1996 

- Acting Bishop of Dili, Carlos Belo, and resistance leader Jose Ramos-Horta
jointly awarded Nobel Peace Prize, raising international awareness of the East
Timorese independence struggle.

The other East Timorese who received the Nobel Peace Prize in 1996 was Carlos
Felipe Ximenes Belo. He grew up in a farming family, began taking an interest in
religious questions at an early age, and was ordained a Catholic priest in 1981. Shortly
after being elected head of the Catholic church in East Timor in 1983, Carlos Belo
openly denounced the brutal Indonesian occupation of the province. The occupiers
responded by placing Belo under strict surveillance, but the Bishop refused to be
intimidated, even by numerous threats to his life. He continued to speak up for
nonviolent resistance to the oppression. In 1989 he demanded that the UN arrange a
plebiscite on East Timor, and after a bloody massacre two years later he helped to
smuggle two witnesses to Geneva, where they described the violations to the United
Nations Commission on Human Rights. Belo's struggle gained the sympathy of the
Pope in Rome, who demonstrated it by visiting East Timor in the late 1980s.

José Ramos-Horta (1949 -)

EAST TIMOR

The Tireless Diplomat

In 1975, when Portugal had devolved its colonial rule, East Timor was occupied by
Indonesia. José Ramos-Horta was one of the leaders of the resistance. He did not take
up arms himself, but left the country as foreign minister in the government set up by
the liberation movement FRETELIN (Revolutionary Front for an Independent East
Timor). For the next twenty years he traveled all over the world pleading the cause of
the East Timorese, above all in the United Nations. Ramos-Horta shared the Peace
Prize with his countryman, Bishop Carlos Belo. In the mid-1980s, Ramos-Horta
began advocating dialogue with Indonesia, and in 1992 he presented a peace plan. It
contained concrete proposals for humanitarian cooperation with the occupying power
and a growing international presence headed by the UN. This was to lay the
foundations for Indonesian withdrawal and self-determination for the East Timorese
people. Both these peace objectives were reached in 2001. According to Ramos-
Horta, the Nobel Peace Prize contributed significantly to this end.

In 1996, the conflict received more global attention when two East Timorese, Bishop
Carlos Belo and Jose Ramos-Horta were awarded the Nobel Peace prize. In the wake
of the Asian currency crisis in 1997 and continued international pressure, Indonesian
President Suharto resigned, leaving B.J. Habibie as interim president. Habibie offered
conditional autonomy to East Timor and, when the pro-independence forces rejected
it, proposed a referendum to determine its status. In 1999, the United Nations
monitored the referendum, which had a 99% turnout. Despite widespread intimidation
by the Indonesian military and the pro-Indonesian militia, 78% of the electorate voted
for independence. In the two weeks following the vote, the Indonesian army and
proIndonesian militia drove hundreds of thousands of East Timorese into West Timor
under dire humanitarian conditions, and wrecked havoc on East Timor’s
infrastructure, destroying an estimated 70-80% of businesses and 50% of all homes in
the capital, Dili. The United Nations belatedly sent in a peacekeeping force, which
remained during the United Nations Transitional Administration in East Timor
(UNTAET) until the country became fully independent in 2002. East Timor is
currently the poorest nation in Asia.

In the mid-1990s, more than 20 years after the military invasion, the awakening of the
international community was not mirrored by the leaders of the major international
institutions or the global political powers. Even the Nobel Peace Prize, awarded in
October 1996 to Carlos Filipe Ximenes Belo, Bishop of Dili, and José Ramos-Horta,
East Timor’s representative at the UN, did not prompt any reaction from the UN
Security Council or force Indonesia to end its illegal occupation.

It was ultimately the Asian crisis that would trigger a profound change in the
situation, starting in 1997. In May 1998, ten months after the start of this crisis, the
Indonesian economy, weakened by corruption and nepotism, showed the extent of its
fragility, when it was revealed that two-thirds of Indonesians were living below the
poverty line. After being fired upon by the military, Indonesian students occupied the
parliament in Jakarta, forcing General Suharto to resign after 33 years in power. His
vice president, Jusuf Habibie, succeeded him on 20 May 1998. On 9 June, the new
president proposed a “special status” for East Timor. Six days later, 15,000 East
Timorese students took to the streets of Dili to demand a genuine referendum on self-
determination and the release of Xanana Gusmão. During the following month,
65,000 Indonesians, mostly transmigrants, fled the country.

