|
Indonesia The State and Economic Development
Apart from rejection of leftism, probably the single
greatest
discontinuity between the Sukarno and Suharto eras was
economic
policy. Sukarno abused Indonesia's economy, undertaking
ambitious
building projects, nationalizing foreign enterprises, and
refusing
to undertake austerity measures recommended by foreign
donors,
because such measures would have weakened his support
among the
masses. Suharto also used the economy for political ends,
but
initiated a generally orderly process of development
supported by
large infusions of foreign aid and investment.
Debt service obligations in 1966 exceeded export
earnings, and
total foreign debt was US$2.3 billion. One billion dollars
of this
amount was owed to the Soviet Union and its East European
allies,
largely for arms purchases. The following year, talks were
initiated with Western and Japanese creditors for aid and
new lines
of credit. An informal group of major Western nations,
Japan, and
multilateral aid agencies such as the
World Bank (see Glossary),
known as the Inter-Governmental Group on Indonesia
(IGGI--see Glossary),
was organized to coordinate aid programs.
Chaired by the
Netherlands, IGGI gained tremendous, and sometimes
resented,
influence over the nation's economic policymaking.
Hand-in-hand
with aid donors, a new generation of foreign-educated
technocrats--
economic planners attached principally to the National
Development
Planning Council (Bappenas) led by Professor Widjojo
Nitisastro--
designed and implemented a series of five-year plans. The
first plan,
Repelita I (see Glossary),
which occurred in fiscal year
(FY--see Glossary)
1969-73, stressed increased production of
staple
foods and infrastructure development; Repelita II (FY 1974-78)
focused on agriculture, employment, and regionally
equitable
development; Repelita III (FY 1979-83) emphasized
development of
agriculture-related and other industry; Repelita IV (FY
1984-88)
concentrated on basic industries; and Repelita V (FY
1989-93)
targeted transport and communications. During the 1980s,
these
plans also provided a greater role for private capital in
industrialization
(see Central Government Budget
, ch. 3).
Helped substantially by oil revenues after the
quadrupling of
prices during the 1973 global "oil shock," Indonesia
emerged from
pauperdom to modest prosperity. The development of new,
high-yield
varieties of rice and government incentive programs
enabled the
nation to become largely self-sufficient in this staple
crop
(see Food Crops
, ch. 3). In most areas of the archipelago,
standards of
nutrition and public health improved substantially.
Oil revenues were vital for the Suharto regime because
they
provided it with resources to compensate groups whose
cooperation
was essential for political stability. Government projects
and
programs expanded impressively. Indonesia is a member of
the
Organization of the Petroleum Exporting Countries
(OPEC--see Glossary).
Reflecting OPEC's pricing policies, the state's
income
from oil, channelled through the state-owned enterprise
Pertamina
(the National Oil and Natural Gas Mining Company),
increased 4,000
percent between the FY 1968 and FY 1985. Economic planners
realized, however, the danger of depending excessively on
this
single source of export revenue, particularly when crude
oil prices
declined during the mid- and late 1980s. As a result, the
export
not only of manufactured goods but also of non-oil raw and
semiprocessed materials such as plywood and forest products
was
promoted. But the oil boom also provided new opportunities
for
corruption. Pertamina was established in 1968 as a merger
of
Permina and two other firms. Its director, General Ibnu
Sutowo, a
hardy survivor of the transition from Guided Democracy to
New Order
who had been director of Permina, embarked on an ambitious
investment program that included purchase of oil tankers
and
construction of P.T. Krakatau, a steel complex. In the
mid-1970s,
however, it was discovered that he had brought the firm to
the
brink of bankruptcy and accrued a debt totaling US$10
billion. In
1976 he was forced to resign, but his activities had
severely
damaged the credibility of Indonesian economic policy in
the eyes
of foreign creditors.
The Pertamina affair revealed the problems of what
Australian
economist Richard Robison, in a 1978 article, called
Indonesia's
system of "bureaucratic capitalism": a system based on
"patrimonial
bureaucratic authority" in which powerful public figures,
especially in the military, gained control of potentially
lucrative
offices and used them as personal fiefs or appanages,
almost in the
style of precolonial Javanese rulers, not only to build
private
economic empires but also to consolidate and enhance their
political power. Because Indonesia lacked an indigenous
class of
entrepreneurs, large-scale enterprises were organized
either
through the action of the state (Pertamina, for example),
by ethnic
Chinese capitalists (known in Indonesia as cukong),
or,
quite often, a cooperative relationship of the two.
Through the 1970s and 1980s, Indonesia's pervasive
corruption
became a political issue that the New Order state could
not
entirely muffle. In January 1974, the visit of Japanese
prime
minister Tanaka Kakuei sparked rioting by students and
urban poor
in Jakarta. Ostensibly fueled by resentment of Japanese
exploitation of Indonesia's economy, the so-called "Malari
Affair"
also expressed popular resentment against bureaucratic
capitalists
and their cukong associates. During the 1980s, the
ties
between Suharto and Chinese entrepreneur Liem Sioe Liong,
one of
the world's richest men, generated considerable
controversy. The
Liem business conglomerate was in a favored position to
win
lucrative government contracts at the expense of
competitors
lacking presidential ties. Import licenses were another
generator
of profits for well-connected businessmen. The licensing
system had
been established to reduce dependence on imports, but in
fact it
created a high-priced, protected sub-economy that amply
rewarded
license holders but reduced economic efficiency. By 1986
licenses
were required for as many as 1,500 items. Foreign journals
also
published reports concerning the rapidly growing business
interests
of Suharto's children.
Data as of November 1992
|
