JAKARTA - As Indonesians debate Suharto's
legacy - he died on Sunday - some will undoubtedly
place his New Order government's undisputed
economic accomplishments above and beyond the
unresolved charges of embezzlement and human
rights abuses that followed the former strongman
leader to his grave.
Editorial pages have
been full of letters, alternatively praising and
condemning the former president. The critical
missives concentrate on criminal corruption
charges, dropped on January 8 after his
hospitalization, where the attorney general has
accused Suharto of embezzling more than US$1
billion through a charitable foundation during his
rule. A civil case is still pending.
Many
others have hailed the economic stability and
prosperity his government ushered in, beginning
with stabilization of runaway inflation in 1966,
roaring economic growth through the 1970s, 1980s
and early 1990s, and ending in 1998 with the sharp
economic collapse that coincided with the 1997-98
Asian financial crisis and marked the end of his
32-year rule.
Suharto, an independence
fighter and later Cold War warrior against the
spread of communism, perhaps more significantly is
credited as the chief architect of Indonesia's
extraordinary economic boom, which saw average
gross domestic product (GDP) growth of 7% for over
three decades.
It was as an army
commander, where he was responsible for putting
down regional insurrections, running intelligence
networks and also doing business deals, that
Suharto's ideas on leadership were formed.
On taking power after a still
controversial coup attempt in the mid-1960s,
Suharto restored economic ties with the West,
opened the economy to foreign investment and set
up a series of five-year development plans with
economic growth targets. Turning his back on the
anti-Western rhetoric of his left-leaning
predecessor Sukarno, Suharto welcomed Western
investors and liberalized investment rules to
encourage capital inflows.
Perhaps most
importantly he appointed a brain trust of mostly
US-trained economic advisors, the so-called
"Berkeley Mafia", as several had PhDs in economics
from the US university, to lead his economic
reform program. "In the 1960s, he quickly learned
economics and was an excellent crisis manager,"
said Mohammad Sadli, a former minister and
economic advisor under Suharto. "He laid the
foundations of prosperity."
Sadli and
other economic advisors liked to tell the story of
Suharto listening patiently, taking notes of their
explanations of economic theory, rice production
and industrialization. In return, he largely
insulated the technocrats from outside political
pressures. The market-minded technocrats
aggressively shifted the levers of monetary policy
to bring the country's 600% hyperinflation rate of
1964-65 under control. Drawing on classical
economic theories, the technocrats laid the
regulatory foundations for the three-decade
economic boom.
Suharto referred constantly
in speeches to his New Order regime's economic
development achievements. Indonesia's per capita
income rose from $50 in 1967 to $650 in 1996, two
years before the authoritarian leader's downfall.
Adult illiteracy rates were cut by two-thirds over
the same period, while life expectancy rates
increased by a whopping 20 years.
Agricultural experts gave the early
Suharto regime high marks for boosting food
production, particularly through the introduction
of so-called "green revolution" technologies
including higher-yielding varieties of rice. Some
subsequently criticized his government's
full-embrace of the Western-hatched techniques,
arguing they often disrupted local social
structures and had a negative environmental
impact. Yet food security, particularly for the
key commodity of rice, improved significantly.
Indonesia was also hailed as a global
success in the area of family planning, reducing
the population growth rate from high levels in the
1960s, to about 2% by the mid-1990s. Suharto often
claimed this was the result of his government's
two-children only family planning program while
academic demographers such as Terry Hull of the
Australian National University judged that the
country's fast growing economy made it less
attractive for women to bear large families.
All in the family
Still,
critical political economists claim that the
economic policies of the New Order benefited
mostly-ethnic Chinese conglomerates, nearly all of
which were beholden to Suharto for government
concessions and patronage. Although representative
of only 2% to 3% of the population, ethnic Chinese
businessmen reportedly own as much as 80% of the
national wealth. That disparity sparked
ethnic-based resentments, which exploded to the
fore during the 1998 pogroms against Chinese shop
owners in Jakarta and other cities and still
simmer 10 years later.
One key Suharto
ally, Ibnu Sutowo, founded the state oil and gas
company Pertamina in 1968, which to many observers
was a symbol of the freewheeling patronage that
dominated the New Order administration. Oil
revenues were critical to Indonesia's initial
economic turnaround under Suharto and the country
quickly became a new frontier for regional oil
production, blessed with shallow offshore
oil-and-gas fields and newfound political
stability.