For twenty-four years, the Indonesian government subjected the people of East Timor
to routine and systematic torture, sexual slavery, extrajudicial executions, massacres,
and deliberate starvation.

 The contagion spread quickly, with currencies across the region falling—
some quite catastrophically.
 The crisis was rooted in economic growth policies that encouraged
investment but also created high levels of debt (and risk) to finance it.
 The International Monetary Fund bailed out many countries but imposed
strict spending restrictions in exchange for the help.
 Affected countries have since put in place mechani c

Impact of the Asian Financial Crisis

As the Thai baht fell, other Asian currencies fell, some precipitously. Across Asia,
inflows of capital slowed or reversed.

The Thai baht had been trading at about 26 to the U.S. dollar before the crisis but lost
half its value by the end of 1997, falling to 53 to the dollar by January 1998.
The Korean won fell from about 900 to the dollar to 1,695 by the end of 1997.
The Indonesian rupiah, which had been trading at around 2,400 to the dollar in June
of 1997, plummeted to 14,900 by June of 1998, less than one-sixth its pre-crisis
level.

Some of the more heavily affected countries fell into severe  recession.
Indonesia's gross domestic product (GDP) growth fell from 4.7% in 1997 to -13.1%
in 1998.3  In the Philippines, it slid from 5.2% to -0.5% over the same
period.4  Malaysia's GDP growth similarly slid from 7.3% in 1997 to -7.4% in 1998, 5

 while Korea's contracted from 6.2% to -5.1%.6

In Indonesia, the ensuing economic crisis led to the collapse of the three-decade-old
dictatorship of President Suharto.7

The crisis was alleviated by intervention from the  International Monetary Fund
(IMF) and the World Bank, which poured some $118 billion into Thailand,
Indonesia, and South Korea to bail out their economies. 1

Causes of the Asian Financial Crisis

The crisis was rooted in several threads of industrial, financial, and monetary
government policies and the investment trends they created. Once the crisis began,
markets reacted strongly, and one currency after another came under pressure. Some
of the macroeconomic problems included  current account deficits, high levels
of foreign debt, climbing budget deficits, excessive bank lending, poor debt-
service ratios, and imbalanced  capital inflows and outflows.

Many of these problems were the result of policies to promote  export-led economic
growth in the years leading up to the crisis. Governments worked closely with
manufacturers to support exports, including providing  subsidies to favored
businesses, more favorable financing, and a currency peg to the U.S. dollar to ensure
an exchange rate favorable to exporters.

While this did support exports, it also created risk. Explicit and implicit government
guarantees to bail out domestic industries and banks meant investors often did not
assess the profitability of an investment but rather looked to its political support.
Investment policies also created cozy relationships among local conglomerates,
financial institutions, and the regulators who oversaw their industries. Large volumes
of foreign money flowed in, often with little attention to potential risks. These factors
all contributed to a massive moral hazard in Asian economies, encouraging major
investment in marginal and potentially unsound projects.

As the crisis spread, it became clear that the impressive economic growth rates in
these countries were concealing serious vulnerabilities. In particular, domestic credit
had expanded rapidly for years, often poorly supervised, creating
significant leverage along with loans extended to dubious projects. Rapidly rising
real estate values (often fueled by easy access to credit) contributed to the problem,
along with rising current account deficits and a build-up in external debt. Heavy
foreign borrowing, often at short maturities, also exposed corporations and banks to
significant exchange rate and funding risks—risks that had been masked by
longstanding currency pegs. When the pegs fell apart, companies that owed money in
foreign currencies suddenly owed a lot more in local currency terms, forcing many
into insolvency.1

Many Asian economies had also slid into current account deficits. If a country has a
current account surplus, that means it is essentially a net lender to the rest of the
world. If the current account balance is negative, the country is net borrower from
the rest of the world. Current account deficits had grown on the back of heavy
government spending (much of it directed to s

