Saturday, February 21, 1998
As the regional currency crisis drives Indonesia closer towards social chaos, the search for someone to blame intensifies. LOUISE WILLIAMS reports.

AT THE beginning, a couple of hundred university students were marching down the dusty, main street of the coastal city of Kendari, on the island of Sulawesi, shouting angrily about rising food prices and gathering supporters along the way.

By Thursday night, according to residents huddled in their homes, up to 10,000 people were rioting in the streets, a six-kilometre ribbon of shops and offices lay in ruins, hundreds had been arrested and the local police and military officers remained hopelessly outnumbered as the rampage continued.

"The city is completely paralysed," said one resident, contacted by phone. He said troops had already used teargas against the crowd, but the demonstrators had just come back.

At first their targets were the shops and homes of the ethnic Chinese, Indonesia's minority which dominates business and trade. Later, they began to attack any symbols of economic power as their rage over the long months of drought, and skyrocketing prices, exploded on the streets.

A policeman's wife said the unrest had begun five days ago and her husband had not been home since. She was worried about his personal safety but she understood the protests, she said. Another resident wanted to join the demonstration, but had been too scared to venture out.

"Just one packet of milk has gone up from 8,000 rupiah ($1.30) to 50,000, can you imagine how hard it is?" the policeman's wife said.

Kendari is on the isolated eastern coast of Sulawesi, far from the strategic industrial centres on Java and Sumatra. Jakarta is secured by 25,000 troops, and a ban came into force this week outlawing public gatherings of more than 30 people in an attempt to prevent street demonstrations in the capital.

But the reality is that rising prices are forcing millions upon millions back into the poverty they thought they had escaped after three decades of hard work and steady economic growth.

Since thousands attacked ethnic Chinese shops and homes on Java, Lombok, Sumatra and Sulawesi last weekend, Indonesia's economic crisis has shifted one step closer to social chaos and bloodshed. Five people died when troops opened fire on rioters in central Java and Lombok, and dozens were injured.

The emotional toll on communities which have witnessed the torching of Chinese homes by angry Muslim mobs is more difficult to assess. But behind every triumphant looter carting off his booty is a personal story of fear and loss.

The unleashing of ethnic scapegoating, in a nation still nursing the scars of the communal massacres of 1965 which left 500,000 Communist sympathisers and ethnic Chinese dead, is a dangerous card to play.

On both the political and economic fronts, President Soeharto appears to have dug in his heels, closing off any option for dialogue with the new poor, the sacked labourers or the pro-democracy activists from the middle class, and effectively turning the crisis over to military control.

The Government has announced cheap food supplies will be trucked into hard-hit areas and is using soldiers to assist in rice distribution, but their efforts have only dented the impact of the economic downturn.

For the time being, soldiers and police have stood by watching the crowds torch and loot the shops of the relatively wealthy Chinese, their rage and despair diverted by the easy identification of a scapegoat.

For tens of millions of ordinary Indonesians the crisis is merely about food prices, many of which have jumped more than 100 per cent this week. So unstable are the prices and supplies of basic goods that a major wholesaler printed its catalogue with pictures of specials but no prices marked.

As they picked through the smouldering remains of the main street of Pamanukan in West Java earlier this week, the looters loudly blamed the Chinese shopkeepers for raising the prices of staple goods, unaware of the mechanisms of imported inflation caused by the fall of the rupiah, or the massive foreign debt burden pushing the corporate sector to the brink of collapse.

But, once the Chinese shops are burnt and life does not improve, the key question is whether the protesters will turn on the Government and the armed forces, and who will lead them if they do.

"What we are looking at now is the momentum, whether this will move from economic rioting to political opposition," said one Western diplomat.

The outgoing armed forces commander, General Feisal Tanjung, announced this week that if mass protests turned brutal then the military would use "repressive actions". In East Java, where the food riots first began last month, the military spokesman announced that shooting rioters on sight was a "justifiable" action.

