Bank Indonesia and the Crisis: An Insider's View

Notes

262 Notes© 2005 Institute of Southeast Asian Studies, Singapore Notes Prologue: The Crisis and Me 1 This stipulation is similar to Article 48 of the new Central Bank Law No. 23, 1999. 2 The SEACEN Governors are governors of central banks and heads of monetary authorities, comprising Korea, Malaysia, Mongolia, Myanmar, Nepal, the Philippines, Singapore, Ceylon, China-Taipei, Thailand and Indonesia. During this meeting there were only 10 members, since Mongolia had not joined yet. However, governors of the Central Banks of Samoa, Tonga and Fiji were also present as guests. 3 See Republika, 16 February 1998 and Gatra, 21 February 1998, which reported the plan to replace me with Syahril Sabirin. 4 Several dailies and weeklies in Jakarta, including Business News, Merdeka, Republika, Jawa Post, Tiras, and others, carried similar reports in their 20 February 1998 edition. 5 Suara Pembaruan, 18 February 1998, http:/ /suarapembaruan.com/News/1998/ 02/180298/Headline/h102/h102htm. Several newspapers in Jakarta reported the government’s announcement with titles such: “Soedradjad goes back to the Campus” and “Soedradjad will go back to his Teaching Job”. 6 For examples, see “Soedradjad’s Voice after his Freedom”, Merdeka Minggu, February 1998, and “It’s Embarrassing, Retreating before the War is Over”, Republika, 10 February 1998. 7 All of these reports were published in Suara Pembaruan, 11 February 1998, http://www.suarapembaruan.com/News/1988/02/110298/Ekonomi/ekl/ ekl.html. 8 Several sources told me that President Soeharto always did his reading, including several Indonesian papers, every day after his morning prayers. So he must have followed the debate about the CBS as reported in the press. 9 Taken from several editions of Suara Pembaruan, some statements were made after their meetings with President Soeharto between the second to last week of February 1998. One of the reports was entitled “G-7 asked Indonesia to Reproduced from Bank Indonesia and the Crisis: An Insider’s View by J. Soedradjad Djiwandono (Singapore: Institute of Southeast Asian Studies, 2005). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at Notes 263© 2005 Institute of Southeast Asian Studies, Singapore Cancel its Plan to Adopt CBS”, http:/ /suarapembaruan.com/News/1998/ 02/220298/Headline/hioi/hioi.html. 10 Prospek, 2 March 1998. 11 Xpos, no. 08/I, 21–27 February, 1998. The last attack had appeared in the publication Konspirasi Menggoyang Soeharto. [Conspiracy to Rock Soeharto]. (Kumpulan Selebaran Paling Aktual, November 1997). 12 See footnote 24, Chap. 4. Chapter 1: Introduction 1 He seemed to think that the Indonesian crisis tarnished his image as Indonesia’s “Father of Development”. 2 See Peter Montagnon and Sander Thoenes, “Rupiah’s Defensive Walls Turned out to be Built on Sand”, Financial Times, Weekend, 14–15 March 1998, and Jose Manuel Tesoro, “Once a Castle in the Sand: The Central Banker is Focused on Rebuilding”, Asiaweek, 6 February 1998. Chapter 2: Origin of the Crisis and Early Responses 1 Bank Indonesia, Report for the Financial Year 1994/95 (Jakarta: Bank Indonesia, May 1995), p. 23. 2 It should be mentioned here that during that period, the daily volume of foreign exchange trading in Jakarta was approximately US$4 billion. This daily trading had been increasing from US$1.5 billion in early 1980s, to US$8 billion in mid-1997. 3 Flights to safety by rich Indonesians transforming their rupiah assets into dollars have occurred every time social tensions rose, whether they originated from economic, social or political causes. Dollar purchase has been popular since the government made the rupiah convertible in the 1970s. Traditionally, the flight to safety was done through buying land or gold. 4 See also, Overview of the Proceeding of a Conference on Macroeconomic Issues for Asian Countries, organized by Bank Indonesia and the IMF, Jakarta 7–8 November 1996, Macroeconomic Issues Facing Asean Countries, edited by John Hicklin, David Robinson and Anoop Singh (Washington D.C.: IMF, 1997). 5 Articles and books on the Asian crisis flourished almost immediately upon its outbreak. Some authors used more dramatic expressions, like Leo Gough, Asia Meltdown (Oxford: Capstone, 1998), Callum Henderson, Asia Falling (New York: MacGraw-Hill 1998), Michael Backman, Asian Elipse, (Singapore: John Wiley & Sons 2001). 6 Institute of International Finance, Capital Flows to Emerging Economies (Washington D.C.: IIF, 29 January 1998). Also see a description by the World Bank that...