During Suharto’s three decades in power, Indonesia’s economy grew an average of 7

percent annually, and living standards rose substantially for the bulk of the
population. Education and mass literacy programs were used to propagate the national
language, Bahasa Indonesia, and to unify the country’s disparate ethnic groups and
scattered islands. The government also initiated one of Asia’s most successful family-
planning programs in order to slow down the growth of Indonesia’s large population.
These successes were increasingly marred, however, by the inequitable distribution of
the nation’s expanding wealth, with relatively small urban elites and military circles
receiving a disproportionately large share of the benefits of modernization and
development. Suharto allowed his friends and his six children to assume control of
key sectors of the economy and amass enormous fortunes by means of monopolies
and lucrative trade arrangements.

By the 1990s the unrestrained corruption and favoritism of his regime had begun to

alienate even the middle class and business circles, but continuing high rates of
economic growth and the government’s tight political controls insulated Suharto from
any genuine opposition. In 1997, however, Indonesia became caught up in a currency
crisis sweeping across Southeast Asia. The value of the Indonesian national currency,
the rupiah, plummeted, and the resulting financial crisis exposed deep flaws in the
national economy. Suharto resisted demands for structural reforms even while the
economy went into recession, inflation skyrocketed, and living standards collapsed for
the poor. Antigovernment demonstrations turned into rioting in Jakarta and other
cities in May 1998, and Suharto, having lost the support of the military, was forced to
resign the presidency on May 21. He was succeeded in office by the vice president,
B.J. Habibie.

JAKARTA, Indonesia -- Indonesian President B.J. Habibie proposed a solution to his

country's most serious territorial dispute, offering so-called special-autonomy status to
East Timor in a substantial shift from the hard-line stance of former President
Suharto.

"I am ready to consider giving East Timor special status like Jakarta, Aceh and
Yogyakarta," Mr. Habibie told the BBC in an interview on Tuesday. He was referring
to three Indonesian provinces that are allowed to administer themselves with a slightly
higher degree of autonomy than the rest of the country.

The pronouncement could jump-start negotiations on the long-debated "Timor

question," diplomats in Jakarta said. Progress on the issue also could boost Mr.
Habibie's nascent government, which took office just three weeks ago and is
struggling to build legitimacy both at home and abroad. The idea of special autonomy
for East Timor "has always been floating around, but Suharto always rejected it," said
one high-ranking Indonesian government official. "Things now seem to be moving in
the right direction."

Analysts stress, however, that Mr. Habibie doesn't appear ready to let East Timor exit
from Indonesia. They also point out that the terms of this "special autonomy" must be
clarified before the proposal generates much optimism. Some East Timorese activists,
such as Tolibo Silva, already reject the proposal out of hand. "Special autonomy
means nothing and we will reject it 100%," he said. "What we want is a referendum"
to vote for independence.

JAKARTA, Indonesia -- Indonesian President B.J. Habibie proposed a solution to his

country's most serious territorial dispute, offering so-called special-autonomy status to
East Timor in a substantial shift from the hard-line stance of former President
Suharto.

"I am ready to consider giving East Timor special status like Jakarta, Aceh and
Yogyakarta," Mr. Habibie told the BBC in an interview on Tuesday. He was referring
to three Indonesian provinces that are allowed to administer themselves with a slightly
higher degree of autonomy than the rest of the country.

The pronouncement could jump-start negotiations on the long-debated "Timor

question," diplomats in Jakarta said. Progress on the issue also could boost Mr.
Habibie's nascent government, which took office just three weeks ago and is
struggling to build legitimacy both at home and abroad. The idea of special autonomy
for East Timor "has always been floating around, but Suharto always rejected it," said
one high-ranking Indonesian government official. "Things now seem to be moving in
the right direction."

Analysts stress, however, that Mr. Habibie doesn't appear ready to let East Timor exit
from Indonesia. They also point out that the terms of this "special autonomy" must be
clarified before the proposal generates much optimism. Some East Timorese activists,
such as Tolibo Silva, already reject the proposal out of hand. "Special autonomy
means nothing and we will reject it 100%," he said. "What we want is a referendum"
to vote for independence.