Three Reasons to Watch Indonesia

Global economy, Asian peace, human rights

An American economist based in Jakarta says his children sometimes ask him why all the trouble in Indonesia is such a big deal. In other words: Why should they care?

"Well," he tells them, "there are 200 million Indonesians who are good people and who can do a lot for the world, and they need help."

There are less altruistic reasons to be concerned about Indonesia:

Beginning last summer, several East Asian economies, including this one, slowed significantly as the value of their currencies depreciated. This Asian stagnation has trimmed the pace of growth in the US and is a contributing factor in Japan's enduring economic malaise. Late last year, economists worried aloud that contractions in the region could set off a deflationary spiral that would cause bankruptcies and unemployment around the globe.

And while two of East Asia's more important economies, South Korea and Thailand, seem as if they are on the road to recovery, a collapse in Indonesia could turn that trend around. Just yesterday, concerns over the future of an international rescue package for Indonesia drove down the South Korean stock market, which this year has been encouragingly robust.

In the global economy, there are no safe distances. Japanese and German banks hold big chunks of the $74 billion in foreign debt that Indonesian companies cannot pay off at the moment. A Japanese bank that cannot recover its Indonesian loans might be tempted to sell its US Treasury bonds to meet obligations. If other Japanese financial institutions did the same, Indonesia's financial turbulence would rumble through Wall Street.

Despite these economic woes, Asia remains a dynamic region. The US, Japan, and China compete with one another, generally with great subtlety, to ensure that the post-cold-war order emerging here suits their interests. Sometimes the competition is not so discreet. In 1996, the US sent two aircraft carriers into the South China Sea to suggest to Beijing why invading Taiwan might not be a good idea.

Indonesia is one of the region's focal points. Its population of 200 million is the fourth-largest on the planet. Indonesia's location is strategic, since its more than 13,600 islands are sprinkled through sea lanes that carry vital commodities, like oil, to Japan and other countries. The last time Japan got worried about the safety of its oil supplies, it decided to strike the US Navy at Pearl Harbor. Some strategists see great benefits from a strong and stable Indonesia.

As the biggest country in Southeast Asia, it has helped to unite the region into a bloc that can begin to stand up for itself in regional politics. A cohesive and interdependent Southeast Asia, this thinking goes, is good for global peace. Conversely, a turbulent Indonesia is bad news. As it is, the economic crisis has all but frozen Indonesia's diplomatic efforts in the region.

A third area of concern is human rights. Indonesia experienced a cataclysmic wave of violence in the months before President Suharto came to power in 1966. Experts estimate that perhaps a half a million people were killed in massacres of Communist Party members and their presumed supporters among the country's ethnic Chinese minority.

The memory of this outburst is a grim undercurrent today. If economic turmoil were to turn into ethnic and communal attacks, the victims would probably be members of the Chinese community, who have already been the targets of rioting. Violence against Indonesia's 6 million residents of Chinese origin might then pose a geopolitical problem, since no one knows how China would react.

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