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800 | <s>[INST] In Indonesia, the case [/INST] is complicated further by corruption and cronyism. </s> |
801 | <s>[INST] A rupiah value fixed well above the early Monday morning 9,400 or so to the U.S. dollar -- about [/INST] 5,500 to the dollar, Mr. Hanke is believed to favor -- would give the nation's wealthy elite, including Mr. Suharto's children and associates, a chance to trade their rupiah for dollars and deposit them overseas. </s> |
802 | <s>[INST] If they did so, interest rates [/INST] would climb and batter what is left of the economy. </s> |
803 | <s>[INST] In talk after talk in Jakarta [/INST] and Washington, Mr. Hanke has brushed aside the concerns. </s> |
804 | <s>[INST] Money will flow into Indonesia, not out, he [/INST] told a gathering of Indonesia's journalism union, thanks to new international confidence in the currency. </s> |
805 | <s>[INST] A currency board "is the [/INST] least risky option for the Indonesian economy," he says. </s> |
806 | <s>[INST] As for corruption, a currency board "completely takes [/INST] out the political element" from monetary policy, he explained in an earlier interview. </s> |
807 | <s>[INST] Recently Mr. Hanke met with a group of Indonesia's top economic [/INST] minds, led by Sumitro Djojohadikusumo, who, as a Suharto adviser, helped craft the long economic surge that preceded today's crisis. </s> |
808 | <s>[INST] After listening to the group's criticisms of the currency-board idea [/INST] for a short while, Mr. Hanke lost patience, says Mohammad Sadli, a former Suharto minister of mines and energy. </s> |
809 | <s>[INST] "If you don't listen, I'll [/INST] leave," Mr. Hanke said, according to Mr. Sadli. </s> |
810 | <s>[INST] "He said that he had work [/INST] to do and that [my criticisms] were simply nitpicking". </s> |
811 | <s>[INST] Former U.S. Ambassador to Indonesia Paul Wolfowitz says, "Hanke is basking [/INST] in the moment of his glory, but the great fear is that his plan is just too radical to work". </s> |
812 | <s>[INST] Mr. Wolfowitz heads the School of Advanced International [/INST] Studies at Johns Hopkins; Mr. Hanke is a professor of applied economics at the university. </s> |
813 | <s>[INST] Explaining how Mr. Hanke's Indonesian role came about, his business [/INST] colleague Mr. Friedberg says that early this month, Mr. Hanke told him simply, "The big man called". </s> |
814 | <s>[INST] A receptionist at the luxurious Shangri-La Hotel, where he is registered under the pseudonym [/INST] Simon Holland, says his room is booked by PT Astra International, an Indonesian conglomerate whose chairman is Mohamad "Bob" Hasan -- Mr. Suharto's oldest golfing buddy. </s> |
815 | <s>[INST] An Astra director, Rini Soewandi, accompanies [/INST] Mr. Hanke on some of his rounds in Jakarta. </s> |
816 | <s>[INST] Government officials say Mr. Hanke's first meeting [/INST] with Mr. Suharto was organized by the president's eldest daughter, Siti Hardiyanti Rukmana. </s> |
817 | <s>[INST] At a time when Indonesia's economy was failing to respond to the [/INST] bitter medicine the IMF had prescribed, such as budget discipline and the closing of failing banks, Mr. Hanke had a more optimistic message. </s> |
818 | <s>[INST] Instead of focusing only on painful economic reforms that could take [/INST] months to help, Mr. Hanke was saying he could get the country back on track in as little as three weeks. </s> |
819 | <s>[INST] Last week, he explained to 200 bankers at the [/INST] Jakarta Financial Club how currency boards had been used successfully from early 20th-century Russia to Bulgaria today. </s> |
820 | <s>[INST] He also mentioned that a solution to Indonesia's [/INST] problem of $74 billion in private-sector debt had come to him over coffee. </s> |
821 | <s>[INST] He offered no specifics but said [/INST] the problem "can be taken care of in a week". </s> |
822 | <s>[INST] IMF officials, deeply skeptical of such advice, say they [/INST] have been in three meetings with Mr. Hanke and concluded it isn't possible to budge him. </s> |
823 | <s>[INST] In one meeting, Mr. Hanke sparred with IMF special [/INST] envoy Prabhakar Narvekar, each trying to get the other to commit on paper to a plan. </s> |
824 | <s>[INST] Neither did, say participants, because each feared [/INST] the other would trash it during private meetings with the president. </s> |
825 | <s>[INST] In the first, Mr. Suharto seemed taken with the [/INST] Hanke plan, but during the second meeting, last Tuesday, the president indicated he was open to alternatives. </s> |
826 | <s>[INST] By Mr. Clinton's call on Friday, Mr. Suharto had bowed [/INST] further to pressure and said that the Hanke plan was only one of several he was considering. </s> |
