As President Suharto eases into his fourth decade of power over the world's fourth-largest country, the Bapak Pembangunan, or Father of Development, can pride himself on Indonesia's economic transformation. Routinely hailed by the World Bank as a model developing country, Indonesia posted another banner year last year; the economy grew 7.8 percent, slightly more than the annual average since Suharto's rule began in 1966. Exports reached $50 billion in 1996, double the 1991 volume. At current rates of growth, Indonesia could become the world's sixth-largest economy by 2010.

During Suharto's tenure, tens of millions of Indonesians have been rescued from poverty. A burgeoning middle class in the cities of Jakarta, Surabaya, and Medan lives in fancy new apartments and shops in gleaming malls. Foreign investors pour billions every year into new factories, putting the sons and daughters of poor farmers to work making everything from Reebok sneakers to Sony televisions. A stable and increasingly prosperous Indonesia provides ballast and leadership to the Association of Southeast Asian Nations, with Suharto playing the role of the region's elder statesman.

Indonesia has changed almost beyond recognition from the impoverished, fractious nation, distrusted abroad, that it was under Suharto's predecessor, Sukarno. The Sukarno era (1945-66) was defined by jockeying for power among three factions, one of them the Indonesian Communist Party, then the world's third-largest communist organization. Those strife-ridden years and the transition to the Suharto regime -- during which as many as half a million real and imagined communists died in communal violence that wiped out the Communist Party -- left Indonesians wary of conflict. Suharto's New Order government has worked assiduously to create the image of political stability and communal harmony that has earned the country the reputation of a safe haven for foreign capital. To get there, it abridged civil and political liberties and turned democratic institutions into hollow shells.

Recent unrest has shaken the aura of stability. The government's ouster of the elected leader of a political party triggered riots last year in the capital, Jakarta. Other rioters burned Christian churches and attacked ethnic Chinese, and tribal people clashed with Muslim settlers on one of the outlying islands. The awarding of the 1996 Nobel Peace Prize to East Timor's Bishop Carlos Ximenes Belo and independence spokesman Jose Ramos-Horta thrust Indonesia's troubled colony back into the international spotlight. Campaigning for parliamentary elections this May was repeatedly marred by clashes between rival groups frustrated by the strict limits placed on public debate. Indonesia's creaky political system appears incapable of accommodating mounting economic, religious, ethnic, and regional tensions.

In a rapidly changing society, half of whose members were born after Suharto came to power, political institutions stand still. The regime has outlived its usefulness, many Indonesians say. Disillusioned professionals and intellectuals declare that economic growth is no longer sufficient compensation for their lost rights. Workers, students, and younger activists increasingly turn to unlawful and violent action to express their discontent. Even many of the president's former allies describe him as aloof and out of touch. "Suharto is a true dictator now," says a wealthy businessman who not many years ago counted himself an avid supporter.

Suharto sits astride the political edifice with his powers very much intact. He retains the support of the military and full control over the levers of bureaucratic power. His opponents, including some disaffected officers, are deeply divided. And much as many Indonesians long for movement on the political front, they also harbor enormous misgivings about what will happen after Suharto, now 76, is gone. That is especially true of the growing middle class, which sees its fortunes as entwined with those of the regime.

But if major political change is unlikely anytime soon, so is political peace. With each new effort to quash popular calls for greater accountability, Suharto diminishes the chances for a peaceful presidential succession as well as hoped-for liberalization. The small businessman disgusted about losing a contract to one of Suharto's relatives, the farmer paid a pittance when he is forced off land slated for development, the teacher beaten by the police for disciplining a corporal's son have no legal recourse for their grievances. In such a climate the wealthy take their capital offshore, while the poor burn and loot.


In the late 1980s and early 1990s, Indonesians watched with rising anticipation as the Iron Curtain fell and the totalitarian regimes of Eastern Europe tumbled. The emergence of democratic governments in South Korea, Taiwan, Thailand, and the Philippines undermined claims by Suharto and other Asian authoritarians that democracy was not an "Asian value."

