Indonesia Crisis Wreaks Havoc on World Markets

By Hill, Patrice | The Washington Times (Washington, DC), January 10, 1998 | Go to article overview

Indonesia Crisis Wreaks Havoc on World Markets


Hill, Patrice, The Washington Times (Washington, DC)


Stock markets from Jakarta to Wall Street nose-dived yesterday, defying attempts by the White House to stanch the crisis of confidence precipitated by Indonesia's financial turmoil this week.

Investors largely dismissed a pledge yesterday by Indonesian President Suharto to carry out the economic reforms demanded by the West in return for about $40 billion in aid. The pledge was issued at President Clinton's urging to stop an exodus from the country's stock and currency markets.

Indonesia's currency rose in response to the White House effort, but its stock market continued to fall, and markets in Asia, Europe and the United States tumbled anew on fears of spillover effects. The Dow Jones Industrial Average lost 222 points, ending its worst week this decade on the Indonesian-inspired turmoil.

High-ranking Clinton administration and International Monetary Fund officials are heading to Indonesia today on a mission to win the Indonesian leader's agreement to speed up belt-tightening requirements demanded by the international lending agency.

If Suharto agrees, then the IMF and the United States may accelerate payments in a $40 billion rescue package, as they did two weeks ago with South Korea.

Deputy Treasury Secretary Lawrence Summers and the two top officials of the IMF, Managing Director Michel Camdessus and his deputy, Stanley Fischer, are rushing off to Jakarta, the Indonesian capital, in part because of fear that the economic crisis could produce civil unrest in the world's fourth-most-populous country, which has more than 200 million citizens.

Defense Secretary William S. Cohen also travels to Asia today, with stops planned in seven countries, including Indonesia and South Korea.

Realizing that the Indonesian crisis was threatening to trigger social upheaval and endanger stability, Mr. Clinton had telephoned Suharto late Thursday to stress the importance of sticking with reforms prescribed by the IMF.

Mr. Clinton also called Singapore's Prime Minister Goh Chok Tong, whose nation has close ties with Indonesia and is suffering the most from its neighbor's economic maladies, and dispatched top national security and economic aides to Jakarta.

"Indonesia is serious about carrying out the plan," Indonesian State Secretariat Minister Murdiono told reporters after Mr. Clinton's call.

"Suharto really knows that there had been panic among the population," he said. "President Clinton believes that under the leadership of President Suharto, the Indonesian nation will be able to overcome these difficult conditions."

The White House effort comes amid signs that Indonesia's economic crisis is creating social unrest there and could turn into a political crisis.

The steep fall of Indonesia's currency early in the week sent panicky buyers into the nation's supermarkets to strip shelves of sugar, rice and other staples, and sparked unfounded rumors of a military coup. Murdiono said the ailing president ordered the quick distribution of food supplies to avoid more panic.

Yesterday, calm returned to the streets of Jakarta. About 20 students staged a peaceful protest downtown, demanding solutions to the crisis and a new president and Cabinet. The military made a statement apparently aimed at bolstering Suharto.

"The situation is now safe and stable. People shouldn't worry," armed forces spokesman Brig. Gen. A. Wahab Mokodongan said, warning the media not to spread false claims of unrest and political instability. …

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