827 | <s>[INST] The IMF appears to have succeeded in its immediate goal: Get Mr. Suharto to put off a currency [/INST] board for at least several months -- an eternity in the fast-moving Asian crisis -- while Indonesia cleans up the banking mess that the IMF believes is a major cause of the nation's problem. </s> |
828 | <s>[INST] Nevertheless, IMF officials complain that the Hanke [/INST] controversy has distracted them and their Indonesian counterparts from moving ahead. </s> |
829 | <s>[INST] One thing the IMF is currently trying to do is get Indonesia to make [/INST] its food subsidies for the poor a clear part of its budget, rather than hide them through currency gimmicks that the financially savvy could exploit for profits. </s> |
830 | <s>[INST] This week, the Fund [/INST] also wants to tackle Indonesia's debt-repayment problems. </s> |
831 | <s>[INST] Officials in Jakarta already are pointing [/INST] to progress made in recent days on some issues. </s> |
832 | <s>[INST] On Friday, Japan announced that it would provide [/INST] a $1 billion credit line for trade insurance for Japanese companies trading with Indonesian concerns. </s> |
833 | <s>[INST] Tokyo also announced plans to help [/INST] Indonesia deal with shortages of food and medicine, and Messrs. </s> |
834 | <s>[INST] Clinton and Suharto discussed [/INST] similar plans in their Friday telephone call. </s> |
835 | <s>[INST] A nagging row preventing bankers and debtors from beginning to tackle private-sector debt may also [/INST] be over, with all parties agreeing on David Brougham, a Hong Kong-based executive director of Britain's Standard Chartered PLC, to serve as chairman of the bankers' steering committee. </s> |
836 | <s>[INST] Even the dogged Mr. Hanke admits to [/INST] some doubts about whether his ideas will be adopted in Indonesia. </s> |
837 | <s>[INST] He told reporters on Thursday that [/INST] "speed is of the essence" in creating a currency board. </s> |
838 | <s>[INST] Asked if Mr. Suharto was going to heed [/INST] this advice, the American economic missionary responded: "You'll have to ask the president. </s> |
839 | <s>[INST] (See related letter: "Letters to the Editor: Assaulting the [/INST] Power Of Economic Havoc" -- WSJ March 17, 1998) Credit: Staff Reporters of The Wall Street Journal </s> |
840 | <s>[INST] ___ Document 197 of 500 Rally Round the Rupiah [/INST] Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 19 Feb 1998: A22. </s> |
841 | <s>[INST] accountid=28034 Abstract: Indonesia's rupiah has again been reeling, with [/INST] President Suharto and the International Monetary Fund dueling over how to save the country's battered currency. </s> |
842 | <s>[INST] Yesterday came hints of a potential compromise [/INST] that would mainly postpone the rescue -- and further damage Indonesia. </s> |
843 | <s>[INST] We'd like to suggest that there is a better solution [/INST] available, but only if the titans and technocrats of Indonesian finance would stop dickering long enough to notice. </s> |
844 | <s>[INST] The problem is this: Mr. Suharto wants to set up a [/INST] currency board, which would end massive market uncertainty about the value of the rupiah by automatically fixing it to the dollar. </s> |
845 | <s>[INST] The IMF fears that in Indonesia a currency board would be abused as an escape route [/INST] for capital belonging to the same set of Suharto family members and cron-ies who for more than three decades now have practiced skimming the cream off the Indonesian economy. </s> |
846 | <s>[INST] Beyond that, the IMF also worries that fixing the [/INST] rupiah to the dollar could send Indonesian interest rates high enough to vaporize the domestic banking system. </s> |
847 | <s>[INST] Full text: Indonesia's rupiah has again been reeling, with [/INST] President Suharto and the International Monetary Fund dueling over how to save the country's battered currency. </s> |
848 | <s>[INST] Yesterday came hints of a potential compromise [/INST] that would mainly postpone the rescue -- and further damage Indonesia. </s> |
849 | <s>[INST] We'd like to suggest that there is a better solution [/INST] available, but only if the titans and technocrats of Indonesian finance would stop dickering long enough to notice. </s> |
850 | <s>[INST] The problem is this: Mr. Suharto wants to set up a [/INST] currency board, which would end massive market uncertainty about the value of the rupiah by automatically fixing it to the dollar. </s> |
851 | <s>[INST] The IMF fears that in Indonesia a currency board would be abused as an escape route [/INST] for capital belonging to the same set of Suharto family members and cron-ies who for more than three decades now have practiced skimming the cream off the Indonesian economy. </s> |
