NOVEMBER 1997 · VOLUME 18 · NUMBER 11
E C O N O M I C S
NOVEMBER 1997 · VOLUME 18 · NUMBER 11
E C O N O M I C S
MR. CHAIRMAN, I am delighted to welcome Mr. Greenspan and Mr. Summers here
today to talk about the economic crisis in Asia and the Indonesian bailout
which includes a $10 billion loan from the IMF, an $8 billion loan from the
World Bank and Asian Development Bank, a further $5 billion from Indonesia's
own reserves plus $3 billion in contingency loans underwritten by the taxpayers
of the United States. As you know, of the more than $20 billion bailout
provided from the international financial institutions, a substantial portion
of that sum also comes from the taxpayers of the United States.
Mr. Chairman, I have one slight problem with this bailout. It's illegal. Let
me read directly from a law, commonly known as the Sanders-Frank Amendment,
which was enacted by Congress in the spring of 1994:
"(a) The Secretary of the Treasury shall direct the United States Executive Directors of the international financial institutions (as defined in section 1701 (c)(2) [22 U.S.C. Section 262r(c)(2)]) to use the voice and vote of the United States to urge the respective institution --
(1) to adopt policies to encourage borrowing countries to guarantee internationally recognized worker rights (within the meaning of section 507(4) of the Trade Act of 1974 [19 U.S.C. Section 2467(4)] and to include the status of such rights as an integral part of the institution's policy dialogue with each borrowing country;
(2) in developing the policies referred to in paragraph (1), to use the relevant conventions of the International Labor Organization, which have set forth, among other things, the right of association, the right to organize and bargain collectively, a prohibition on the use of forced or compulsory labor, and certain minimum labor standards that take into account differences in development levels among nations including a minimum age for the employment of children, acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health."
In plain English, what this means is that the United States government cannot support any IMF or World Bank loans to Indonesia unless the loan proposal guarantees internationally recognized worker rights.
Mr. Chairman, I have before me the proposal of the Indonesian military dictatorship, led by General Suharto, which details the policies they are proposing in order to obtain these loans. I have read this proposal carefully and I have not found one word in it which suggests that they will adopt policies guaranteeing internationally recognized worker rights. Further, as the law requires, they do not include the status of such rights as an integral part of the institution's policy dialogue. Therefore, plain and simple, it is against the law for the United States, and the Secretary of the Treasury, to support this bailout.
Mr. Chairman, almost nobody disputes that Indonesia is an authoritarian society and that workers there do not enjoy internationally recognized worker rights. Let me briefly quote from the U.S. State Department's Annual Human Rights Report for 1996:
"Despite a surface adherence to democratic forms, the Indonesian political system remains strongly authoritarian. The government is dominated by an elite comprising President Suharto (now in his sixth five-year term), his close associates, and the military. The government requires allegiance to a state ideology known as 'Pancasila,' which stresses consultation and consensus, but is also used to limit dissent, to enforce social and political cohesion, and to restrict the development of opposition elements. The judiciary is subordinated to the executive and the military."
Further, the report states, "the government continued to commit serious human rights abuses." Further, "the authorities maintained their tight grip on the political process, which denies citizens the ability to change their government democratically."
Further, "The government continued to impose severe limitations on freedom of assembly and association. In anticipation of the 1997 parliamentary elections, the government took a number of actions to intimidate political opponents. Notably, the Government crudely engineered the removal of a popular opposition party leader and the forcible takeover of the party headquarters. The headquarters takeover and the subsequent rioting in Jakarta, the worst in decades, resulted in at least five dead, over 20 missing, scores of injuries and over 200 arrests."
In terms of worker rights, the State Department states that the International Labor Organization's (ILO) Committee on Freedom of Association found that "Indonesian legislation comprises requirements that are so stringent as to constitute a major limitation to freedom of association."
Let me now quote from the Dickinson School of Law in Carlisle, Pennsylvania which on June 2, 1997 awarded a special Rule of Law Citation in absentia to Muchtar Pakpahan: "an Indonesian lawyer who has risked his life and sacrificed his freedom for democratic ideals."
This is what the Dickinson School of Law stated in its presentation: "A lawyer with a degree in constitutional law, Pakpahan has been imprisoned for his pro-democracy and pro-labor activities." And they continue: "According to the U.S. Government and various human rights organizations, Pakpahan has been followed, harassed, threatened and arrested several times for his activities. In 1994, he was arrested and convicted of instigating strikes and a riot, charges that the U.S. Government regarded as a pretext to punish him for representing workers and leading a union. Although the charges were dropped, the Indonesian Supreme Court subsequently reinstated his conviction. Before returning to prison, however, he was arrested on yet another charge which the U.S. Department of State has called 'unjustified.' He now faces a possible death sentence."
And now let me quote from a statement of the AFL-CIO Executive Council, February 19, 1997, in awarding Muchtar Pakpahan, head of the independent Indonesia Labor Welfare Union, the 1997 George Meany Human Rights Award: "The heavy-handed campaign against Brother Pakpahan and his union, culminating in the show trial now being held in Jakarta, has made a mockery of the rule of law in Indonesia and any pretense that the Indonesian Government has any respect for internationally recognized worker rights."
Let me further quote from the AFL-CIO Executive Council, and what they say here is very relevant to the bailout of Indonesia which we are currently discussing: "The AFL-CIO reiterates its call for the removal of Indonesia's trade preferences under the Generalized System of Preferences (GSP) program for gross violations of basic worker rights. The first step in this process would be the immediate lifting of the February 1994 suspension by the U.S. Trade Representative of the review of Indonesia's worker rights practices. In addition, we urge the Clinton Administration to suspend all OPIC programs in Indonesia and to vote against all projects submitted by Indonesia to multilateral development and investment institutions. Finally, we urge the U.S. Government to suspend any active promotion of new American investment in Indonesia by the Department of Commerce and other government agencies until every worker now in prison for trade union activity is released and internationally recognized worker rights are respected."
Mr. Chairman, I could go on and on, and quote human rights groups and other institutions but the facts are clear. Indonesia is an authoritarian country which does not respect internationally recognized worker rights. It is, therefore, against the law for the United States to support any IMF or World Bank bailout of Indonesia.
Let me conclude my remarks, Mr. Chairman, by stating the following: Even if the bailout was legal, which it is not, I would oppose it. Not only is it morally wrong for the United States to provide political and economic support for an illegitimate, authoritarian government, such as the Suharto regime, but it is totally absurd -- given the fact that General Suharto and his family are one of the wealthiest families in the world. It is an outrage that the taxpayers of this country, many of whom are struggling hard to keep their heads above water, are being asked to bail out a corrupt, undemocratic government led by General Suharto who, according to Forbes magazine, is himself worth $16 billion. It seems to me that before the taxpayers of this country provide $3 billion to bail out Indonesia, and participate in the IMF and World Bank bailout, that maybe this corrupt dictator might want to come up with a few billion of his own dollars.
And while Forbes magazine estimates that Suharto himself is worth $16 billion, Jeffrey Winters of Northwestern University has estimated the Suharto family wealth at over $30 billion, with another $30 billion held by 50 close allies. So here we have a handful of people in that country worth $60 billion, owning almost all of the industry and resources in Indonesia, and the taxpayers of the United States are being asked to bail them out.
Mr. Chairman, that makes absolutely no sense at all.