The social strains created by Indonesia's economic crisis could result in massive riots against the Chinese and other minorities, far more serious than the worrisome incidents that have recently occurred. Such violence, especially but not solely against ethnic Chinese, would be a humanitarian disaster. It would also severely set back the country's chance of economic recovery and thus fuel further violence.
To examine what measures international actors could take to prevent ethnic clashes, the Council on Foreign Relations' Center for Preventive Action and the International Crisis Group convened a meeting in Washington, D.C., on 3 March 1998. The meeting assembled representatives of the US government, including the Departments of State and Treasury; other major states, including Germany and Japan; the World Bank and International Monetary Fund; major corporations with business in Indonesia; human rights and environmental organizations; and academic experts.
This memorandum summarizes policy recommendations that emerged from that discussion. It does not focus on the massive difficulties of stabilizing Indonesia's economy, but on short-term measures that could reduce the possibility of large-scale violence.
Ethnic violence results from two factors: tensions structured or perceived along ethnic lines, often intensified by misinformation that spreads quickly in times of crisis; and political leadership that promotes it or fails to halt it. International policy should thus proceed on a double track: (1) undertaking measures to reduce tensions that fuel violence by ending scarcity on the markets; and (2) sending clear messages to the Jakarta government that it must not engage in scapegoating and must undertake active measures to defuse ethnic animosities.
To reduce tensions, members of the international community should:
- Urgently supply large amounts of emergency food aid and medicines to the country. Indonesia has suffered a severe drought that has destroyed 10 percent of the rice crop. It has also suffered transportation problems in certain areas. Although the World Bank is considering $1 billion in commodity aid and other assistance to low-income groups as part of its overall $2.5 billion three-year package, further commodity donations are needed. The World Bank should estimate how much total aid is really needed, and every effort must be made to assure its early delivery. Aid to the most deprived sectors of society should continue regardless of the government's compliance with the IMF reform package.
- Immediately create a special fund for trade financing to keep the economy going and assure imports of vital commodities. The collapse of the banking system has made it impossible for traders to obtain letters of credit to finance imports, and the IMF has proposed a special fund to provide such financing. Implementation, however, has been delayed. This program should be put on a fast track.
- Use aid from the international financial institutions and donor governments to encourage Indonesia to continue subsidies for basic commodities and support for essential health and education activities. The IMF has already eased its usual conditionality on reducing such subsidies. Since budgetary overspending was not a cause of the crisis and ending such subsidies could provoke violence, they should not be targets of cuts, especially in the current environment.
- Transfer assistance, to the extent possible, through local non-governmental organizations and community groups both to avoid waste and to help reform government structures. With respect to rice, however, the government rice monopoly has the most extensive distribution network and should be used.
- Establish, donor institutions together with the Indonesian government, a system of information and early warning to identify "hot spots" -- both localities and social groups -- where shortages are particularly acute and ethnic tensions high, and develop mechanisms for targeting these hot spots with urgent aid. The government is now doing this with laid-off construction workers, but more can be done. At the time of the meeting, the World Bank had tentatively identified seven such "hot spots."
- Set up a system to broadcast clear, accurate information about economic conditions and the availability of commodities in order to avoid rumors that can cause panic.
Preventing ethnic conflict also requires energetic efforts of the Indonesian government. In his address to the consultative assembly on March 1, President Suharto condemned unidentified "scapegoating." Furthermore, earlier statements by senior military personnel blaming Chinese for moving their capital abroad now appear to have ceased. Press reports also indicate that some in the top levels of the military oppose focusing the blame on the Chinese. This is encouraging, but all of these efforts must be urgently reinforced by the following actions by Indonesia's leaders:
- Stating clearly that attacks on ethnic Chinese or any other attempt to divide the nation or find scapegoats will not be tolerated.
- Instructing all senior government and military officials that they will be punished if by word or deed if they imply, as some have, that the current economic problems are the responsibility of the Chinese or any other group.
- Clarifying through statements by national and local officials that shortages of commodities and price rises are due to economic factors, not to hoarding by Chinese traders.
- Donors and concerned states and organizations should react quickly and forcefully to signs that Indonesian political or military leaders may be encouraging or tolerating ethnic violence and should support those measures that have already been taken to defuse tensions.