Suharto himself raised hopes by calling for a new era of keterbukaan, or openness. Under this Indonesian glasnost with its relaxed political and social controls, poets, legislators, unionists, and religious leaders voiced thoughts and grievances long bottled up. With almost unprecedented bluntness, the press tackled taboo subjects ranging from the business dealings of Suharto's family to the rustlings in some Muslim groups eager for more political power. Satirical plays poked fun at the dynastic ambitions of the First Family.

But the party ended almost immediately after Suharto's election in 1993 to yet another five-year term. The government maneuvered political opponents out of power, closed important publications, harassed and imprisoned labor leaders, outspoken politicians, and other activists. Many Indonesians now look back at the brief interlude of keterbukaan as an establishment trick to flush out and eliminate Suharto's potential rivals.

Over the last 18 months, as Suharto has made clear that he will meet popular pressure for a more open society with renewed repression, there has been an upswing of violence. Nineteen ninety-six began with secessionist rebels kidnapping nine members of a scientific expedition in Irian Jaya and ended with a string of Muslim riots and church burnings in East and West Java provinces and battles between the native Dayak people and Muslim Javanese migrants in West Kalimantan province on the island of Borneo. This February as many as 1,000 more people died in further clashes between Dayaks and settlers. Around the same time, rioters attacked shops and houses near Jakarta owned by ethnic Chinese. Students, workers, and farmers have demonstrated repeatedly in Java, where 60 percent of Indonesians live, protesting police brutality, corruption, land confiscation, and the widening wealth gap.

In June 1996 the government dislodged Sukarno's daughter Megawati Sukarnoputri from her position as leader of the small Indonesian Democratic Party, one of only two authorized "opposition" parties. After taking over as party leader in 1994 Megawati had quickly become a popular figure, her calls for more government accountability and political pluralism winning the party a wide following among the young. Seeing this, Suharto's government prompted a rebel faction of the party to hold new balloting for party chief, from which Megawati was excluded. Under strict military supervision in the Sumatran city of Medan, party dissidents complied with government instructions and voted to reelect former party head Suryadi.

Disaffected groups of all stripes rallied to Megawati's cause. Megawati loyalists camped out in the Democratic Party headquarters building, on a quiet, leafy street in central Jakarta, holding free-speech forums and demanding their leader's reinstatement. Hundreds gathered daily, many wearing motorcycle helmets in anticipation of a military assault. The government waited in vain for the furor to die down.

In late July 1996 military-backed thugs burst into party headquarters and forcibly evicted Megawati's supporters. The action triggered the worst rioting in the capital since 1974, when students rampaged through the streets to protest corruption and the growing links between major Japanese investors and ethnic Chinese businesspeople in Indonesia. In last year's riots, five people were killed, 149 injured, and 23 listed as missing; there was considerable damage to property downtown. The army's performance during the riots dispelled any remaining doubts about its willingness to act as Suharto's palace guard.

Megawati's relatively restrained response to her ouster disappointed many of her supporters, who had hoped for an open confrontation with the regime. She has taken her case to the courts, where it will no doubt languish for some time. The interference in its internal affairs has turned the Democratic Party back into what the regime wants it to be: a divided, disemboweled grouping whose sole function is to contribute to the form of democracy. But Suharto's reaction to a fairly weak, though popular, potential challenger shows how insecure his rule has become.


Of the many political taboos the Democratic Party broached, the most sensitive was presidential succession. In six meetings of a special assembly that chooses the president, dating back to the 1960s, Suharto has yet to face an opponent. Many believe it was the possibility of Megawati challenging him in the assembly scheduled for March 1998 that prompted the president to force her from the party leadership.

Since declaring independence from the Netherlands in 1945, Indonesia has had only one political transition, and it was one of the bloodiest of a bloody century. An attempted coup in September 1965 allegedly mounted by the Indonesian Communist Party was put down by the relatively unknown Major-General Suharto, the son of a Javanese clerk. The months of communal violence afterward imprinted themselves on Indonesians' memories. Playing off their fears of a repetition, President Suharto has reduced political strife by making it increasingly difficult for Indonesians to engage in political activity of any sort, however broadly defined. While preserving the trappings of a democratic state, Suharto has slowly bled democratic institutions of content.