852 | <s>[INST] Beyond that, the IMF also worries that fixing the [/INST] rupiah to the dollar could send Indonesian interest rates high enough to vaporize the domestic banking system. </s> |
853 | <s>[INST] So the IMF has been threatening that if Mr. Suharto goes ahead [/INST] with a currency board, the Fund will cut off the $43 billion rescue package it has been administering to Indonesia's stricken economy. </s> |
854 | <s>[INST] Even President Clinton has weighed in, phoning [/INST] Mr. Suharto last week to urge that Jakarta comply with IMF wishes. </s> |
855 | <s>[INST] Meanwhile, the folks bearing the brunt of this wrangle are ordinary [/INST] Indonesians, who desperately need enough economic stability so that they can again start to find work and feed their families. </s> |
856 | <s>[INST] Imagine if only someone could come up [/INST] with a way to at one swoop fix this whole caboodle. </s> |
857 | <s>[INST] Back in 1995, Argentina, which already had [/INST] a currency board, faced similar problems in defending the peso against speculative attack. </s> |
858 | <s>[INST] In that case, the IMF -- to its [/INST] credit -- helped back the currency board by helping to shore up the banks. </s> |
859 | <s>[INST] But what also made a [/INST] difference was Argentina's effort to help itself. </s> |
860 | <s>[INST] Knowing that even in crisis at least a few wealthy Argentines could rustle up cash if they wanted [/INST] to, Argentina's Economic Minister Domingo Cavallo set up a special patriotic fund to help tide the country's private banks through the bout of sky-high interest rates brought on by sticking with the currency board. </s> |
861 | <s>[INST] The beauty of this fund was that it called on [/INST] the wealthiest Argentines to put their money not into Swiss banks, but into defense of their country's economy. </s> |
862 | <s>[INST] Called the "fiduciary fund for bank capitalization," [/INST] Argentina's fund was designed to provide liquidity to banks during the crisis. </s> |
863 | <s>[INST] Argentine tycoons were asked to [/INST] show their patriotism by subscribing to this fund. </s> |
864 | <s>[INST] Everyone, including the patriotic tycoons, could concentrate again not [/INST] on hustling capital out of the country, but on making themselves and their nation rich. </s> |
865 | <s>[INST] Mr. Suharto could set up a patriotic [/INST] fund to tide domestic banks through the rigors of establishing a currency board. </s> |
866 | <s>[INST] He could ask Indonesia's own tycoons [/INST] to show their good faith by buying into it. </s> |
867 | <s>[INST] Such a deal would send a [/INST] clear signal that Indonesians have confidence in their own plans. </s> |
868 | <s>[INST] It would turn the cronies -- cause [/INST] of legitimate complaints about corruption -- into an asset in reviving the economy. </s> |
869 | <s>[INST] And Mr. Suharto would then be able to [/INST] remind the IMF that it backed this kind of arrangement in Argentina, with great success. </s> |
870 | <s>[INST] Conveniently enough, should Mr. Suharto go for [/INST] this idea, Forbes magazine published a listing last July of the world's billionaires. </s> |
871 | <s>[INST] In it we find a rundown of [/INST] Indonesians best fixed to pay into a patriotic fund to support the rupiah. </s> |
872 | <s>[INST] Topping the list is Mr. Suharto himself, who [/INST] last July was estimated by Forbes to be worth some $16 billion, from family businesses. </s> |
873 | <s>[INST] Next comes the Wonowidjojo family, with [/INST] a tobacco empire that last year was worth some $7.3 billion. </s> |
874 | <s>[INST] There are others, such as Liem Sioe Liong -- and his $4 [/INST] billion -- who have long presided over big chunks of Indonesian business, and would be well placed to recruit patriotic help now. </s> |
875 | <s>[INST] Not least, there is Mochtar Riady, who [/INST] in 1996 showed himself willing to help finance President Clinton's re-election. </s> |
876 | <s>[INST] Surely he could show at least as [/INST] much zeal for a project of financing the recovery of his own country. </s> |
877 | <s>[INST] Of course, Forbes calculated these Indonesian crony fortunes at last July's [/INST] pre-crash rupiah exchange rate of 2,400 to the dollar -- about four times what the rupiah has plunged to since. </s> |
878 | <s>[INST] But that devastation of the currency is exactly why Mr. Suharto and his rich family [/INST] and friends might find it worthwhile to put their dwindling fortunes into a fund to help a currency board restore the value and stability of the rupiah. </s> |
