Watershed for Indonesia's New Order

Watershed for Indonesia's New Order

By Leonard C. Sebastian

With the economic crisis, prospects of social unrest and the
impending Presidential election, Indonesia enters a crucial
period.

AFTER a period of vacillation in November and December, and
much to the relief of the region, President Soeharto and his
government seem to have grasped the nettle by endorsing a reform
package which hopefully will bring respite to Indonesia's
embattled economy.

It was a brave and highly commendable decision taken by Mr
Soeharto on Jan. 15 to sign an agreement with the International
Monetary Fund that required the dismantling of monopolies and
subsidies, including for family-owned businesses.

The central bank was to be granted autonomy in policy-making,
with a restructuring plan of the financial system to follow.

While regional economic planners, concerned about the
contagion effect, should be relieved that President Soeharto has
taken concrete steps to signal his commitment to IMF reform
package, just how economic reform will be worked out in practice
together with its political and social costs, remains one of the
great imponderables.

Is there a possibility that the political fallout from the
financial crisis that has swept over Indonesia and the rest of
Southeast Asia since mid-1997 could overwhelm President Soeharto?

Much depends on the political choices he makes over the next
month.

It is no understatement to say that Feb. 1, 1998, was a
historic watershed for Indonesia. It was the first day for the
implementation of the newly negotiated IMF package.

Similarly, it marked the end of the Lebaran holiday and the
dawning of new realities for many Indonesians forced to come to
grips with rising prices and unemployment.

There is every possibility that job losses could provoke riots
and not merely quiet despair.

The possibility of heightened social unrest in the run-up to
the March 10 Presidential elections has increased significantly.

Whatever the case maybe, President Soeharto faces the greatest
challenge to his political office since the Malari incident on
Feb. 15, 1974.

Why is the current situation so significant? It could be seen
as a historical congruence of events: a deep economic crisis; a
severe drought hitting rural families and causing a shortfall in
rice and other crops; a widening wealth gap fueling social unrest
with strong racial and religious overtones; rising domestic
unemployment complicated by the possible repatriation of large
numbers of overseas workers from other hard-hit Asian nations;
and uncertainty over political leadership.

Not since the 1960s has Indonesia faced such a volatile
combination of circumstances.

Among the many problems in this new emerging scenario is the
lack of any obvious candidate for the Vice-Presidency.

The President's age and concerns over his health have led to
an obsession among Indonesians with the succession issue.

However, no plausible candidate has been allowed the
opportunity to openly canvass support for the position.

With lack of transparency, rumors continually abound.

There were a number of contenders. These names included:
current Vice-President Try Sutrisno, Information Minister R
Hartono, Armed Forces Chief-of-Staff Gen. Wiranto, State Minister
for Research and Technology Dr B.J. Habibie, Bappenas chief
Ginanjar Kartasasmita, and former Vice-President Soedharmono to
name the commonly fancied candidates.

Seasoned observers pointed to the likelihood that the Vice-
President would have to be a military man with an army
background.

However, it was lately rumored that, like the situation in
1993, President Soeharto favors Habibie.

In 1993, the strong secular-nationalist faction within the
Armed Forces took pre-emptive action against a possible Habibie
Vice-Presidency by nominating General Try Sutrisno as Vice-
President.

The success of Habibie's candidacy revolved around two
questions.

First, how would the financial markets respond? Second, how
would the military react to his appointment? There was a sense
that an adverse reaction may not necessarily be forthcoming.

From the perspective of financial markets, the identity of the
individual might not be all that significant.

However, the financial markets have since responded negatively
to a possible Habibie Vice-Presidency.

The key remains the military.

The reshuffle of the military high command since 1996 has been
widely interpreted as an effort to weaken opposition to Habibie
within the Armed Forces.

While there may be strong rumblings of discontent within the
corps of retired officers, it may be unlikely that current
military leadership, hand-picked by Mr Soeharto, will
be split over a Habibie candidature.

However, being the consummate politician that he is, Soeharto
may opt for a surprise choice. We have to remember that a list of
nominees will be handed to President Soeharto by the MPR.

He is at liberty to choose a running mate on that list or
reject the choices provided to him altogether.

One thing is for certain, only he knows the identity of the
future Vice-President.

The run-up to the March 1998 session is likely to be different
from anything we have witnessed previously. Since the President's
illness in mid-December, a marked change of mood has occurred.

The voices clamoring for change are getting louder. Two people
with significant popular support to challenge Soeharto, namely,
Megawati Sukarnoputri (the daughter of former president Sukarno)
and Amien Rais, a Moslem leader of some stature, have declared
their intention to stand against the President in the up-coming
elections.

At this juncture, their challenge is a symbolic one.

However, the picture becomes more complex with the addition of
other significant voices like Abdurrahman Wahid, leader of the
largest mass-based Moslem movement, the Nahdlatul Ulama; former
Mines and Energy Minister Mohammad Sadli; and former Home Affairs
Minister General Rudini lending their voices to increasing
numbers calling for President Soeharto to step down.

Even a relative of the President, Professor Sumitro
Djojohadikusumo, has made guarded but trenchant criticisms.

With no obvious candidate to step into the void and an absence
of any political force to galvanize sentiment, Soeharto is likely
to step down, only at a timing of his own calling and on his own
terms.

The best scenario now is for the President to be re-elected on
March 10 and with the endorsement of the people, step down,
perhaps in mid-term from a position of strength, to some form of
a custodial role thereby allowing the in-coming Vice-President a
chance to grow and develop in the position.

The abiding worry in the short term is whether the economy has
spun out of President Soeharto's reach.

Hence, to ensure a smooth transition, Soeharto's main priority
was to ward off unrest through the critical Lebaran holiday and
the March Presidential elections.

To do so successfully he and his advisers will need to find a
coherent strategy to deal with the estimated US$65 billion
private sector debt.

Dr Leonard C Sebastian is a Fellow at the Institute of
Southeast Asian Studies, Singapore.