[Congressional Record Volume 143, Number 155 (Friday, November 7, 1997)]
[Senate]
[Pages S12053-S12054]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              IMF AND US FINANCIAL ASSISTANCE TO INDONESIA

 Mr. FEINGOLD. Mr. President, I rise today to express my 
concern about the current financial crisis in Indonesia and the 
decision of the United States and the international financial community 
to provide bailout assistance.
  As you know, Mr. President, the International Monetary Fund announced 
on October 31 that it was putting together a $23 billion aid package 
for Jakarta. This money will allow Indonesia to defend its currency, 
which has depreciated severely in the last few months. The IMF, the 
World Bank, the Asian Development Bank, and the Indonesian government 
will together provide this $23 billion in financing.
  In addition to the IMF package, several countries, including the 
United States, are offering ``second-line'' loan guarantees that 
Indonesia can use if needed. The Administration has guaranteed a $3 
billion loan to Indonesia as part of the Treasury Department's exchange 
stabilization fund. This fund is the same one used to loan $20 billion 
to Mexico during the peso crisis of 1994 and 1995.
  Mr. President, I understand that the Administration hopes the $23 
billion IMF financing will be enough for Indonesia to overcome the 
present crisis and that Jakarta will not need to draw on the $3 billion 
``second-line'' loan from the United States. Nevertheless,

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American taxpayer money is being put on the line both through the 
direct loan guarantee and indirectly through the US contributions to 
the IMF, the World Bank, and the Asian Development Bank.
  While there is clearly a need to help avoid a financial collapse in 
Indonesia that could spill over into other areas of Asia and even to 
the United States, the US taxpayer has a right to know what kind of 
government they are helping to support.
  Mr. President, many of Indonesia's present economic problems are the 
result of rampant corruption and nepotism in the country. Indonesia is 
ruled by a single man, President Suharto, and his relatives and friends 
traditionally enjoy many business perks. Using their connections, this 
group has engaged in highly risky and speculative business deals that 
have exacerbated the present financial crisis. The Financial Times 
reports that of the 16 insolvent banks that Indonesia has been forced 
to close since last week, three are owned by Suharto's children, 
relatives, or close business associates. The link between the financial 
crisis and Indonesia's present political system, where power rests in 
the hands of Suharto's inner circle, is inescapable.
  The IMF has placed tough economic conditions on the $23 billion. To 
qualify for this funding, Indonesia must enact serious financial 
reforms, dismantle monopolies, and liberalize its trading regime. The 
IMF has also asked for greater transparency in Indonesia's business and 
financial markets. But I believe that the IMF and the United States 
should use the opportunity of this bailout to make all assistance 
conditional on Indonesia undertaking specific and verifiable measures 
to ensure that a newly structured system in Indonesia will be free from 
corruption and graft.
  In addition, I strongly feel that Indonesia's need for financial 
support gives the world community leverage to ask for long-needed 
political reforms. So long as Indonesia is run by a corrupt elite, its 
economy will never reach its full potential. The present authoritarian 
system has bred political instability that will ultimately limit 
Indonesia's economic potential. I read with alarm about the many riots 
and hundreds of deaths that occurred in Indonesia during the May 
elections. This is the result of a system that works largely for the 
benefit of President Suharto and his family.
  Finally, I am concerned about the role of the military in Indonesia, 
which has sustained a brutal occupation of East Timor for more than 20 
years. Press reports indicate that Indonesia maintains more than 20,000 
armed troops in East Timor. Just because President Suharto's government 
has boosted the economy in recent years does not mean it has the right 
to murder and torture Indonesians and East Timorese. Economic success 
does not excuse you from answering to your own citizens.
  Political tension in Indonesia will only subside after President 
Suharto initiates real democratic change and, for example, allows all 
parties to compete equally in the political process. Indonesian 
authorities try to argue that greater democracy will lead to 
instability which in turn will impede economic development. But, Mr. 
President, clearly the problem in Indonesia is not too much democracy, 
but too little.
  Mr. President, I urge the administration to use the influence it has 
in the IMF and the other international financial institutions to insure 
that this $23 billion package contains demands for real anti-corruption 
and political reform measures. At the very least, such conditions must 
be placed on the $3 billion direct loan the US has offered.
  These issues--of transparency, of human rights, and of good 
governance--are too important for the United States to ignore as we 
bail Indonesia out of this mess.

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