Pertamina is credited with
pioneering the production-sharing contract (PSC),
an arrangement similar to sharecropping, where the
state is paid in oil rather than a percentage of
profits, and from 1968-1974, oil production
increased by over 1,000%, with oil revenues at the
time providing up to 80% of the state budget. The
PSC gave huge discretion to Pertamina and Ibnu
Sutowo became a major patron of the early New
Order, funding schools, mosques, government
departments and even Indonesia's national
parliament building.
By 1975, however,
Sutowo's overspending on a shipping empire and the
company's breakneck expansion had racked up $10
billion in debt and to many critics the company's
chronic corruption became a glaring symbol of
Suharto's over-reliance on patronage. Some
economists, such as Hal Hill of the Australian
National University, credit the Suharto government
with investing some of those oil revenues wisely.
Indeed, under the Berkeley Mafia's
management, Indonesia began a series of five-year
economic plans in the late 1960s, including
extensive spending on roads, schools, hospitals,
and agriculture. By the mid-1980s, development
agencies such as the World Bank held up Indonesia
as a showcase success story.
Major General
Suharto was little-known to the West when he
emerged as a fiercely anti-communist president in
1966. After an alleged coup attempt by the
Indonesian communist party, between some 300,000
to 1 million alleged communists and their
supporters died in reprisals at the hands of the
military and religious youth groups.
Historians still debate Suharto's role in
the massacres that one US Central Intelligence
Agency report described as "one of the worst mass
murders of the 20th century". Critics say Suharto
failed to develop legal institutions and ruled
through corruption and nepotism. Suharto's
friends, associates, and especially five children
developed sprawling business empires, reaching
into every sector of the Indonesian economy.
Critics, such as Jeffrey Winters, a
professor of political economy at Northwestern
University in the US, claim that Suharto ran
Indonesia in the style of a mafia don. Winters
argues that the systemic corruption of the regime
finally eroded foreign investor confidence to the
point of collapse, when in 1998 the rupiah came
unhinged and the financial system decimated under
the weight of foreign-denominated debts.
Economic growth collapsed to -14% in 1998,
down from 7% the previous year, and the country
unceremoniously signed onto a $43 billion
International Monetary Fund bailout package.
Student protestors at Indonesia's Parliament
building squarely blamed Suharto, his business
associates and family members, and eventually
drove him from power, partially on the charge of
economic mismanagement.
Suharto's greatest
failing to many of his supporters, was the legacy
of corruption. His business wheelings and dealings
first came to light in the 1950s, when as an army
official he was reprimanded over a sugar-smuggling
scheme in Central Java. Throughout his rule, he
cultivated a network of wealthy allies, many in
the ethnic Chinese business community through a
system of rewards and punishments administered by
the state.
Relations with a key supporter
and former intelligence czar Benny Moerdani soured
in the 1980s, after a warning he issued to Suharto
that his children's business activities were
running wild. By the mid-1990s, Suharto's nepotism
reached epic proportions, culminating in a
national car project awarded to Suharto's youngest
and most beloved son, Tommy. According to
anti-corruption watchdog Transparency
International, a financial watchdog, Suharto and
his family may have amassed as much as $35 billion
during his reign and the independent organization
today still ranks Indonesia as one of Asia's most
corrupt countries.
Others debate that
historical interpretation, however. Visiting
Suharto's deathbed, former Singaporean prime
minister Lee Kuan Yew offered another verdict when
he compared the well-being of Indonesian citizens
to those of Myanmar. "Compare. Who's better off?"
he was quoted as saying. "Who deserves to be
honored? What's a few billion dollars lost in bad
excesses. He built hundred of billions of dollars
worth of assets."
In Lee's case, such
statements are at least partially self-serving, as
one day Singaporeans will likewise have to judge
his authoritarian government's economic legacy.
For Suharto, it seems highly unlikely such
questions will ever be resolved through a formal
legal process. His family rejected an out-of-court
settlement offer from the attorney general's
office earlier this month and some Indonesians,
including former political opponents and other
victims of his rule, have called for forgiveness.
In the end, however, Indonesians, foreign
observers and historians will have to make up
their own minds on the former strongman's legacy.
Tom McCawley is a Jakarta-based
journalist.
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