Red Alert: Indonesian Capital Flight Potentially Compounded by Habibie's Communist Remarks
Summary
Fears of capital flight have resurfaced in Indonesia, with the head of the Jakarta branch of the Indonesian Chamber of Commerce warning that 25,000 Indonesian businessmen have fled the country and many more will leave before the elections in June. The focus once again is on the ethnic Chinese, who - despite being a small percentage of the population - control a major part of the economy. The government's attempts to persuade businessmen not to leave Indonesia in the days prior to the elections have seemingly been to little avail as there are several factors raising tensions that will lead to their departure. Aside from the potential for new mass demonstrations to commemorate the shooting of four students last year that in turn led to riots and eventually former President Suharto's downfall, President B.J Habibie has now warned that Communists and Socialists are responsible for the social and political unrest in Indonesia. This is sure to raise concern among Indonesia's ethnic Chinese communities, which were targeted just prior to Suharto's ascension to power in a nationwide crackdown on Communists.
Analysis
The May 5 edition of Bisnis Indonesia cited Pungky Bambang Purwadi, Chairman of the Jakarta chapter of the Indonesian Chamber of Commerce, as warning that large numbers of businessmen have already fled Indonesia and the numbers will certainly grow as the elections draw nearer. Purwadi said as many as 25,000 businessmen have already left Indonesia, and "We estimate that a total of 500 million dollars were already taken away by fleeing businessmen." Purwadi added, "The number of businessmen fleeing Indonesia before the elections will rise further," with many of them coming from the ethnic Chinese community. Purwadi's comments are remarkably similar to those made by Indonesian Investment Minister Hamzah Haz in an April 14 Media Indonesia article, where he warned that 25,000 ethnic Chinese may soon leave the country, taking with them 500 million dollars. In the same report, other sources estimated that as much as 80 billion dollars had already been taken out of the country.
The fear of capital flight, especially by the economically influential ethnic Chinese minority, is a serious issue in Indonesia (Stratfor AIU, April 16, 1999, Volume 2, Number 73). While the Indonesian government has been urging Indonesian businessmen not to leave the country with their money in the run up to the elections in June, it appears that even larger numbers are preparing to leave. There is little trust in the ability of the security forces to keep the peace in Indonesia during the campaigning as evidenced by the numerous barbed wire-topped barricades being erected around shops in Jakarta. The ethnic Chinese are most concerned about a return of violence as their businesses and homes were targeted one year ago during the massive riots that led to the fall of the Suharto government.
President B.J. Habibie made comments on May 4 that could well increase the concern in Indonesia's ethnic Chinese communities. Speaking with members of the Moslem Muhammadiyah Youth Movement, Habibie warned that Communists are behind much of the unrest in Indonesia. According to Najamuddin Ramly, General Chairman of the Central Executive Board of the Muhammadiyah Youth Movement, Habibie said there was a movement - referred to as KOMAS - of Communists, Marhaenists (an Indonesian version of Socialists), and Socialists, that was working toward the disintegration of Indonesia. Najamuddin quoted Habibie as saying, "This movement employs all means and disregards ethics. They want to seize power by all means." Najamuddin added that Habibie told him that KOMAS was behind riots and bombings in Indonesia, and, "They have tried to induce the so-called popular platform but have disregarded ethics."
On the surface, Habibie's comments seem little more than an attempt to put a label on the mysterious "third force" operating in Indonesia and triggering unrest around the country. There have been may other explanations for the makeup of the third force, the most prevalent being the supporters of Suharto. All sides in Indonesia, including the military, government, and opposition have promoted the idea of provocateurs at work. Both the military and the Free Aceh Force have blamed the May 3 events in Aceh on provocateurs. The killings of four students on May 12, 1998, which triggered the massive wave of riots that left 1200 dead was also blamed on a third party.
Habibie's suggestion that KOMAS is the third force, however, will undoubtedly raise even more concern from the ethnic Chinese community. The Habibie government has tried to woo Indonesia's Chinese by eliminating discriminatory laws and emphasizing the need for all Indonesians to work together. Habibie, in an effort to stem the flow of significant amounts of capital, has also tried to avoid labeling ethnic Chinese as a scapegoat for economic disparities and distress in Indonesia. However, by blaming the Communists for instigating unrest, Habibie has reminded not only the Chinese community, but also the Indonesian populace of Suharto's rise to power. Following Suharto's quelling of an attempted coup against President Sukarno, there was a massive purge of suspected communists in Indonesia. Indonesian Chinese were targeted in the slaughter, using the excuse that China was a Communist country.
The increasingly tense situation in Indonesia has now been compounded by Habibie's warnings on Communist troublemakers. With ethnic, religious, and economic differences already causing the Chinese in Indonesia to be targets of violence and hate, Habibie has now added political reasons as well, and raised a gruesome specter of the past. These increasingly numerous and combined dangers for the Chinese community will likely increase the pace at which they leave the country, potentially damaging further any hopes of economic and social recovery in the near future.
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