One of the most important chapters in
Indonesia’s history was written in May 1998, when nationwide protests demanded
President Suharto step down from office.
Students and intellectuals overran the parliament building.
Elsewhere in Jakarta, there were violent riots, rampant looting and clashes
between security forces and students. At some places, angry mobs attacked
military and police officers. Elsewhere, there were mass rapes and murderous
violence targeting the ethnic Chinese community.
The situation marked the end of Suharto’s 32 years of
dictatorship. “People power” triumphed, setting a new course for the nation to
embark on an era of reforms: reformasi .
Many factors contributed to Suharto’s downfall — the Asian
financial crisis, the shooting of university students, calls for freedom of
expression and the power of the media. But the first sign that Suharto really
would step down came on the night of May 20, when US Secretary of State
Madeleine Albright called upon the president to resign and roll out a
democratic transition plan. Prominent media pioneer Peter F. Gontha, the
Jakarta Globe group publisher, broke the story, sharing it with journalists
that night.
It would be naive to believe there was no connection between
Albright’s call and Suharto’s resignation. The next morning, on May 21, 1998,
Suharto transferred formal authority to his vice president, B.J. Habibie.
Indonesia had long been under the dictates of the
International Monetary Fund. But Suharto toward the end of his reign failed to
implement the economic prescriptions demanded by the IMF. Four months earlier
IMF director Michel Camdessus stood over Suharto with his arms folded in true
colonial style and witnessed Suharto sign a new letter of intent bowing to IMF
demands.
Earlier, Suharto tried to overcome economic problems by
methods including exploring the idea of pegging the rupiah to the US dollar, an
idea presented by leading US academic Steve Hanke. But the efforts were too
late.
Since the signing of that letter of intent, Indonesia had
been deprived of its economic and monetary sovereignty, some pundits claim.
But what exactly was stipulated in the letter of intent of
Jan. 15, 1998? Among other things, Indonesia had to re-formulate its central
bank law under an IMF prescription, leading to Law No. 23 of 1999. In Article
V, Section 1 of the letter of intent, the IMF demanded full autonomy for the
central bank. That included a requirement that Indonesia must follow IMF rules
including freer foreign exchange, a need to report natural resources reserves,
production and exports, and detailed balance of trade statements.
The IMF also demanded that Indonesia revoke limitations on
foreign ownership of banks. As a result, even now, foreign-dominated banks
control Indonesian banking. Meanwhile, Indonesia’s state-owned enterprises were
required to divest to make way for foreign investment. For example, Indonesia
lost control of strategic telecommunications company Indosat. In short, the IMF
dictated Indonesia’s economic policies.
As many historians have noted, Suharto’s rule relied on US
support. Prominent US writer Noam Chomsky wrote in his article “Indonesia,
Master Card in Washington’s Hand” that Suharto had been a favorite son of
Western governments and investors since he took power in 1965.
To sustain his power and violence, the White House long
nurtured Suharto for the sake of US interests. The World Bank made sure
Indonesia favored Western governments and corporations.
Indonesia posted 7 percent annual economic growth under
Suharto. Despite these achievements, things suddenly went wrong for Suharto.
His fall from grace was due to disobedience to the IMF and his inability to
subdue popular opposition, which made it clear that his usefulness to US
interests had come to an end. By Yanto Soegiarto managing editor of Globe
Asia, a sister publication of the Jakarta Globe.
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