Suharto emasculated political parties, made the parliament into a rubber stamp, slapped strict controls on the media and religious groups, passed labor legislation that made strikes virtually illegal, and shut down political venues on university campuses. His political party, Golkar, is little more than a patronage machine of impressive proportions. Suharto has expanded the military's political role, placing army officers in key ministerial and civil service positions and guaranteeing the military 75 of 500 seats in the parliament. Indonesians are allowed to cast a vote once every five years, but they are to steer clear of politics otherwise.

Peace and economic growth have prevailed, but Suharto's efforts to depoliticize Indonesia have all but eliminated the secular, moderate middle ground, leaving politics to be played only at the margins. "The greatest damage Suharto has done is to freeze political education at the kindergarten level," says an American academic who wishes to remain anonymous. "The failure to get people to buy in and to learn how to engage in compromise and conflict resolution without violence has carried a huge cost."

As the Australian academic Harold Crouch put it, "If a relatively small issue like the leadership of the [Democratic Party] can set off serious rioting in the center of the capital, what might happen if military and other factions cannot agree on the national leadership after Suharto?" Beyond the question of succession, the current holding pattern in Indonesian politics prevents resolution of a host of other problems.


Economically speaking, the Suharto regime has done many things right. It has used the country's oil wealth relatively wisely, investing in rural infrastructure, schools, and health clinics. By developing a manufacturing base before its reserves were depleted, Indonesia, unlike almost all other OPEC members, has avoided a crippling dependency on petroleum; oil and gas account for just over 20 percent of export earnings, down from more than 80 percent in the early 1980s. Lower tariffs beginning in the mid-1980s and a plentiful supply of cheap labor have combined to make the country a major exporter of light manufactures. Indonesia's political stability and skilled macroeconomic management led foreign investors to commit almost $30 billion last year alone.

But largely because of its ambitious 30-year industrialization project, Indonesia has accumulated worrisome foreign debt -- around $110 billion -- and has been running a current account deficit that is expected to reach about 4 percent of GDP this year. State-owned banks, over-fond of lending to Suharto's friends and relatives, are saddled with an estimated $3 billion in bad debts.

Anxiety about keeping exports competitive while keeping youth employed is also creeping in. Labor costs are marching steadily upward -- real wages have doubled in the last six years, to about 25 cents an hour -- migration from rural areas to cities continues, and the population is growing at almost two percent a year. Officially, unemployment is a low 4.4 percent of a work force of 90 million. The World Bank, however, estimates that 38 percent of workers work less than 35 hours a week. And joblessness is much more common among the young: the 15-to-24 age bracket accounts for 20 percent of the work force but 70 percent of unemployment. In cities where conspicuous consumption by the rich has become the norm, there are now armies of idle youth.

The urban poor are "the single most important factor in future Indonesian politics," contends Juwono Sudarsono, deputy governor of the National Defense Institute, a military-associated think tank. "It's the urban poor who are the most politicized, the most deprived, and therefore the most volatile, and it's not difficult to incite them to violence. It happened in 1974, it happened in 1996, and you may not have to wait another 20 years for it to happen again."

Labor unrest has soared in the 1990s as more workers moved into manufacturing. According to official statistics, only about 1,000 workers went on strike in 1989; in 1994 the figure was almost 150,000. Several new, unrecognized unions are taking on the All-Indonesia Workers Union, the sole government-authorized union. The government has felt the need to tread carefully with the new unions, since it is concerned about losing its preferential tariff rates with the United States, which supposedly depend on its upholding internationally recognized workers' rights, including the right to form unions. However, the regime has found other ways of keeping rebel labor leaders behind bars or under threat of being put there. Muchtar Pakpahan, head of the largest independent union, was arrested and convicted of inciting riots in Medan in 1994, and sentenced to four years in jail. The Supreme Court freed him a year later, citing a lack of evidence at his trial. But last year the Supreme Court elected to hear the case again, a decision many Indonesian analysts believe was ordered by Suharto personally. This time it found Pakpahan guilty.

