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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


Battle for the Economy
It's family and friends vs. the technocrats

By Jose Manuel Tesoro / Jakarta

IT WAS ONE OF the more telling scenes in the past week. On Jan. 9, President Suharto's eldest daughter Siti Hardiyanti Rukmana (better known as Tutut) walked into a Jakarta bank to launch the "Love the Rupiah" campaign. "Let us exchange our dollars for rupiah," she told journalists as she converted a reported $50,000. "If we don't appreciate the rupiah, who will?"

That begs the question: If one appreciates the rupiah so much, why possess all those dollars? In Indonesia, $50,000 represents several lifetimes of income for a lot of people, who might view the gesture with more resentment than respect. But in days following, other prominent folk followed suit: tycoon Aburizal Bakrie changed $100,000, while the franchisee of McDonald's, Bambang Rachmadi, converted $10,000.

The markets were un-impressed. On Jan. 12, the rupiah fell to about 8,600 to the dollar from around 7,800 the previous trading day. The elite, many of whom have prospered through their chummy links to the government, are widely seen as being a big part of the problem. Suharto's immediate family, in particular, has been on the receiving end of much public ire in the current turmoil.

The First Family's economic dominance is obvious everywhere. Take a taxi from the airport to downtown Jakarta and you'll pass a big billboard advertising the Timor, youngest son Tommy Suharto's "national car," which is imported from South Korea with big tax breaks. The taxi you're in might well be operated by a conglomerate owned by Tutut, as well as the toll road you're cruising on. When you get into the center of town and check into the posh Grand Hyatt hotel, keep in mind that the prime piece of real estate it is sitting on is owned by Bimantara, a group controlled by Suharto's second son, Bambang Trihatmodjo.

Though nepotism as well as cronyism (many of Suharto's friends are enormously wealthy) occur nearly everywhere, Indonesia boasts some of the more egregious instances. Still, the country as a whole has prospered over the past three decades -- mainly due to the efforts of university-educated technocrats. Dubbed the Berkeley Mafia in the 1970s and '80s (because many of them attended the University of California at Berkeley), they have largely been responsible for the country's economic direction under Suharto, who, to his credit, accepted their advice -- then. Reversing the anti-West policies of founding president Sukarno, they welcomed foreign aid and investment, and advocated a more open, export-based economy. The result: an average annual GDP growth of 7% from 1965 to 1980 and 5.5% from 1980 to 1995.

The IMF bailout package, however, has seen growing tension between the president's family and cronies and his technocrats. The latter, including Finance Minister Mar'ie Muhammad, Bank Indonesia Governor Sudradjad Jiwandono and economic adviser Widjojo Nitisastro, are on the frontlines of the IMF negotiations and are the main actors in moving to restructure the economy under the monetary body's guidelines. But progress has been slowed by opposition from vested interests.

In November, when the hard-working and widely respected Mar'ie announced the liquidation of 16 ailing banks as part of the IMF's requirements, Suharto son Bambang, part-owner of one of the targeted banks, balked and publicly accused the minister of "an attempt to sully our family name and indirectly to disgrace my father." Bambang sued Mar'ie and Sudradjad over the matter, but later withdrew his suit and set up another bank.

As if such obstacles are not trouble enough, the technocrats face resistance from an even higher level: Suharto himself. Word is that the president has been turning increasingly to his family members for advice. An Internet joke refers to them as the PPP, originally the Indonesian initials of the United Development Party, but now referring to Putra-Putri Presiden -- the President's Sons and Daughters.

The aging patriarch is apparently distrustful of his economic team for hewing too closely to the IMF's program. "You're supposed to be working for me!" he is said to have shouted at Mar'ie and Sudradjad at a meeting last month. Suharto's intransigence was apparent in November when a presidential decree allowed 15 megaprojects to proceed, even though Jakarta had promised to review such ventures.

In the wake of the meltdown, the government has backtracked and announced that seven of the projects have now been shelved. There is talk of reducing tariffs and barriers, and adjusting the budget, considered not austere enough. The steady stream of international visitors seems to have persuaded Suharto -- for now -- that the IMF program must be implemented. Perhaps the message is coming home to Suharto and those close to him: you can overrule your advisers but not market forces.

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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