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Indonesia: Habibie's First Hurdle: How To Feed The Country


International Business: INDONESIA

INDONESIA: HABIBIE'S FIRST HURDLE: HOW TO FEED THE COUNTRY

He must rebuild a distribution system wrecked in the riots

Indonesia's interim President B.J. Habibie is desperate to restore confidence in his riot-torn country. In his first week in office, his son Ilham Akbar and brother Jusuf Effendi resigned from state-run enterprises to avoid charges of nepotism. The President released prominent dissidents to meet demands for political reform, and visited areas rocked by rioting. Then he pledged economic reforms, meeting senior International Monetary Fund official Hubert Neiss to renegotiate a suspended $43 billion bailout.

But Habibie is only just starting to scratch the surface of a more fundamental problem: how to feed Indonesia's 200 million people and stave off a replay of the food and fuel riots that forced the resignation of President Suharto on May 20. Many of the country's warehouse districts, truck depots, and shopping areas were destroyed by the rampaging mobs. As a result, food is now difficult to deliver and in short supply, and what is available costs 20% more than before mid-May's riots.

The government has announced plans to rebuild the destroyed areas. The project will cost at least $1 billion, according to the State Logistics Agency (Bulog), but the government has yet to figure out how to pay for it. Most likely, Indonesia will have to try to find international donors. The trouble is that they're all wary of throwing money into an unstable situation.

The magnitude of the problem is immense. Across the country, some 1,600 public markets, 20 shopping malls, 2,480 small stores, and thousands of trucks used to move the goods between them, were destroyed. Jakarta's main Mangga Dua distribution center covering several city blocks is now a deserted, burned-out shell. All the consumer goods, food, and clothing going in and out of Jakarta moved through Mangga Dua, so the disruption is huge. Many warehouses at ports and in Indonesia's secondary cities suffered the same fate. Throughout the archipelago, merchants are on their own in trying to get their products to customers. And retailers don't know who to call to get deliveries. "The truck drivers are afraid their trucks will be attacked...[by] people who steal food," says an Indonesian economist.

Ironically, Indonesia's refusal to dismantle monopolies despite International Monetary Fund directives is proving an unlikely benefit. The country's food-distribution monopolies are controlled by Suharto buddy Liem Sioe Liong's Indofood and by the government-run Bulog. Previous IMF bailout packages had stipulated that these monopolies be opened to competition. In the current crisis, however, the central food distributors seem to have the best chance of recovering from the disaster and getting food to Indonesia's people. That means these cronyist structures could well retain their clout.COAXING THE MERCHANTS. Multinational corporations that do not want to abandon investments in Indonesia are also prepared to help resume food distribution. Last year, Coca-Cola Amatil Indonesia donated potable water from its 10 bottling plants to drought-stricken towns in central Java. Now, CEO John E. Brady says he's prepared to resume that free service in order to help stabilize prices for bottled water, which have skyrocketed.

As the Jakarta government's reserves dwindle, the role of international donors will be critical. Officially, the government claims net reserves of $14.7 billion, but most economists think that number is too optimistic. Asian Development Bank and World Bank officials who fled the country during the rioting are now returning and just beginning to consider how to resume lending.

But even if the ports, warehouses, and markets are rebuilt, the government will need the return of ethnic Chinese merchants, who have long managed the flow of goods to markets in Indonesia. Many of them fled to Singapore after they became scapegoats for high prices. Now the government wants to coax them back.

Those who see Habibie as a stopgap President until elections can be held wonder whether he can muster the credibility required to get funds coming in. In order to do it, he will need to name a reputable technocrat to coordinate the aid effort from various donors. But he doesn't have time to waste. As food continues to be in short supply, the cost of delaying may be the presidency itself.By Michael Shari in Jakarta


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