Soeharto's resignation: the end of an era?

• Author: Smith, Anthony
• Position: Former Indonesian president - New Zealand Foreign Policy

Anthony Smith discusses the events surrounding the seventy-six year old Indonesian President Soeharto's decision to step down from office at the end of May.

Indonesia's economic crisis seriously undermined Soeharto's regime, leading to pressure from the Indonesian people, elements of the ruling party and the armed forces to resign. The recent events of Indonesia's leadership change further underscore the role of the military in internal stability.

Indonesia's political turmoil can be directly linked to the financial crisis experienced by the archipelago since mid-1997. Indonesia's loss of economic competitiveness, in large part due to the corrupt practices of the first family and their friends, is not only well documented but was increasingly obvious to the entire population. However Soeharto's earlier achievements in Indonesia's economic development, after edging out President Soekarno from 1965, were remarkable. He grounded the legitimacy of his regime on economic growth and dramatically improved industrial growth, foreign investment, literacy, health, population control, and other economic and social indicators. The regime altered its foreign policy course to pursue friendly relations with the United States and neighbouring South-east Asian states -- ending Soekarno's expansionistic military adventurism on to Malaysian soil. Forming a new party, Golkar, Soeharto managed to maintain unchallenged power for more than three decades to create his `new order'. Of humble Javanese origins, he had a reserved leadership style markedly in contrast to that of his charismatic predecessor, Soekarno.

Yet the Soeharto administration, while in many ways an improvement on its predecessor, made some costly and inhumane decisions. In 1965, following the Army's seizure of power, violence against the Indonesian Communist Party (PKI) and supposed communist sympathisers (including many innocent Chinese who were targeted in what can only be described as a `witch-hunt') saw 500,000 perish. To this day not only is communism, and its symbols, banned but so also are Chinese written characters, medicines and some cultural performances.

The 1975 invasion of East Timor remains a significant problem for Indonesia, internally and externally. With between 100,000-200,000 deaths and the continued subjection of the East Timorese this remains a negative point on Soeharto's scorecard.

In the late 1980s, with the backdrop of faltering dictatorships all over the world, Soeharto promised his own version of glasnost, known as keterbukaan. This proved to be empty rhetoric when in 1994 three newspapers -- Tempo, Ketik and Editor -- were forced to close for criticising government decisions. In 1996, Golkar, the ruling party, engineered the removal of Megawati Sukarnoputri (Soekarno's daughter) from her official position as leader of the opposition Democratic Party of Indonesia (PDI). While there is more freedom of speech and association in Indonesia than in many other more hardline dictatorships, pro-democracy campaigners have at times experienced harassment and jail terms (in particular for attacking the personage of Soeharto).

Great weakness

While Soeharto employed the rhetoric, and some of the practice, of open markets and global free trade, his great weakness was that he allowed his own family access to large sections of the economy through monopolies, favourable tariffs and levies. Over time the economic technocrats and planners had their power ebb away and nepotism and cronyism practically became official policy. The collective wealth of the Soeharto family, complete with six multi-millionaire children, is generally thought to be more than US$30 billion. This, coupled with a general crisis in the banking sector, has brought the Indonesian economy to its knees, including a fall in the rupiah of 70 per cent since mid-1997.

Financial assistance to stave off a complete economic collapse could only come from offshore sources given Indonesia's depleted financial reserves. Soeharto and Michel Camdessus, head of the International Monetary Fund (IMF), came to an agreement in January 1998 to undertake long overdue economic reforms. Camdessus negotiated a tough deal whereby the IMF would provide $43 billion on condition that Indonesia:

* reduce inflation

* cancel a number of infrastructural projects

* abandon funding for a national car and a national aircraft

* remove monopolies on flour, sugar, cement, paper, plywood, and cloves

* reduce tariffs

* strengthen banking laws and allow for further foreign investment in the financial sector

* remove subsidies on fuel and electricity.

Immediately after the signing of the agreement there were grave concerns as to whether Indonesia would honour it. To add to this was a proposal to establish a currency control board to prop up the rupiah, but the idea was quietly dropped.

Confidence...