonesia seven months ago

Shops have been looted and set on fire in several towns across Java and the islands of Flores, Sumbawa and Sulawesi in recent weeks, after rises in prices of rice, cooking oil, and milk.

The ethnic Chinese community makes up only about 4 percent of Indonesia's majority-Muslim population of 202 million. Nonetheless, they dominate commerce, and Chinese storekeepers are often targeted when prices increase and civil unrest breaks out.

Military announces new commander
Also Thursday, the military, which is guaranteed a political role under the constitution and is the most powerful institution in Indonesia, announced that a close Suharto aide would be its new commander-in-chief.

Army Chief of Staff General Wiranto, a 52-year-old career officer who served previously as Suharto's adjutant, was named to replace outgoing military chief Gen. Feisal Tanjung.

Under Indonesia's electoral system, Suharto, 76, is virtually guaranteed re-election in March to his seventh five-year term. The electoral college that votes in indirect elections has 1,000 members, all directly or indirectly appointed by Suharto.

Currency board idea floated
An announcement Wednesday that Indonesia wants to install a currency board may have kept the rupiah from falling more dramatically. The currency board is an inflexible system that glues the domestic currency to a convertible one, and ties the amount cash that can be in circulation to central bank reserves.

Still, Indonesia is likely to continue its financial roller coaster ride of the last few weeks. The World Bank and the IMF have expressed skepticism about the effectiveness of a currency board.

In addition, the United States has called for caution on Indonesia's plans to race ahead with a fixed-exchange rate currency. Treasury Secretary Robert Rubin said Indonesia needed to strengthen its banks and reaffirm its commitment to reforms before moving ahead with a currency board introduction.

Jakarta Bureau Chief Maria Ressa and Reuters contributed to this report.