Meanwhile, with wages increasing faster than productivity, labor-intensive industries, especially in light manufacturing, are feeling the pinch. A 1996 World Bank report warned that rising minimum wages were slowing job creation, and advised Indonesia to restrain wages.

Labor leaders retort that the government should instead attack the causes of the high cost of doing business in Indonesia, including cartels, weak law enforcement, and corruption. Making workers shoulder the burden of keeping exports competitive, they say, is unfair, and a recipe for labor unrest. Unfortunately for workers, it is easier to keep a lid on wages than to fix market distortions. As their industries' competitiveness declines, owners of clothing, footwear, and other labor-dependent factories will have greater incentive to try to get around minimum wage regulations. That in turn will worsen labor strife.

The regime has offered workers some concessions -- introducing government-financed health and accident insurance and mandating an annual bonus equal to one month's salary -- but has stuck to its strategy of firmly controlling labor unions. Far from ensuring industrial peace, this has turned the income gap and the perception of inequity into potent rallying cries for the opposition.


In annual surveys, business executives rank Indonesia among the region's most corrupt nations, along with Asia's two reforming communist countries, China and Vietnam. From paying small bribes for a driver's license or identity card to shelling out huge sums to secure major construction contracts, corruption is a way of life in Indonesia.

Contracts, exclusive licenses, and state loans are doled out among the president's relatives and a handful of his ethnic Chinese cronies. Taking their cue from Suharto, ministers, regional military commanders, and governors develop their own patronage networks. "Like a Mafia boss," says a politician who supports Megawati, "Suharto protects himself by making everyone around him corrupt." As the Suharto era slowly winds down, the president's associates are grabbing sweetheart deals while they can.

Before Indonesia's limited privatization campaign began in the late 1980s, the flow of spoils to Suharto connections was considered unseemly but not economically significant. But privatization in many cases has been little more than a transfer of assets to Indonesia's political elite, with only a modest increase in competition. The business activities of the president's six children, a grandchild, sundry other relatives, and Chinese associates have grown spectacularly over the last decade. Foreign investors wanting in on any major infrastructure or mining project these days are forced to seek a partner among the inner circle.

The rampant corruption impedes development. A Western economist calls it "a tragic form of regressive taxation. The poor pay higher prices because of all the monopolies, and they have to pay off government officials for everything they need." Corruption sets a tone in the business community, discouraging entrepreneurialism and encouraging underhanded practices.

Corruption also erodes Suharto's legitimacy. "Suharto's children seem to have no idea they are inviting a revolution," says a prominent political analyst. Even the normally apolitical middle class gets exercised about the preferences the business elite enjoy. Groups ranging from student associations to Muslim organizations to the Indonesian Democratic Party have used the issue of corruption to bolster their case for political change.


Diversity in Indonesia is a source of both strength and tensions. A bewildering variety of ethnic, religious, and tribal groups speaking hundreds of languages live on thousands of islands spread out over the distance from London to Baghdad. Indonesian culture is one of the richest on earth. But each group that contributes to it contains seeds of political discord.

The government has been fighting an insurgency in East Timor since it annexed the territory in 1975-76; there were accusations of Indonesian genocide against the Timorese during the early years, and in 1991 troops massacred several hundred peaceful demonstrators in Dili, the capital. Separatist sentiment also exists, to a lesser degree, in Aceh province, the country's most staunchly Muslim, and in Irian Jaya, the easternmost island. These regional disputes with Jakarta are fundamentally political. But the upheavals last year and this year in West Kalimantan demonstrate that economic disparities are now causing considerable alienation in some parts of the country.

Thirty years of development in Indonesia has lifted all boats, but poverty remains more common on the outer islands than in Java or Sumatra. Seven of the country's eight poorest provinces, as measured by World Bank figures for per capita consumption, are on outer islands. People on the sparsely populated Irian Jaya have long contended that most of the profits from the oil, gas, tropical wood, copper, and gold extracted locally go to the relatively well-off Java and Sumatra. Statistics bear them out. Irian Jaya's per capita GDP is one of the highest among Indonesia's 24 provinces, but in terms of per capita income and consumption, the Irianese are at the bottom of the heap.

