FOR IMMEDIATE RELEASE
May 14, 1998

Roots of Turmoil in Indonesia
Extend Far Beyond Financial Crisis

The financial earthquake shaking Indonesia has uncovered far deeper-and more dangerous-fault-lines in the social and economic structure of the world's fourth-most populous nation than most international observers and investors have recognized, reports an article (full text available online) in the May/June 1998 issue of World Watch magazine. The collapse of the Southeast Asian giant's currency and stock prices caught the world greatly by surprise during the past year, but some of the pressures that led to that collapse have been building for decades.

These pressures, which include rapid depletion of forests and topsoil, exploitation of indigenous communities and their lands, and violent repression of student, human-rights, and labor activists, are responsible for a civil instability that has-until now-remained veiled beneath the heavy hand of military control. With vast regional, ethnic, and political disparities underlying the country's rapid development, relatively few Indonesians have seen the majority of the benefits from recent growth. "One result of Soeharto's development strategy is that an entire generation has been left to languish with little hope for participation or incentive for advancement," writes author Curtis Runyan.

By standard indicators, Indonesia has been a developmental paragon, ascending in 30 years from one of the poorest nations in the world to one of the World Bank's "Big Five" developing nations. Before the financial crisis hit at the end of 1997, international investors had poured $59 billion into the country's stock market, and the World Bank had praised Indonesia's model of development as "one of the best in the developing world."

But the financial collapse has raised new doubts about Indonesia's development practices. Among the more egregious examples cited in the article:

• IMF director Michel Camdessus was astounded to find that none of the country's multi-billion dollar reforestation fund had been used to fight the 1997 forest fires that ravaged 2 million hectares and incurred an estimated $1.4 billion in costs to health, industry, and tourism. Camdessus found that the money had been spent on a pet project of President Soeharto's youngest son to build a national car.

• Indigenous tribe members in West Papua (Irian Jaya) have filed a $6 billion dollar suit in U.S. courts against U.S.-based Freeport McMoRan's $60 billion Grasberg copper and gold mine, the richest mine in the world. The suit claims that indigenous lands and local rivers have been dangerously polluted by the nearly 165,000 tons of crushed ore the mine flushes down the river each day. While Freeport made $1.9 billion in revenues and $175 million in profits from the mine in 1996, "local tribal communities have received little compensation for their lands," says Runyan. In addition, security forces have brutally repressed and killed hundreds of opponents of the mining operation.

• Indonesia's "transmigration" program, established to alleviate population pressure on the island of Java, has relocated more than 3.6 million people to the "outer" islands. While doing little to reduce Java's population, transmigration has worsened poverty for both host communities and migrants, and has been a source of increasing social unrest. The program has low success rates; in many cases 40 to 50 percent of settlers have simply abandoned sites. In addition, transmigrants have cleared more than 4 percent of the country's forests-3.7 million hectares.