879 | <s>[INST] It's also the reason why -- for the sake [/INST] of the other 207 million or so Indonesians -- the IMF should give them the chance. </s> |
880 | <s>[INST] ___ Document 201 of 500 Argentina's Experience With Currency Board Suggests Indonesia [/INST] Must Endure Discipline, Pain Author: By Jonathan Friedland Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 13 Feb 1998: A12. </s> |
881 | <s>[INST] accountid=28034 Abstract: But what worked [/INST] for Argentina won't necessarily work for Indonesia. </s> |
882 | <s>[INST] Far from a quick fix, the Argentine experience shows the successful replacement of a traditional central bank with a currency [/INST] board -- which fixes an exchange rate and has the reserves in hand to fully back that rate -- requires iron political discipline and a willingness to sustain repeated and often severe economic pain in defense of the currency. </s> |
883 | <s>[INST] Indonesia's currency has lost as much as 80% of its [/INST] value over the past several months as currency speculators targeted Asian countries with growing current account deficits. </s> |
884 | <s>[INST] Efforts so far to restore confidence in the rupiah, including the announcement of a $43 billion International Monetary [/INST] Fund-led rescue program, have been undermined by policy waffling by Mr. Suharto and fears over the 76-year-old leader's ability to control growing ethnic and religious tension and to ensure an orderly succession process. </s> |
885 | <s>[INST] It is also a far cry [/INST] from where Argentina was when it adopted its currency board. </s> |
886 | <s>[INST] When Mr. Menem decided to fix the local currency [/INST] to the dollar, 50 years of mismanagement had gutted what had once been the world's seventh-largest economy. </s> |
887 | <s>[INST] Decades of profligate government spending covered up by a central [/INST] bank that did little more than print money had triggered a vicious cycle of devaluation and inflation. </s> |
888 | <s>[INST] Full text: BUENOS AIRES -- Seven years ago, President Carlos Menem [/INST] adopted the most inflexible of fixed-exchange-rate regimes to bring the Argentine economy back from the edge of an abyss. </s> |
889 | <s>[INST] That move is now widely viewed as a masterstroke [/INST] that has underpinned the country's transformation from perennial economic basket case to a darling of emerging-market investors. </s> |
890 | <s>[INST] Halfway around the world, President Suharto of Indonesia is contemplating [/INST] the same step as a means of shoring up the rupiah and reviving confidence in his country's beleaguered economy. </s> |
891 | <s>[INST] Far from a quick fix, the Argentine experience shows the successful replacement of a traditional central bank with a currency [/INST] board -- which fixes an exchange rate and has the reserves in hand to fully back that rate -- requires iron political discipline and a willingness to sustain repeated and often severe economic pain in defense of the currency. </s> |
892 | <s>[INST] "In Argentina, a currency board was a direct solution to [/INST] the main problem," says Adam Schwarz, a Council on Foreign Relations fellow who has lived in both countries. </s> |
893 | <s>[INST] "In Indonesia, it's only part of a solution to [/INST] a very complex set of problems and that in itself makes it less likely to succeed". </s> |
894 | <s>[INST] Indonesia's currency has lost as much as 80% of its [/INST] value over the past several months as currency speculators targeted Asian countries with growing current account deficits. </s> |
895 | <s>[INST] Efforts so far to restore confidence in the rupiah, including the announcement of a $43 billion International Monetary [/INST] Fund-led rescue program, have been undermined by policy waffling by Mr. Suharto and fears over the 76-year-old leader's ability to control growing ethnic and religious tension and to ensure an orderly succession process. </s> |
896 | <s>[INST] That is a far cry from a year ago, when Indonesia was being lauded [/INST] as a great economic success story and Mr. Suharto hailed as a visionary leader who managed to knit together a potentially fractious island nation of 200 million. </s> |
897 | <s>[INST] Over the past decade, Indonesia's economy grew more [/INST] than 6% annually, powered by investment in everything from car factories to petrochemical plants. </s> |
898 | <s>[INST] It is also a far cry [/INST] from where Argentina was when it adopted its currency board. </s> |
899 | <s>[INST] When Mr. Menem decided to fix the local currency [/INST] to the dollar, 50 years of mismanagement had gutted what had once been the world's seventh-largest economy. </s> |
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