Tension rises in Indonesia as people left hungry

Two slim young mothers in bare feet, each holding a baby boy, stood on the edge of the small crowd gathered in a north Jakarta truck yard on Wednesday to welcome World Bank President, Mr James Wolfensohn. Not that Tina and Maemunah had any idea who he was or why he had come to their poor Kalibaru suburb. Smiling gracefully as Indonesians do even when life treats them cruelly, they explained that they just were hanging around in the hope that someone might be giving out rice.

These are the people who feel the full force of Indonesia's economic collapse. The two women each earn about 7,000 rupiahs (less than $1) a day selling cooked rice and this sum is fast depreciating as prices shoot up.

"An egg used to cost 250 rupiahs, now it is 400," said Maemunah. "Rice was 1,000, it went up to 1,500." Tina, whose husband died in a motor-cycle accident, continued the list: vegetable oil was up from 1,500 to 4,000 a litre; milk from 2,300 to 3,000, she said.

The World Bank chief arrived in an air-conditioned coach, tearing off his tie as he emerged into the thundery heat to inspect a canal-cleaning operation partly funded by the World Bank to provide employment.

If the International Monetary Fund chairman, Mr Michael Camdessus, is the bad cop, pushing Indonesia into harsh and rapid reforms in exchange for an international bailout, then the avuncular Mr Wolfensohn, with his silver hair and twinkling eyes, is the good cop, seeking to redress the pain while achieving the same result.

The World Bank broadly supports the IMF measures, Mr Wolfensohn said at the start of his current Asian tour. They "put a tourniquet around the bleeding arm". But he is concerned that rapidly rising unemployment and growing poverty could undermine political support for the reforms throughout a devastated south-east Asia.

Already there have been riots in Indonesia and stiffening opposition in South Korea to layoffs resulting from IMF reforms. The World Bank is considering allocating $9 billion (£6.4 billion) to emergency job creation and protecting the poor, some of which would come from pre-crisis projects.

However, in his quest to show the caring face of international finance, Mr Wolfensohn had to face furious criticism from those in Indonesia who believe that the financial crisis engulfing south-east Asia has seriously damaged the credibility of the World Bank.

Indonesia was always regarded as a model country by the World Bank, which is owned by 180 governments and must stay out of politics. But a forum of independent economists and non-governmental organisations confronted Mr Wolfensohn in a Jakarta hotel earlier that day and accused him of not only getting Indonesia wrong, but contributing to a political crisis by giving over-optimistic forecasts which lessened pressure on the Suharto government to introduce crucial reforms.

"Until very recently the bank has assumed a largely uncritical stand with regards to Indonesian government policy, and backed its continuous praises with annual infusions of financial support," a group of independent economists told him. They had long warned of the dangers of huge current account deficits supported by an over-valued rupiah, lack of enforcement of prudent regulations in the banking sector, and heavy reliance on short-term foreign borrowings. Yet the World Bank, even up to July 1997, still took an over-optimistic view of Indonesia's economic prospects, and encouraged over-confidence among domestic and foreign investors.

Misappropriation of World Bank funds in Indonesia was routine they claimed. Its funds went missing each year but the bank "was willing to suppress information and analyses that presented Indonesian development efforts in an unfavourable light". And all the time the Indonesian public was excluded from information about project selection, formulation, supervision and evaluation. The people should not carry the burden of corrupt practices which the bank failed to monitor. With the downfall of Indonesia, it was time for the World Bank to change course, Ms Zoemrotin Soesilo, chairwoman of the forum's steering committee told Mr Wolfensohn. She accused the bank of increasing its support for President Suharto's government "even though, quietly, the bank knows that the government was losing its own people's confidence due to corruption and collusion". There is no question that the World Bank was severely embarrassed by its over-optimistic reports on south-east Asia, especially Indonesia, and all Mr Wolfensohn could do was beat his breast and acknowledge that they didn't get everything right in the past.

"There's really no point in the middle of this crisis trying to decide `who shot John'," he protested to journalists. "If wrong I will write 100 times `We were wrong'." The fact was that he and his colleagues had raised corruption regularly as "we believe corruption is the biggest cancer wherever it exists".

The immediate priority for the World Bank was to focus on the practical issues in Indonesia, Mr Wolfensohn went on. He listed these as restructuring banks and financial systems, alleviating unemployment, ensuring the security of basic staples like rice, soy beans, wheat and sugar, and guaranteeing the provision of medical supplies. To his surprise, he said, he had just discovered that the 220 pharmaceutical companies in Indonesia imported 90 per cent of their raw materials, and could not continue to do so because of the devaluation of the rupiah.

The main concern, however, was that many many millions could lose their jobs because of the crisis. Indonesian officials expect unemployment to reach 13.5 million this year, almost 15 per cent of the workforce, with more than half the country's workers under-employed. "In Asia there isn't the sort of social welfare programme that exists in the west. There is no safety net to catch you," he said. That was why he said he was particularly pleased to visit Kalibaru and see for himself the canal-cleaning operation.

At every level Indonesians will suffer. Watching Mr Wolfensohn from a distance was a skinny dark-skinned man with a scraggly moustache, called Taufik. His job is laying plastic irrigation pipes in fields. A short length of pipe had gone up from 3,500 to 7,000 rupiahs, he said, showing the thickness of the pipe with his fingers. Many of his customers couldn't afford that and would grow less, he said. He shook his head despondently. "Maybe the World Bank will help me," he said, smiling, as a crowd of listening children broke into giggles.