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A slow metamorphosis to liberal markets

Robison, R. (1999) A slow metamorphosis to liberal markets. In: Aspinall, Edward, van Klinken, Gerry and Feith, Herb, (eds.) The last days of President Suharto. Monash Asia Institute, Clayton, Victoria, pp. 2-4.


The big question about Indonesia's currency meltdown is whether it represents a genuine watershed in the evolution of its markets, business and politics. Are we seeing the final unravelling of a system of capitalism so long dominated by powerful bureaucrats and by predatory alliances of political families and private conglomerates? Is this the end of markets in which the currency of success is political power and monopolies and licences? Free market economists see the currency crisis as the discipline that global markets impose in response to excessive growth in money and credit, ballooning ' foreign debt and corporate leverage, and an absence of rules for disclosure and transparency. In Indonesia's case, there is a belief that the government is genuinely' ready to reform. Stanley Fischer, the IMP's second-ranking senior official remarked of the Indonesian government negotiators: 'This is a group of guys who want to get reforms done.' Goodwill aside, the Indonesian government and business seem in no strong position to resist. Although foreign reserves and export capacity are strong, the blowout of the($US60 billion (AU$86.1 billion) public debt resulting from rapid, currency depreciation has imposed new fiscal strains as the debt servicing burden rises. Private debt appears to be much more than the official $US55 billion estimate because of unreported debt incurred between the corporate sector and the overseas financial institutions who rushed to funnel funds into highly geared and dubious projects. Some predict that non-performing loans of Indonesian banks will jump towards 20% of total loans in 1998, reaching $US19 billion.

Publication Type: Book Chapter
Murdoch Affiliation: Asia Research Centre
Publisher: Monash Asia Institute
Copyright: Monash Asia Institute
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