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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

COVER STORY - SPECIAL REPORT

WATCHING SUHARTO
World leaders hope they can persuade the president to restore confidence

By Susan Berfield and Jose Manuel Tesoro / Jakarta


Go to a story about similarities between Marcos and Suharto

Go to a story about well entrenched cronies in Indonesia

Go to a story debating IMF policies

Go to a story about pressure on other Asian economies

Go to a quick guide to Asia's economic crisis

Go to a story about investment bank Peregrine

Go to an analysis of the safety of Asian banks

Go to an analysis of looming deflation

POWER is a slippery beast. The way leaders let it go is as important as how they use it. Consider, for example, President Suharto. He has not just ruled Indonesia for 32 years, he has dominated the vast country. For much of that time he used his power well, even if he did not share it. Suharto directed the country's economic development, and tens of millions live better as a result. But he undermined the institutions (the judiciary and parliament) that otherwise would have checked his power, and he overwhelmed potential opponents. There is Suharto, and there is everybody else. Now the country is worse off because of that.

Suharto's ability to overcome Indonesia's economic troubles is in doubt, his credibility in decline. He hesitated to implement IMF reforms, which he agreed to in October as part of a $43 billion rescue package. Suharto feared doing so could cause social and political unrest; it certainly would not do much good for the business empires of his relatives and friends. Even what restructuring has occurred has been slow and sloppy. Nearly 38,000 depositors in the 16 banks liquidated in October have not yet been reimbursed; they are owed more than 20 million rupiah. "Suharto doesn't seem to grasp how difficult and dire the situation really is," says a well-connected academic. "He has surrounded himself with sycophants, yes-men, family and cronies." Suharto may have been ill-advised. But he alone created the crisis of confidence, as only he could. If he cannot resolve it, no one else can either.

Suharto's 1998 big-spending budget managed to spook nearly everyone: the rupiah lost 47% of its value within two days of his Jan. 6 speech, reaching 10,550; people all over Jakarta panicked and bought whatever rice and cooking oil they could find at whatever price they had to pay. What was Suharto thinking when he put together the budget? "It's a symptom of an aging leader, this overconfidence in his own policies," says a prominent retired general. U.S. President Bill Clinton called Suharto from Air Force One Jan. 9 to express his concern about Indonesia's turmoil. During a 20-minute conversation, Suharto assured Clinton that he was "determined to implement seriously our IMF program," said State Secretary Murdiono. Japanese Prime Minister Hashimoto Ryutaro, German Chancellor Helmut Kohl and Australian Prime Minister John Howard also spoke with Suharto.

A senior IMF official immediately flew to Jakarta to discuss the rescue package. U.S. Deputy Treasury Secretary Lawrence Summers rushed to the capital just a day later. Emerging from a 90-minute meeting at the president's residence Jan. 13, Summers said: "It's clear that Suharto recognizes the need to take strong steps of the kind that has been under discussion with the IMF to create confidence." U.S. Secretary of Defense William Cohen said he was reassured after talking to Suharto. Singapore Prime Minister Goh Chok Tong, whose government contributed to the rescue package, also arrived in Jakarta for a one-day visit. And IMF managing director Michel Camdessus met with Suharto Jan. 15. The IMF was expected to disclose the results of the talks afterward.

But official promises may (or may not) be taken at face value. "Nobody trusts the government," says the academic. "So whatever comes out will be looked down upon." Is there anyone who still believes that economic reform can succeed without political change? (See stories beginning page 20 on the IMF's impact on Asia.)

The fall of the rupiah sparked concerns about an Indonesian debt default that could spread to Thailand, hurt the fragile Japanese banking system and undermine South Korea's efforts to contain its economic problems. "Adverse news from Indonesia will really affect the image of the region as a whole and have a contagion effect on all the economies," says Abdul Razak Abdullah Baginda, executive director of the Malaysian Strategic Research Center. Even Malaysian Prime Minister Mahathir Mohamad, that most vocal proponent of keeping quiet about the neighbors' problems, will visit Suharto to talk about Indonesia's economy. "Constructive involvement is a necessity," says Jusuf Wanandi, head of the Center for Strategic and International Studies in Jakarta.

The panic buying in the days after Suharto's budget speech challenged much of the government's remaining credibility. Onghokham, a local historian, said such a stampede for basic goods "hadn't happened in 30 years." At a Makro outlet in a Jakarta suburb, cars were lined up for 500 meters Jan. 8. Once inside, people grabbed what they could, even from others' shopping carts. "There was no baby formula on the shelves," said one woman. "So I took a tin from someone else's trolley."

Those who can afford baby formula are shaken; those who can't are agitated. All this makes the military nervous. Violence sparked by economic fears has not been uncommon in the past year. The Chinese community, always a target in tough times, has come under fire. And the full impact of the economic downturn has not yet hit. Reliable unemployment estimates are hard to come by, but it is likely that several million will be unable to find work or will lose their jobs this year.

Unrest could become widespread. But any Philippine-style "People Power" campaign would probably end very differently in Indonesia. The armed forces chief has said that his men will do whatever is necessary to keep Indonesia calm. Short of "whatever," what worries many is the proven potential for popular demonstrations to degenerate into looting.

The turmoil has already upset the order of Suharto's New Order regime. You would have to be living in a very remote place indeed to have missed the crashing sound in Indonesia last week. It was not just the rupiah falling, though, it was the noise of broken taboos. Words that had been voiced only in private were uttered in public: it is time for Suharto, who is 76 and showing his age, to give up power. Even the usually tame Jakarta Post ran front-page stories quoting a former cabinet minister and a political scientist who called for new leaders.

For the first time a united opposition is emerging. Megawati Sukarnoputri, daughter of the founding president and ousted leader of the Indonesian Democratic Party, announced Jan. 10 that she was prepared to run for the presidency. Her speech was significant, for she has never before said she would like to rule the country, but mostly it was symbolic. There is no constitutional way for her to take power. Amien Rais, leader of the 28-million-strong Muhammadiyah Islamic organization and a self-proclaimed presidential candidate, has said that Indonesia cannot overcome its economic crisis until Suharto leaves office. Abdurrahman Wahid, who heads the Nahdlatul Ulama, Indonesia's largest grassroots Muslim group, has said that Suharto should step down, but that "circumstances dictate otherwise."

One day, of course, Suharto will cede power. But probably not any day soon. In March the People's Consultative Assembly will select a president to lead Indonesia for the next five years. The ruling party, Golkar, announced Jan. 13 that it will nominate Suharto for a seventh term; Golkar's candidates are always chosen. Thirteen contenders for vice president have been registered; Suharto usually makes clear his choice. The favorites include Information Minister Hartono, Army chief Wiranto and Suharto's daughter, Siti Hardiyanti Rukmana. One thing is sure: whoever is selected will have to be acceptable to the armed forces, which traditionally has a prominent role in governing the nation. Before the economic crisis, most assumed that during the next few years Suharto would gradually hand over power to his vice president. Some believe that may still be possible, especially because any sudden movements might lead to even worse troubles. But others caution that a slow transition could be dangerous too. "There is no way we can look for a solution on the economic front [with Suharto in power]," says the academic. "That means more confrontation."

The consensus in the military seems to be that Suharto should stay in power, but that he should begin to open up the political system. Suharto has made a career out of keeping quiet. The next president won't have it so easy.

-- With reporting by Dewi Loveard / Jakarta and Santha Oorjitham / Kuala Lumpur


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