Fall of a dictator

By Faiza Rady

Indonesian schoolchildren mourn the death of a pro-democracy activist in the capital Jakarta

Understandably perhaps, Suharto's woefully mimicked resignation pledge lacked credibility among the Indonesian public. Students and workers continued to demand his immediatde resignation and rallied against World Bank (WB) and International Monetary Fund (IMF) dictates of fiscal austerity measures. Closely monitoring the ongoing crisis, Dennis de Tray, the WB country director for Indonesia, said on Monday that international donors must perform a "major reassessment" of the situation in Indonesia because of the social unrest.

"The medicine dished out by the IMF is the same as ever," explained economist Alan Woods on a Web site dealing with economic issues. "Loans are given on condition that the entire burden of the crisis is placed squarely on the shoulders of the people ('austerity'). Growth must slow down, unemployment must grow, factories and banks must close, interest rates must rise, budgets must be balanced, living standards reduced."

In the case of Indonesia, the agencies' prescriptions combined with the effects of the crisis to result in a drastic devaluation of the national currency -- the rupiah -- which depreciated 400 per cent against the US dollar over the last nine months, a spiralling inflation rate of 33 per cent in the first quarter of 1998, lay-offs affecting an estimated 10 million workers, skyrocketing prices of staple commodities and the reduction of subsidies on gas and kerosene -- resulting in 71 per cent and 25 per cent price hikes respectively. "When Indonesia explodes, it's going to be very extreme. Believe me, the people are very angry," Newsweek quoted Jakarta business consultant Wilson Nababan as saying.

Attending the G-15 meeting in Cairo last week, the Indonesian dictator declared that he would consider stepping down if the people withdrew their confidence in him. "If I am no longer trusted, I will become a pandito (sage) and endeavor to get closer to God," he said. A somewhat bizarre proposition coming from a man who came to power through a bloody US-backed military coup, during which Suharto overthrew the democratically-elected government of leftist President Ahmed Sukarno, and killed an estimated 500,000 people. In addition, Suharto "launched the greatest massacre since the Holocaust... [slaughtering] hundreds of thousands of mostly landless peasants in a few months during his 1975 invasion and annexation of East Timor," wrote renowned linguist and political writer Noam Chomsky.

Raising the worn-out spectre of communist agitation and the imminent threat of a replay of the massacres of old, Home Affairs Minister Raden Hartono warned that "the people should remain alert so that the sad events will not be repeated, because I have already reminded you that behind this unrest are remnants of the PKI (Communist Party of Indonesia)."

Meanwhile, Indonesia's government-controlled television also got out of hand -- showing thousands of demonstrating students and impoverished workers burning Suharto in effigy and condemning him to death. "[The students] are widening the cracks in the facade of Mr Suharto's impregnability," wrote The Economist. "Even the media, used to censoring itself for fear of reprisals, is covering their protests. So millions of Indonesians are able, for the first time, to see their compatriots demanding Suharto's downfall."

Upon his return from the G-15 meeting in Cairo, Suharto quickly and efficiently quelled the media's sudden insubordination by barring any coverage of the demonstrations. Suharto's attempt to quell the raging social unrest by rolling back gas and kerosene price hikes and ordering the army into Jakarta, however, proved less successful.

Unwilling to accept belated and token gestures of appeasement, the Indonesian people continued to demonstrate -- demanding Suharto's ouster. And while some of the troops deployed in the capital scrupulously guarded embassies and foreign compounds, soldiers and protesting students seemingly fraternised as troops watched the marches from a distance without intervening. "Indonesian army troops dispatched to trouble spots in Jakarta were greeted with wild applause by the rioters, and the soldiers smiled and raised their fists in return," reported The New York Times.

While rumours of a rift in the military and disaffection among junior officers swirl in Jakarta, the multinational corporate establishment is desperately scrutinising the Indonesian top brass in the hope of hand-picking a compliant successor to the aging dictator from the army leadership.

"With no clear, organised political opposition in Indonesia, the 'market' is increasingly looking to the Indonesian armed forces as a savior," said David Stars, a currency strategist with 4Cast, a London-based market analyst agency.

The chief of Indonesia's armed forces, General Wiranto, may very well emerge as a potential "market" candidate. Attempting to walk a tightrope between Suharto and the people, Wiranto possibly groomed himself for the top job by remaining on the sidelines of events. As rallies and demonstrations rocked the capital, he failed to impose a curfew and cautiously restrained his troops -- keeping them at bay from the protesters.

Whereas the WB and the IMF blamed the turmoil on the regime's nepotism, rampant corruption, embezzlement of public funds and blatant fiscal mismanagement, many analysts believe that the agencies' economic reform package actually sparked off the turmoil.

Suharto, his family and his ruling clique have succeeded in monopolising a large chunk of the nation's capital for the past two decades. As early as 1980, Suharto's daughter Siti Hardiyanti Hastuti, nicknamed Tutut, started the Citra Lamtoro Gung Conglomerate -- an outfit worth an estimated $2 billion, and a major shareholder in the country's real estate, toll roads, major highways, telecommunication, television, gas and a bank.

Tutut's brother, Bambang Trihatmojo, is the co-owner of the Bimantara Group -- a $3 billion concern -- with business interests in television, the chemical industry, banking, automotive manufacturing and oil refineries among other things. And Suharto's youngest son, Hutomo Mandala Putra -- Tommy to his cronies -- generally regarded as less ambitious than his siblings, owns a conglomerate, Humpuss, which is only evaluated at $600 million. As for Suharto himself, a 1997 Forbes magazine article evaluated his personal fortune at $16 billion.

Beyond the Suharto clan's pillage of the country's resources, many economists agree that the Indonesian crisis extends to the entire region and cannot only be reduced to grand-scale nepotism, looting and profiteering of the ruling class. "The problem is the real crisis [in East Asia], in which thousands of factories are shuttered, millions of jobs are lost and prices soar out of control, is only just beginning," commented Newsweek.

The crisis started last July with the slippage of the Thai currency caused by the weakness of an over-stretched, vastly indebted banking system. As a result of sudden market "nervousness", foreign investors started pulling out and the system gave way. "Suddenly 'confidence' collapses. Someone, or some group, decides that the whole structure is unsound and begins to sell. And sell. And sell. This is a classical development, seen in every cycle, and not at all the result of Thai or Asian peculiarities," explained Woods.

This "classical development" also applies to the Indonesian economy that was grounded in flighty, non-productive speculative capital. Attracted by the speculative bubble of Asian "boom" years of the 1980s and 1990s, both foreign and national investors poured their money into the property market, which caused a spiraling inflation of real estate and property values. This, in turn, induced a cycle of increased investment and property development projects -- resulting in the over-extension and indebtedness of the banking system. After capital flight finally hit Indonesia when the foreign debt reached $137.4 billion, and the stock market crashed by 22 per cent, the government announced the fusion of a number of big banks considered insolvent. But the debacle did not end there, the country needed a major bailout from the IMF to the tune of $43 billion. Yet, paying the price of this bailout according to IMF directives, has so far cost Suharto dearly.