Students Rally As Indonesia Cabinet Is Sworn In

Indonesian police beat back students staging a campus protest against President Suharto yesterday as he installed a new cabinet to deal with the countrys worst economic crisis in decades.

Police baton-charged about 100 students at the gates of the National University in Jakarta. Students retreated on to the campus hurling stones back at the police. No one appeared to be seriously hurt.

Thousands of students also held a protest rally in Surabaya against the cabinet line-up, but there was no violence, witnesses said. Students charged the autocratic former army general with nepotism.

Suharto, 76, swore in 36 ministers at the presidential palace in Jakarta, including his eldest daughter, Siti Hardiyanti Rukmana, and an old golfing buddy whom he has named trade and industry minister.

 

Economic analysts said the line-up indicated he was on a collision course with the International Monetary Fund, which has drawn up a $40 billion rescue package for Indonesia in exchange for reforms.

Suharto has been at odds with the IMF over the reform programme, much to the consternation of the worlds major industrialised nations, which have rushed top officials to the country to try and persuade the president accept the programme.

Eisuke Sakakibara, Japans vice finance minister for international affairs, stayed behind after a weekend visit by Prime Minister Ryutaro Hashimoto for talks with the new ministers, diplomats said.

US treasury under-secretary David Lipton was in discussions with ministers to get a better understanding of where the economy is, one diplomatic source said. Klaus Regling, director general of Germanys finance ministry, was also holding talks with Indonesian officials.

Both the US and Japan, which have contributed to the rescue package, have expressed concern at developments in Indonesia and its differences with the IMF.

Both nations, and the IMF, have repeatedly urged Suharto to implement the reforms and drop plans for adopting a currency board to fix the rupiah to a single rate, which they say would be impossible to maintain.

But Suharto, desperate to strengthen the rupiah which has fallen 70 per cent since July, has dragged his feet on the reforms and questioned their contribution towards helping the economy recover.

The currency crisis has triggered roaring inflation and widespread unemployment and left many companies technically insolvent. Sporadic riots broke out last month because of rising prices of food and trade is at a virtual standstill.

Vice-President Jusuf Habibie, a Suharto protege named to his post last week, told Japanese politicians that Indonesia could implement all but two provisions in a 50-point programme agreed with the IMF in January in exchange for bail-out funds, Japanese media said.

He was quoted as telling Taku Yamasaki, policy chief of the ruling Liberal Democratic Party, and others accompanying Hashimoto to Jakarta that Indonesia would like to implement all the reforms but not anything which would be against the constitution.

Habibie said 40 of the reforms could be implemented soon and eight others could be adopted after some revision. But he said monopolies on the spice trade and on agricultural products other than rice could not be scrapped, the Nihon Keizai Shimbun newspaper said.

Hashimoto left Jakarta after a 2-1/2 hour meeting with Suharto on Sunday. Both sides said they had agreed on the need for some flexibility in the IMF programme.

Hashimoto also quoted Suharto as saying he too would be flexible, but there were no specific details on what the president planned to do.

Mitsuo Sato, the president of the Asian Development Bank (ADB), said in Manila that it was unlikely there could be any flexibility in structural reforms.

When it comes to the question of so-called structural adjustment, which is more important in this kind of crisis...I dont think much flexibility can be justified, he said.

The ADB and the World Bank are both party to the reform programme along with the IMF.

IMF officials are in Jakarta to conduct a review on the reforms before releasing the second $3 billion tranche from the bail-out. They will be joined today by Hubert Weiss, the director of the agencys Asia-Pacific operations.

Political analysts say Suharto has sent signals he intends to got it alone on efforts to revive the economy, pointing to the ambivalent comments made by Hashimoto after the meeting and the make-up of his cabinet.

Suharto appointed his eldest daughter as social welfare minister and golfing buddy Mohamad Bob Hasan, who controls the lucrative timber trade, to the trade and industry ministry.

He chose Ginandjar Kartasasmita, a fierce nationalist who criticised the IMF earlier this month, as the coordinating minister for the economy.

Yesterday, Suharto led the 36-member cabinet in reciting the pledge to the constitution. The ministers are to hold their first full meeting today and some analysts have said policy decisions on how to pull Indonesia out of the crisis may be discussed.