>Date: Thu, 20 Jan 2000 06:18:15 -0500 >To: <[EMAIL PROTECTED]> >Reply-To: [EMAIL PROTECTED] >Status: > >STRATFOR.COM Global Intelligence Update >20 January 2000 > > >Unrest Threatens Indonesian Bailout > >Summary > >Shortly after Singapore announced a $1.2 billion investment plan >for Indonesia, a Singaporean firm threatened to close its >facilities on the island of Bintan following several days of social >unrest. The events in Bintan are symptomatic of the difficulties >Indonesia is facing in attracting foreign investment. Indonesia's >dilemma is that it is counting on foreign investment to solve the >nation's social and political problems, and those problems are >keeping the investment away. > >Analysis > >A protest on the Indonesian island of Bintan that began Jan. 15, >led to a two-day shutdown of a Singaporean-operated industrial >park. The industrial park's management threatened that further >disruptions would lead to the permanent closing of the facility. >The two-day shutdown occurred just days after Singapore's >announcement of a $1.2 billion investment plan designed to >stimulate further investment and help stabilize Indonesia's >shattered economy. The events in Bintan demonstrate the ongoing >challenges facing the Indonesian government at a time when the >country is desperately seeking foreign capital. > >President Abdurrahman Wahid has said that foreign investment would >be the key to the future of Indonesia's economy. Even Vice >President Megawati Sukarnoputri >[http://www.stratfor.com/asia/specialreports/special33.htm] has >emphasized the importance of foreign assistance in rebuilding >Indonesia. > >Within Asia, Wahid's administration has particularly targeted >Japan, South Korea, Hong Kong and Singapore as sources for >investment and assistance. In addition, Indonesia is courting >Europe and the Middle East for needed funds. However, despite >several reassuring nods, including U.S. agreement to give $80 >million in aid in 2000, Singapore remains one of the few nations to >offer any substantial investments in Indonesia. > >Singapore's $1.2 billion plan, however, is overshadowed by the >estimated $80 billion or more withdrawn from Indonesia by ethnic >Chinese businessmen fleeing social and political unrest at the end >of Suharto's regime. Even with Singapore's vote of confidence in >the stability of the Indonesian investment climate, it remains >unlikely that much of this money will return to Indonesia soon. > >While Indonesia looks to the international community for financial >assistance in resolving its problems, the domestic unrest remains a >major hindrance to substantial new foreign investment. Not only >does the threat of violent protests and demonstrations, as well as >separatist battles, frighten away foreign money, but widespread >corruption within Indonesia continues to discourage investment. > >A prime example is the U.K.'s Standard Chartered Bank PLC pullout >in December 1999 - because of a political corruption scandal - from >a planned 20 percent stake in Indonesia's Bank Bali. Standard >Chartered's withdrawal came just after a visit to Indonesia by a >British business delegation that expressed confidence in >Indonesia's government and in the country's chances for change and >recovery. > >This leaves the Indonesian government in a quandary. It has already >admitted that corruption runs deep and that the rapid removal of >corrupt elements within the government will do more harm than good. >In addition, a major cause of Indonesia's unrest stems from >economic disparities among its regions, something that can, in >part, be remedied by an influx of foreign funds. > >As it nears its 100-day benchmark, Wahid's government remains stuck >in a cycle whereby it is counting on foreign investment to allow it >to tackle its internal troubles. Indonesia must solve these >internal issues before investors will gain confidence in Indonesia. >It remains to be seen whether Indonesia's troubles will cause >investors to lose interest, or whether Indonesia's strategic >position in the region will trigger a push from foreign nations to >invest and stabilize its position. > > > > > >(c) 2000, Stratfor, Inc. http://www.stratfor.com/ > > >-- >Macdonald Stainsby > >check the "ten point platform" of Tao at: http://new.tao.ca > >"We believe that socialism is the fairest system and we >are devoting our lives to it, but we have to demonstrate its >viability. It has always been a complex process, even though we >thought it would be easy. We have lived under pressure from the >start, and more so today, but we are not going to give up. That would >be crazy." >-Raul Castro, General of the Cuban Army, 1999. > > > > > __________________________________ KOMINFORM P.O. 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