Indonesians Brace for Rapid Descent Into Poverty

Asian nation is a striking example of economic crisis with 80 million now poor.

Dressed in a long black skirt and a peach blouse, wearing her hair pulled back and even a touch of lipstick, Sarti seems to be maintaining body, soul, and a sense of style amid one of the most devastating economic collapses of modern times.

But the reality is that Ms. Sarti, who like many Indonesians uses just one name, is probably just weeks away from being pushed from the threshold of the middle class back into scrabbling poverty.

She used to be able to save money, but now she is three months behind in renewing the lease on her tailoring shop. For five months, she hasn't paid the bank the installments she owes on her business loan. She can't afford the school fees for her three children.

Sarti's story is commonplace in this country, where the social advancement and material prosperity created by three decades of economic growth are evaporating with stunning speed. As experts worry about a "lost generation" of Indonesians who will be underfed and undereducated, ordinary people bring their possessions to the pawn shop, take any job they can find, and concentrate on getting enough to eat.

Sarti's customers are fewer, inflation is soaring, and time is running out. The last time the bank's loan collectors came, she says, they went away angry when she couldn't pay even a small portion of what she owes. Soon they will take her two electric sewing machines. "I just dread that time," she adds. "I know it will come but I hope it won't."

Then she will try to earn money by selling bananas and cassava root on the sidewalk in the market in this small city in central Java, the main island of the Indonesian archipelago. "All I want is for things to be as cheap as before," she says.

But in Indonesia, very little is as it was just one year ago. In Jakarta, the capital, the security guards at a major bank are growing crops in the empty lot next door - where developers once planned to raise a luxury hotel.

The other day a man named Nurhadi, who sells soup from a cart on a sidewalk in front of the bank, climbed the fence around the empty lot. He squatted next to a muddy, rain-fed pool and gently released a small plastic bag of inch-long fish into the water.

He says it only takes four or five months for the catfish to mature into an edible half-pound or so, providing a way to augment his family's food supply. "It's much more difficult than before," he says of Indonesia's economy. "We're just happy to get something to eat every day."

Getting enough to eat

Many Indonesians are finding it difficult to do just that. Sarti says her family is eating half the rice it used to and forgoing meat, fish, and even the soybeans that provide many poor people with a cheap source of protein.

During the first half of this year, the major hospital in Surabaya, the country's second largest city, admitted 75 children under 14 with the symptoms of severe malnutrition - five times the number two years ago. This statistic covers one institution in a sprawling island nation of more than 200 million people, in which even the government admits that nearly 80 million live below the poverty line. Two years ago, that number was 23 million.

"No country in recent history, let alone one the size of Indonesia, has ever suffered such a dramatic reversal of fortune," says a World Bank report released in July.

Indonesians are the most numerous and most severely affected victims of Asia's economic crisis. When confidence in the region sagged in July 1997, investors pulled out rapidly, causing the value of the country's currency to shrivel. The weakened rupiah in turn played havoc with prices as the cost of imported goods doubled and doubled again.

Companies found themselves unable to pay back overseas loans or import the goods they needed. The economy wound down as projects were canceled or put on hold and the banking system started to collapse. "We have more or less lost the globalization game," says Sarwono Kusumaatmadja, a politician who served as a Cabinet minister under Suharto. He likens the sudden withdrawal of foreign capital and investment to a "wild wrecking ball," lurching here and there through the Indonesian economy.

Just before the crisis hit, all the shares trading in the Jakarta Stock Exchange were worth about $100 billion. This July, their value was a little more than $15 billion.

Economic turmoil quickly generated political outrage. Students and other protesters blamed former President Suharto for the crisis, alleging corruption and mismanagement. On May 21, abandoned by onetime supporters in the military and politics, he stepped down after 32 years in power.

Now Indonesians are reveling in political freedoms they haven't experienced since the 1950s and working to develop a more democratic system. But it will take 15 more months to complete these political changes and so far Mr. Suharto's successor, President B.J. Habibie, has been unable to engineer any sort of economic revival. His credibility is weak because of his government's extensive ties to the old regime.

Suharto's fall was presaged by protests and rioting - in two days in mid-May, approximately 1,200 people died in an outburst of anger and arson in the capital, much of it directed at the ethnic Chinese minority. Despite the transition at the top, riots and looting continue today, along with political frustration at the slow pace of reform.

"It is a race against time," says another former Cabinet minister, referring to the government's predicament. "What people are worried about is that in May the attacks were against the Chinese, but now anybody who is considered rich could be the target of mass dissatisfaction, of social revolution," he says, insisting on anonymity. Judging from the plush, baroque furniture in his living room and his glove-leather loafers, this man might not escape a mob.

International efforts

Meanwhile the government, along with international organizations like the World Bank and the UN, is trying to stem the human damage. The main tasks are to make sure that people have enough to eat, to try to reduce the rising cost of health care, and to encourage parents not to pull their children out of school.

Stephen Woodhouse, UNICEF representative for Indonesia and Malaysia, says attempts to build a social safety net should be based on existing strengths: family networks, well-organized religious organizations, and a willingness for neighbors to help each other out in times of crisis.

He cites associations called arisan, where members of an extended family regularly contribute money to a pool that each person receives in turn, providing a windfall that can be used to pay off debts or invest in a business. But crises erode even culturally entrenched institutions. Sarti's arisan, for instance, isn't much use to her, since she can't afford to participate.

On the other hand, a World Bank program intended to pay school fees for families that can't afford them is reaching Sarti. Her eldest child, a boy in junior high school, is receiving the subsidy.

In efforts to provide food, health care, or money for school, the challenge is to distribute the help efficiently and honestly. To take one example, the country is importing rice and selling it at below-market prices, but the effort is being sapped by corruption.

The problem, in a globalized economy that suddenly seems more bane than boon, is the inescapable incentive to re-export the rice at a profit. "The government is not able to handle the rice subsidy," says Alexander Irwan, a member of an anticorruption watchdog group that is assisting the World Bank. "It's being enjoyed by smugglers and traders."

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