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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

FORTRESS SUHARTO

His cabinet headed by friends and family, the president seems willing to go it alone

By Jose Manuel Tesoro / Jakarta


Go to a list of five controversial new cabinet members

IN JAKARTA, RUMORS CAN CONTAIN a surprising amount of truth. The trick, of course, is to separate fact from fancy. But in this case, even the most experienced information traders did not know what to believe. The People's Consultative Assembly electoral college had not even finished electing Suharto, before fax machines and computers across the city were spitting out clandestinely circulated lists of the president's new cabinet.

More than one rumored line-up included the names Mohamad "Bob" Hasan and Siti Hardiyanti Rukmana, a.k.a. Tutut. No one could quite swallow that. It just seemed too audacious that Suharto would appoint his closest business associate, as well as his eldest daughter, to help run the nation. The talk was especially hard to credit because the International Monetary Fund had postponed $3 billion of its $43-billion bailout unless Suharto and Co. got serious about economic reform.

But the improbable was indeed possible. On March 14, Suharto announced that Hasan would become Indonesia's minister for trade and industry, while Tutut would handle the social affairs portfolio. The president thus proved that no one, not even the IMF, can dictate to Suharto.

Yet the appointments appear less an intentional rebuff to the Fund than an indication of the 76-year-old leader's desperation. With the soaring economy he built up over three decades collapsing around him, Suharto has clearly decided that only his most trusted followers can carry out his instructions. "I don't see anyone in this cabinet who can say 'no' to the president." says an Indonesian economist. Development is the foundation of Suharto's power. The composition of his cabinet only means that he intends to save the country in his own way -- and on his own, if necessary.

The new economic coordination minister, Ginandjar Kartasasmita, announced on radio that Indonesia was facing "a most difficult time, just like at the beginning of the New Order" -- the name given to Suharto's 32-year rule. The cabinet's main priority is to secure affordable food supplies throughout the archipelago, severely disrupted by riots and shortages of imports. Ginandjar downplayed the currency board proposal to directly back the rupiah with the country's dwindling foreign reserves, saying the plan was only one of the options. Meanwhile, he said, "reforms in Indonesia will proceed with or without the IMF."

Those words do not reassure hard-core globalists. Many expect Indonesia to turn inward and aim for economic self-sufficiency. Such a scenario has clearly given the IMF pause. The Fund's Asia-Pacific chief Hubert Neiss flew to Jakarta to find a way around the impasse. But in the president's mind, satifying the IMF is less important than salvaging his legacy.

Suharto's family members appear to have been given the responsibility for averting a social eruption. As social affairs minister, Tutut will be key in executing government aid and social welfare programs. Distributing government largesse would help endear Tutut to the masses -- not a bad move if she is to succeed her father, as some speculate. To alleviate a spare-parts shortage that is slowly crippling transportation, the company of the president's second son Bambang Trihatmodjo recently got permission to import parts at a state-subsidized exchange rate of 5,000 rupiah to the greenback. The firm claimed it would not seek to profit from the deal.

"The New Order has come full circle," says Indonesian journalist-poet Gunawan Mohamad. Suharto's rule has always been a tug-of-war between technocrats and cronies, between those who craft policy and those who dispense patronage. Each side has tried to win over the president. Economists and bureaucrats demanded rational programs for Indonesia's development; family and friends sought ways to secure their own economic and personal power, as well as Suharto's.

For most of the past 30 years, both sides were evenly matched. The president listened to one, then the other, but always made his own decisions. In the first years of New Order, the technocrats dominated. "Now, the rational side is gone entirely," says Gunawan. Suharto's children are now ascendant and very influential.

A few cabinet members, such as the ministers of health and of mines and energy, could be considered of the technocrat persuasion (U.S.-educated, free-market friendly, open to advice from multilateral organizations). But with people loyal to Suharto in the top portfolios, the technocrats are clearly out of favor. By calling in the IMF, they may have over-reached in the eyes of Suharto. Since the first IMF package was announced at the beginning of November, the rupiah has weakened more often than it has strengthened. And the second IMF reform package negotiated in January, with its 50-point memorandum, may well have been too ambitious. "The technocrats let the president down," says James Castle, who heads an economic research group in Jakarta.

