The Foreign Service Journal, January-February 2019

40 JANUARY-FEBRUARY 2019 | THE FOREIGN SERVICE JOURNAL vately and publicly, in their praise of the embassy, including with the U.S. Congress; but, unfortunately, that is atypical. However, I greatly valued the Mickey Mouse T-shirt my staff gave me for my birthday as a reminder of our excellent antipiracy work. Kevin McGuire joined the Foreign Service in 1966. He served as am- bassador to Namibia, deputy chief of mission and economic minister counselor in Korea, and economic minister counselor in Italy, in addition to economic jobs in Greece, Ireland and Washington, D.C., in the bureaus of Economic and Business Affairs and International Organizations. After retirement in 2004 he became a senior inspec- tor in the Office of the Inspector General and director of the Rangel International Affairs Program. For more on what economic officers do and how the Foreign Service helped build a comprehensive economic system that has served U.S. interests in the post-World War II era, see his oral history at www.adst.org . The Asian Financial Crisis: The Ground View from Jakarta Indonesia, 1997 By Brian McFeeters The 1997-1998 Asian financial crisis began, most observers later agreed, on July 2, 1997, when the Thai government allowed the baht to float against the U.S. dollar, throwing a wrench into the region after an amazing decade of growth. The same day, my family and I arrived in Jakarta, and I began my third FS assign- ment, as finance and development officer at U.S. Embassy Jakarta. Coming directly out of the Foreign Service Institute’s nine- month economic training, I would love to be able to say that I saw the financial storm on Indonesia’s horizon and alerted Washington about it. Instead, as I began to meet government officials and foreign bank executives, I believed what they told me: the fundamentals were sound. Indonesia was not like the other overextended Asian economies. It boasted world-class macroeconomic management, a solid foreign investment inflow, rich natural resources and an emerging middle class. Though sitting atop a corrupt system for decades, President Suharto had kept things stable and economic deals flow- ing. Even when Indonesia followed other regional countries and floated the rupiah in August, Jakarta’s in-the-know circle stayed calm. In October 1997 Ambassador J. Stapleton Roy, an inspir- ing leader, summoned our economic section to his office. He told us he didn’t want the embassy to keep telling Washington that the fundamentals were sound and have the Indonesian economy “come crashing down around our ears.” Economic Counselor Judith Fergin and her deputy, Pat Haslach, told us to dig deeper. Judith, working her huge network of contacts, began daily phone briefings back to State and Treasury. Banking con- tacts I had met a few months earlier now sounded worried. They said funds from abroad—which Indonesian firms relied on to keep rolling over short-term U.S. dollar loans—were drying up. As things grew more uncertain, FSI economic course cochairman Barry Blenner was my lifeline. I often called him at night, taking advantage of the 12-hour difference, to talk through the worsening situation and prepare for the next day. For example, I once confidently briefed the ambassador and country team about the need for the government to sterilize the money supply, keeping the overall supply stable as foreign assets were increasingly withdrawn, based on Barry’s explana- tion the night before. By January 1998 there were no more illusions about Indone- sia. The exchange rate, our main instability indicator, suddenly weakened to 12,000Rp/USD compared to just 2,400 in August. The crisis hit the real economy. Half-built skyscrapers in central Jakarta became deserted sites, and businesses shut down. Real GDP would decline by 13 percent that year. Ambassador Roy called us in again, saying that a senior Treasury official wanted his bottom-line assessment on where Indonesia was heading. He gave us until close of business. Pat Haslach, running the section that day, gathered us in the common area and asked us each to write a short summary of the situation and our recommendations. A mid-level officer, I felt empowered, recognizing that other senior officers might have taken sole lead on such a high-priority project. We jointly described the situation as dire and government credibility as low. We suggested that a senior U.S. government official come meet with President Suharto to recommend that his govern- ment seek International Monetary Fund assistance. A few days