Many economists argue that the only way to reduce such disparities is to decentralize economic decision-making and give local officials more say in the design of programs to alleviate poverty. The need to do so will become all the more important as the central government's oil monopoly brings in a diminishing share of revenue and a larger share comes from local sources. So far, the few decentralization efforts under way have not made many inroads on the concentration of power in Jakarta.


The issues of economic inequality, ethnic tension, and corruption intersect in Indonesia's community of ethnic Chinese. Although people of Chinese origin account for less than 4 percent of the population, they dominate the economy. Suharto's authoritarian rule, which dilutes the demographic weight of Indonesia's pribumi, or indigenous, majority, serves the ethnic Chinese well. Enjoying presidential patronage and protected from populist reprisals by their links with military and government leaders, several dozen ethnic Chinese families have amassed great wealth. Some surveys suggest that ethnic Chinese control between two-thirds and three-quarters of private sector activity. The growing middle class includes a disproportionate number of ethnic Chinese.

Indonesian-Chinese have as few political rights as the pribumi -- indeed fewer. They are not allowed to form political associations, and most face discrimination when trying to enter the military, top universities, or the civil service. Few Chinese-language schools are permitted, and these must steer clear of teaching Chinese politics or culture. Advertisements in Chinese are forbidden.

In a sense, however, Indonesia's policymakers are hostage to the ethnic Chinese, whose firms provide hundreds of thousands of jobs and produce a sizable share of output: if Indonesian-Chinese were to slow down new investment or diversify overseas more aggressively, the economy would suffer. Thus the group has usually been able to fend off measures that would hinder business operations.

The economic power of the ethnic Chinese is a sensitive subject for the pribumi. Riots in Medan in 1994, in Tasikmalaya in 1996, and near Jakarta in 1997 were sparked by other grievances but quickly took on an anti-Chinese flavor. Several ethnic Chinese were killed, and Chinese shops, cars, and houses were looted and burned.

To the extent that animosity is aimed against the ethnic Chinese in Indonesia, it is against the elites who own the enormous, urban-based conglomerates. But they and their wealth are out of reach, as are Suharto's relatives, who have done their bit to exacerbate the growing economic frustration. That leaves poorer, mainly rural ethnic Chinese as scapegoats for both the rich Indonesian-Chinese and the government that abets them.


The anomaly of an ethnic majority that feels it is treated like a minority is mirrored in the relationships between and within Indonesia's religious communities. Almost 90 percent of a population approaching 200 million is Muslim, giving Indonesia the world's largest Muslim community; scattered Christians, Hindus, and Buddhists account for the rest. But Muslim leaders often sound and act like members of a persecuted minority. That is partly because Christians have held many important government and military posts during Suharto's tenure. More fundamentally, there is, in a practical sense, no Muslim majority; instead, there are a handful of Muslim minorities.

One segment of the community strives for greater political clout for Muslims. Only its radical fringe wants Indonesia to become an Islamic theocracy, but many in this camp believe the government should openly embrace Islam as the country's moral and ethical guide. In addition, these Muslims insist that the country's main political institutions, the army and the bureaucracy, adopt a policy of proportional representation: in other words, Muslims should get 90 percent of the jobs. The best-known organization representing this viewpoint is the Indonesian Association of Islamic Intellectuals (ICMI). Headed by a trusted Suharto lieutenant, B. J. Habibie, this mixed bag of clerics, bureaucrats, and political activists has gradually come to be seen as part of the ruling establishment. Some say Suharto supported its emergence to offset his weak backing in the military.

Members of Indonesia's largest Muslim group, the 30-million-strong Nahdlatul Ulama, also take their religion seriously, but are more supportive of the official policy that keeps politics and religion separate. The group's leader, Abdurrahman Wahid, has blasted Suharto for legitimating, with ICMI, the very Muslims who, in Wahid's view, are most likely to foster religious intolerance and erode religious harmony.