Hence a choice like Bob Hasan, who is the technocrats' antithesis. In Hasan's portfolio, says economic analyst Didiek Rachbini, "we need a really tough trader -- we have had executives and scientists for several terms, and exports did not perform as expected." Hasan may be a "tough trader," but he used his influence to build a plywood marketing cartel that dictated prices to buyers in Japan and Korea. Although the cartel was one of the monopolies ordered abolished under the second IMF agreement, Hasan is unrepentant. "What is wrong with a monopoly or a cartel if it is in the country's benefit?" he said.

Clearly economic nationalism will inform this particular cabinet. Already some wonder if Indonesia can continue without the IMF. It could seek bilateral backing and aid, like that provided by Japan and Australia. Last month Tokyo announced a package worth over $8 billion to aid exports, smooth imports and provide food and medicine to the needy. Japanese PM Hashimoto Ryutaro recently met Suharto -- the first leader from a big economic power to visit the president since the rupiah's collapse.

The technocrats are not the only ones who lost out in the new cabinet; so have confidantes of Vice President B.J. Habibie. The Indonesian Association of Muslim Intellectuals, better known by the initials ICMI, which he chairs, expected their members to get seats in the cabinet, as Habibie favorites did in the previous one. But few Habibie-ites got the nod this time -- which may reflect his uneasy relationship with the Suharto children. On Mar. 12 Habibie formally relinquished the ICMI chairmanship and begged members to continue seeing him. "Please don't leave me," he said. "Don't abandon me in a golden cage."

Many of the new ministers instead are close to Tutut, such as interior minister Hartono. Others have had dealings with her siblings. The presence of so many First Family allies has colored the cabinet, despite the inclusion of figures like the respected Ali Alatas, who retains his post as foreign minister, and popular preacher Tutty Alawiah, the women's affairs minister.

Some Indonesians have dubbed the latest lineup the 3K cabinet, for Korupsi, Kolusi, Keluarga -- or corruption, collusion and family (connections). Cynics could only smile grimly when cabinet members were asked to declare their assets -- but not publicly. Nor were they soothed when the new ministers said they would forgo their first year's salary; the cash will go into a fund for the poor controlled by Tutut.

The economic issues the new ministers face are severe enough without the additional handicap of a poor image. The new cabinet may have the trust of President Suharto. But the one "K" it lacks may turn out to be just as important -- Kepercayaan, or public confidence.


CRONY CREW

Suharto's trust, not IMF approval, was the main criterion for cabinet appointees. Here are five who fulfilled that, but do not necessarily inspire public confidence.

BACHARUDDIN JUSUF HABIBIE, 61
VICE PRESIDENT
Suharto's protégé. As minister of research and technology for 20 years, he developed tech-heavy but capital-intensive "strategic industries" like steel and transport. The IMF wanted funding for his beloved national plane cut; he is still searching for ways to keep the project going. Nickname: Rudy.

SITI HARDIYANTI RUKMANA, 49
MINISTER OF SOCIAL AFFAIRS
Suharto's eldest daughter. She is vice chair of ruling party Golkar and runs an extensive web of businesses. A power project linked to her was one of the 15 megaprojects cancelled after the IMF negotiations. She is best known as Tutut.

MOHAMAD HASAN, 67
MINISTER OF TRADE AND INDUSTRY
Suharto's golfing partner. An associate of the president for over 40 years, Hasan, pictured above, dominates Indonesia's lucrative forestry industry. The IMF pact lifted barriers on private plywood exports, which hit his pulp and paper marketing cartel Apkindo directly. People call him Bob.

FUAD BAWAZIER, 48
MINISTER OF FINANCE
Former head of the tax department. Thought to be close to Suharto children, he retained tax breaks on unsold stock of national cars from the company of Suharto's youngest son Hutomo Mandala Putra. The benefits were to be scrapped under the IMF deal.

SJAHRIL SABIRIN, 54
GOVERNOR, BANK OF INDONESIA
Longtime central bank employee. He may not resist the still-mooted introduction of a currency board system, a controversial proposal to back the rupiah with foreign currency that has intrigued Suharto but infuriated the IMF.


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