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Clinton Policies On Indonesia Under Scrutiny Hefty Donations May Have Influenced Trade

Wed., Oct. 16, 1996

Over the last four years, the Clinton administration has taken specific steps to provide trade and political benefits to Indonesian President Suharto and his government, in some cases rejecting recommendations or stopping investigations pursued by lower-level U.S. officials.

In one instance, the White House interceded after James Riady, scion of a wealthy Indonesian family, came to Washington to arrange meetings between a senior aide to Suharto and top-level officials in the administration. Riady, his family and their companies and executives have contributed $475,000 to the Democratic Party and its candidates since 1991.

Riady was also present at meetings on at least two occasions with U.S. officials at which Indonesia’s trade benefits were discussed, administration officials acknowledged.

Clinton administration officials have repeatedly asserted that the contributions by the Riady family are legal and proper and that they have not influenced U.S. government policy. “There was no connection between James Riady and U.S. trade policy in Indonesia,” Secretary of Commerce Mickey Kantor, until recently the U.S. trade representative, told the Los Angeles Times Tuesday. “Absolutely none.”

But the Clinton administration’s steps for Suharto and Indonesia provide a window into the controversy that now swirls around Clinton’s and Democratic Party fund-raising among Indonesian interests. In addition to the Riadys’ donations, another $425,000 in contributions by one Indonesian immigrant couple to the Democratic National Committee has provoked questions about whether Indonesian money is unduly affecting U.S. policies and actions.

In Albuquerque, N.M., where he has been preparing for Wednesday night’s presidential debate, Clinton told reporters he expected he would be asked about the Indonesian contributions during the televised session.

“I expect to have the opportunity to discuss” the issue, he said, “but I believe that the political parties should not give back contributions that were legally made and legally received. And if they made a mistake and took money that shouldn’t be taken, they ought to give that money back.”

The available evidence is not conclusive on whether undue Indonesian influence exists. But the evidence does suggest that the Indonesian government was the third partner in a complex relationship that evolved between the Clinton administration and the wealthy Riady family.

The Riadys, owners of the Indonesia-based Lippo Group and one-time owners of a bank in Little Rock, Ark., provided money to Clinton and the Democratic Party. The Clinton administration was in a position to help Suharto’s Indonesian government. And Suharto, who with his family dominates the Indonesian economy, was in a position to help the Riadys and the Lippo Bank.

One of President Clinton’s senior advisers, Bruce Lindsey, said he has been present for two meetings between Riady and Clinton in the last two years, including one in the past few months.

“It was basically a drop-by social visit,” Lindsey said of that session. He said no issues of U.S. policy were discussed. When asked whether the meeting was about fund-raising, he declined further comment. “I’m not going to tell you what the meeting was about,” he said.

The Clinton administration help for Indonesia has included the following:

Trade: U.S. government officials were conducting a formal investigation of whether to cut off Indonesia’s trade privileges because of the country’s labor policies. But on Feb. 16, 1994, before the U.S government review had ended, Kantor suddenly announced that the administration was suspending the process and was allowing Indonesia to keep its trade privileges, worth over $600 million in sales to Indonesian companies.

Diplomacy: In the spring of 1993, Suharto was seeking the right to meet with Clinton at a summit of world leaders in Tokyo - an idea opposed by many U.S. foreign policy officials. A top-level Indonesian official was dispatched to Washington to pursue the request and Riady helped to arrange his meetings. In May 1993, Clinton surprised his advisers by abruptly announcing in public that he would meet with Suharto.

When Clinton took office, he had ties dating back well over a decade to the Riady family. The Riadys were at the center of a network of wealthy businessmen in Arkansas and Indonesia who worked with one another.

In 1977, Mochtar Riady, the senior member of the family, began exploring the possibility of buying a bank in the United States and wound up in contact with a major Southern business leader, Jackson T. Stephens, who encouraged him to invest in Little Rock.

Together, the Riadys and the Stephens family bought the Worthen Bank, Arkansas’ leading financial institution. James Riady moved to Little Rock and became the president of the bank.

The Riadys sold their interest in the Worthen Bank in the 1980s. But they kept up their ties with Arkansas leaders and with the Clintons after they came to the White House.

In March 1993, two months after the new administration took office, first lady Hillary Rodham Clinton flew to a Little Rock banquet to receive a March of Dimes award as Arkansas Citizen of the Year. Mochtar Riady flew in from Indonesia for the affair and gave the charity $50,000 in the Clintons’ honor.

In 1993, a top priority of Suharto was to get a face-to-face meeting with Clinton and other world leaders.

That year, the G-7 summit meeting of the world’s leading industrialized nations was to take place in Tokyo. Suharto was arguing that he should be permitted to attend the summit as a representative of the countries that make up the Non-Aligned Movement.

In May 1993, the Indonesian president dispatched an Indonesian political leader, Research and Technology Minister B.J. Habibie, to Washington to persuade the Clinton administration to grant the meeting with Suharto. James Riady came to Washington to help Habibie and arrange meetings for him, U.S. officials said.

On May 6, 1993, with Habibie in attendance, Clinton appeared at a meeting of the Export-Import Bank. In the midst of a speech about global trade he suddenly began to talk about Indonesia.

“I know we have someone here from Indonesia,” the new president declared, referring to the Indonesian minister. “… We have enormous opportunities there. When I go to the (G-7) meeting in Japan, I’m going to meet with the president of Indonesia to send a signal to the … emerging nations of the world that the United States wants to be their partner in new trade relations.”

Clinton’s remarks took by surprise the foreign-policy staff members who had drafted Clinton’s speech. “We never figured out how that (the promise to meet Suharto) got in there,” said one of these officials, who declined to be identified.

When Clinton finally met with Suharto in Tokyo, one of the main issues Suharto raised was his irritation with U.S efforts to curb his country’s trade privileges, according to U.S. officials.

In 1992, the United States had launched an intensive, yearlong formal review of whether Indonesia should lose trade benefits known as the generalized system of preferences.

On June 25, 1993, Kantor, then U.S. trade representative, finished the yearlong review, which included several other countries besides Indonesia. He did not move to cut off Indonesia’s GSP privileges. But Kantor did take a relatively tough action, announcing that the administration was going to continue its review, rather than ending the investigation.

U.S. labor officials considered Indonesia an especially egregious case, because it paid workers extremely low wages, discouraged the development of independent unions and sometimes relied on the help of the military to keep labor in line.

On Feb. 16, 1994, Kantor reversed course and the review of Indonesian labor policies was suddenly ended. While saying that “more needs to be done,” Kantor announced that Indonesia had recently made enough progress to be relieved of the threat of losing its trade benefits. xxxx DEBATE Place: Shiley Theater, University of San Diego. Time: Today, 6 p.m. to 7:30 p.m. Moderator: Jim Lehrer of PBS. TV coverage: ABC, CBS, NBC and PBS will broadcast live. On cable, CNN, C-SPAN, Fox News Channel and MSNBC also will carry live.

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