CUNf ItlOOfAtSSIFIED CONFIDENTIAL THE WHITE HOUSE RELEASED IN p B 1 1 4 B 1 4 D @ WASHINGTON MEMORANDUM OF TELEPHONE CONVERSATION SUBJECT Telephone Conversation with Soeha to President of the Republic of Indonesia PARTICIPANTS Soeharto President of the Republic of Indonesia 'Interpreter Larry Fisher Notetakers Sean Rice Larry Wright Jim Smith Joel Schrader and Cindy Lawrence DATE TIME January 8 1998 9 42 - 10 08 p m EST Air Force One JFK International Airport AND PLACE New York The President Hello president Soeharto J U Hello U The President Mr President thank you for taking my call at such an early hour C President Soeharto Thank you Mr President for your kind attention to the monetary' turmoil not only in Indonesia but also in other South East Asian countries as well C The President I have long valued our friendship and I just wanted to talk to you personally C President Soeharto Well indeed your Excellency U The President have been following closely the financial situation in Indonesia I know how painful the current problems must'be for you and all Indonesians America values the criticcLl and constructive role Indonesia plays in the region It is because we appreciate Indonesia's importance that the United states has been supportive of your reform program with the IMF Initially there was a positive reaction by markets to your commitment to reform but nat anymore because of a CONFIDENTIAL UNITED STATES DEPARTMENT OF STATE Classified by 'Glyn T Davl es CLASSIFIED BY DEPT OF STATE L HEDGBETH DAS AlISS Reason 1 5 b d REVIEW AUTHORITY CHARLES E LAHIGUERA Declassify On 01 12 08 CLASSIFICATION CONFIDENTIAL REASON 1 4 B 1 4 D UNCLASSIFIED DECLASSIFY AFTER 15 JAN 2013 DATE CASE ID 12 MAY 2008 200502960 UNCLASSIFIED CONFIDENTIAL 2 perception these commitments are not going o be imple ented You have always shown great courage and leadership I think it is vital now that you use those powers to provide this support for economic reform I believe this is the best way to preserve your impressive economic legacy in Indonesia and to get out of this difficult situation C I know it is difficult to do but among other things interest rates should 'be kept high untii the rupiah stabilizes The situation is I think very similar to the situation faced by Korea and President Kim before the presidential election there I understand IMF Managing Director Camdessus will be in Jakarta shortlYI and I urge you and your ec'onomic team to work closely with him We are in close contact with your team I know you have very capable advisors and we want to be in touch with them I would like to send Deputy Secretary of the Treasury Larry Summers to consult with your economic team He has worked closely with me on the Korean and Mexican situations He is prepared to travel to the region immediately and I would like you to spend some time with him to discuss the current economic situation He will be able to tell you first hand how I view it C I also intend to release a statement in the next few minutes reiterating the importance of the relationship between our countries and to make it absolutely clear that we support you and that we will stand with you throughout these difficult times C President Soeharto Thank you very much for your views These are very important not only to me but to the Indonesian people Indeed in a short time January 15th the managing director of the IMF is going to meet with me Mr President I wouid also like to express my appreciation for sending your mission and your efforts for resolving the present economic crisis and you s pport of the Indonesian economy in general C Bl CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED CONFIDENTIAL 3 Bl Bl The situation faced by Indonesia is difficult to overcome here as well as in other countries of South East Asia As far as implementation of the program is concerned I can assure you there is no problem as the Indonesian people are willing to sacrifice to ensure a beneficial result Thank you very much' Mr President for allowing me to make these points C The President Thank you 'Mr President If I could say one or two words in response to the very helpful summary you've given me First I know how much an impact currency speculation can CONFIDENTIAL UNCLASSIFIED UNCLASSIFIED CONFIDENTIAL have we saw this in Great Britain a couple of years ago Once they get started in one direction it's hard o stop it But I think the whole question is one of changing the psychology of the situation to restore confidence in the currency It's obvious that the people of Indonesia have an enormous productive capacity one has only to look at the progress of the last few years to see that c So in response to your briefing I have only two observations First I think what you are trying to do with private loans to get as many as possible rolled over is a good thing I've been talking to experts here and they have told me several things When the companies negotiate loans they must make sure the records of the loans are accurate so the banks can get a true picture of the status of the company I hope that when Mr Camdessus and Mr Summers come they can advise you on this It is very important The only other observation I have is that sometimes small things can make a big difference For instance when several banks were closed it made a big difference for the investors but when some were reopened under new names it had a huge influence on the psychology of investors here - I think anyone can sympathize with not wanting to end subsidies for fuel oil that would hurt the-people of Indonesia but you need to see if there are some small steps that could help psychologically to deal with the situation and to restore confidence in the reform plan for the economy of Indonesia Meanwhile I will issue my statement and send Mr Summers and we will work for the best and hope for the best C President Soeharto Thank you very much Your Excellency for your interest Your demarche 'will be very valuable CONFIDENTIAL UNCLASSIFIED Bl UNCLASSIFIED 5 CONFIDENTIAL Bl The President Thank you very much Mr President U President Soeharto Goodbye U End of Conversation CONFIDENTIAL UNCLASSIFIED Goodbye This document is from the holdings of The National Security Archive Suite 701 Gelman Library The George Washington University 2130 H Street NW Washington D C 20037 Phone 202 994-7000 Fax 202 994-7005 nsarchiv@gwu edu