Price-hike retreat the start of Mega’s rough ride ahead


The Indonesian President will continue to face protests at home over a host of other issues.

What a difference 18 months can make.

When President Megawati Sukarnoputri took power, her rivals swore to a pact that would allow her to stay in office until 2004.

She also had the critical backing of the US and other countries.

But the relatively stable political tenure she enjoyed thus far seems to be crumbling under the weight of her price hike policy. It has emerged as one of the biggest thorns in her side since she took office in August 2000.

It is unlikely to strike a fatal blow to her leadership as international support has bought the 55-year-old President some time. However, her grip domestically appears to be weakening.

At the height of the demonstrations last week, Ms Megawati summoned her intelligence chief A.M Hendropriyono and military commander Endriartono Sutarto for a briefing.

A senior intelligence source said she became extremely agitated when the ‘doomsday scenario’ of the effects of the fuel and electricity price increases was painted to her-the mass riots were beginning to look like those in May 1998 that overthrew former president Suharto.

He said the intelligence brief made clear that an ad hoc coalition of political forces comprising Islamic radicals and remnants from the Suharto era, including retired generals, were using the price hikes as fodder. She was to fall by June. Intelligence circles here reckoned the coalition’s plan would get a boost if the US attacked Iraq as the street protests would escalate.

Military sources said the price hikes caused a rift in the armed forces (TNI).

A three-star general said army chief Ryamizard Ryacudu seemed to be taking a different tack from other officers in the military high command.

General Ryamizard, who sees Indonesia’s army as a ‘people’s army’, declared the TNI had ‘to listen to the aspirations of the masses’.

He had also gathered senior officers at the army headquarters to discuss the issue.

And some generals – active and retired – were already talking about ‘power-sharing arrangements with the police and civilians’ if the Megawati administration collapsed.

But observers believe that talk of a coup d’etat and mass violence in the capital are exaggerated.

It was enough, however, to force Ms Megawati – clearly aware this explosive issue was instrumental in toppling Mr Suharto – to roll back fuel and utility price hikes.

The key issue for Ms Megawati and her advisers was whether this would damage the government’s credibility and throw into doubt again its commitment to implement the International Monetary Fund (IMF) programme to cut state subsidies and narrow the massive budget deficit.

Jakarta has vacillated over the issue of price increases given fears of a domestic backlash.

While the climbdown may be well-received by the public, it could be a major issue with international donors, who began a two-day meeting yesterday in Bali with US$2.8 billion (S$4.8 billion) in aid on offer.

But such fears were laid to rest after the IMF and World Bank came out in support of Jakarta, saying they understood its decision to back down over the price hikes.

Sources said Jakarta had explained to the US and other key donor countries the danger for the government in pushing ahead with the policy now.

The President won an important reprieve from the international community that might have feared that a collapse of the current government could do more harm than good for Indonesia.

Will she get equal breathing space at home?

Intelligence sources say she will continue to face demonstrations over a host of other issues besides price hikes.

The groups sponsoring them are intent on unseating her, but are unlikely to succeed now.

Her rivals are operating from the fringes. They can cause uncertainty and mischief on the streets that can prove destabilising.

They cannot, however, generate the political momentum to overthrow her without the backing of the principal actors in Indonesia.

Ms Megawati still has the generals on her side despite some disquiet among the senior ranks. They are unlikely to engage in a coup that could invite an international backlash.

The political parties are still holding on to a consensus to keep her in power until 2004. But some of them will continue to needle the administration periodically.

It is open season in Indonesia after all. The next 18 months are going to be even more turbulent for the President.


If she had dug in her heels on the price hikes, she risked alienating some of her generals and fuelling more talk of a coup


But backpedalling on the hikes means weakening her credibility abroad and making the budget deficit even worse

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