This week all political parties in the rubber-stamp Parliament, plus the powerful armed forces, endorsed President Soeharto's choice for Vice-President, Dr Jusuf Habibie, giving the controversial Technology Minister an uncontested run for the second spot in next month's presidential polls. President Soeharto is expected to be elected unopposed for a seventh five-year term.

Dr Habibie's candidacy had been widely opposed by the international business community and the first mention of his name last month sent the battered rupiah plunging to a historic low of 17,000 to the US dollar, from 2,400 in mid-1997. Dr Habibie is best known for his ambitious high-tech industries such as the national jet project which has soaked up hundreds of millions of dollars of state funds and is managed by his son.

But, Dr Habibie is a close and trusted ally of President Soeharto and as the country slides further into recession, the President appears to be flexing his muscles to prove that not only can he still do what he wants, but that he is still clearly in control of the key institutions which run Indonesia - the armed forces and the bureaucracy.

In his first public speech, the incoming armed forces commander, General Wiranto, warned the public not to expect any changes, saying the armed forces were strongly behind President Soeharto.

The nomination of Dr Habibie, said political scientist Soedjati Djiwandono, "illustrates how dysfunctional, paralysed and ossified the present political system is in Indonesia".

He said the attempts by the Government to portray the riots as the work of "certain parties" to spread hatred against the Government, is "to fail to read and grasp the political mood of the people".

Mr Soedjati said: "Why have corruption, collusion and nepotism been rampant at the expense of the weak and the poor? Because there is no mechanism of effective control in the political system. Those in power can do anything they want and get away with it."

President Soeharto also announced that he would probably do anything he wanted with the economy, pointing his finger at the International Monetary Fund and accusing it of failing to halt the economy's slide.

Some analysts believe that President Soeharto is not only confident in his belief that he is indispensable as the national leader but that Indonesia, in terms of both regional security and economics, is a pivotal state and, as such, cannot be allowed to fail.

His plan for a currency board, which gambles most of the remaining foreign reserves in a bid to establish a favourable fixed exchange rate for the rupiah against the US dollar, has faced widespread international criticism. But some insiders say the President does not believe the IMF will go through with its threat to withdraw its $US43 billion ($64.5 billion) rescue package if he pushes through with the currency board, on the grounds that a total meltdown in Indonesia would send shock waves through the regional economies and could even trigger a world recession.

"Nothing is for certain right now and this creates tension among the people; even after the presidential election we are not sure about the economy," said the retired General Hasan Habib, a former ambassador to the US and representative on the IMF.

For the armed forces, he said, the biggest threat was to national unity as conspiracy theories and rumours blamed the crisis on the Chinese, the IMF, the Americans, foreign speculators, offering scapegoats to the dispossessed.

However, General Hasan said the opposition forces in Indonesia remained in disarray and faced a united armed forces.

Pro-democracy activists agreed that Indonesia has failed to produce an opposition with a common platform, partly because opponents of the Soeharto regime have been routinely imprisoned or cowed and partly because the opposition is divided by religion and race.

Unlike in the Philippines, where the Catholic Church united behind the opponents of the Marcos regime, Indonesia's majority Muslim religion remains divided.

Outspoken Muslim leader Amien Rais, who heads the 28-million-strong Muhammadiah, has forged a loose alliance with the pro-democracy figurehead Megawati Soekarnoputri. But the union remains uneasy as many of Mr Rais's followers want a more Islamic nation and Ms Megawati's followers are historically drawn from the nationalistic middle class, many of whom are Christians who feel threatened by the rise of Islam in Indonesia.

One former student activist agreed about the weakness of Indonesia's political opposition, but warned that riots and random violence would escalate without a formal channel for people's frustrations.

He agreed that Jakarta was currently safe and well protected. "But, just wait until a Mercedes driven by a Chinese hits a Muslim boy on a bike, then anything can happen."