Religious intolerance has been much in evidence lately. Muslims rioted in October in the East Java city of Situbondo after a man convicted in a civil trial of blasphemy against the Prophet Muhammad received a sentence of only five years in prison -- the legal maximum. Some 20 churches were burned and five people died. In December, in the West Java city of Tasikmalaya, Muslims burned another ten churches and a handful of Christian schools, killing four people. Christian sources say 60 churches were torched in 1996 alone, and up to 300 since 1990. Police brutality and economic injustice played a role in these disturbances, but Muslim community leaders, including those in ICMI, share the blame.


The surge in social unrest is hardly surprising given the dramatic changes in Indonesia over the last decade. Every year a greater number of people move from agriculture into the industrial or service sectors, which almost always entails moving from the countryside to the city. At the same time, rising incomes, increasing educational levels, and the revolution in communications technology have enabled millions to see and learn about the outside world.

When politics cannot respond to and mediate social ferment, frustration builds. The experience of the Democratic Party last year convinced many Indonesians that peaceful political change is impossible within the existing rules. A new generation of activists in student and nongovernmental organizations is turning radical. Many are no longer afraid of the military, or of being labeled a communist or sent to jail on a political charge. The more extreme among them say open confrontation with Suharto and the military -- demonstrations, strikes, and other forms of protest -- is the only way to bring about real change in a system so entrenched. The alienated fringe would exile Suharto, haul his children up before an anticorruption commission, and bind over for trial in world courts military officers charged with violations of human rights in East Timor, Aceh, Irian Jaya, and elsewhere. The poor, the landless, and many disillusioned younger Indonesians feel that Suharto's economic development has passed them by, and they, having little to lose, don't mind rocking the boat if that might bring about change.

But while the causes the regime's critics espouse -- an end to authoritarian rule, corruption, police brutality, and land confiscation, among others -- are broadly popular, systemic change is unlikely in the near future. The opposition movement, such as it is, is weak and riven with distrust, and it is up against huge odds. Disparate groups came together briefly to protest Megawati's ouster, but their continued bickering shows how far they still are from a unified coalition.

Many leaders from the various Christian communities preach political liberalization yet fear that a more democratic government will allow Muslim groups to push Indonesia in the direction of an Islamic state. The Muslim community is divided in its views as well. Wahid, the Nahdlatul Ulama leader, lent his considerable prestige and influence to Megawati both before and after she was replaced as party head. On the other hand, some ICMI leaders who were ardent foes of Suharto when outside the system now seem more interested in securing jobs in the bureaucracy, or in working for greater "Islamization" rather than democratization, as Indonesia expert Douglas Ramage has noted.

Much of the middle class, which by some estimates now numbers between 14 million and 18 million people, is disgusted with corruption, but shies away from public expressions of dissatisfaction with the Suharto regime. Unlike their counterparts in the Philippines and Thailand, who played a pivotal role in the re-establishment of democracy, their commitment to political change is weak. As a Western ambassador in Jakarta says, "They still remember where they came from and they are not ready to risk a return to it."

An American executive who has spent many years in Indonesia neatly encapsulated the fears of middle-class and professional Indonesians: "Intellectually, I know it would be better for Indonesia if Suharto stepped aside," he said. "But . . . as a businessman, I want to postpone the day of reckoning for as long as possible."

Jakarta's version of the inside-the-Beltway crowd believes Suharto can still be persuaded to leave office gracefully, perhaps by appealing to his sense of history. Some argue that he should exercise legal veto power in the selection of his successor.

Many civilians who oppose Suharto, however, believe their only hope of unseating him is an alliance with disaffected military leaders. As the strongest institution in Indonesia, the military is certain to play a crucial part in the immediate post-Suharto period. But while individual officers may be sympathetic to those pressing for political change, the military remains a reactive, conservative force. It too fears a strengthening of political Islam, and is thus unlikely to lead or even participate in any movement against the current regime.

But many Indonesians feel that the political system Suharto built is in dire need of an overhaul, and they can broadly agree on the required changes. To remain competitive in an increasingly globalized economy, Indonesia must develop laws that both reduce corruption and create a more level playing field for business. Cartels and restrictive trade practices that benefit Suharto's relatives and cronies must be dismantled. To make the executive branch more accountable, more power must be given to the legislative and judicial branches of government. The military's role in day-to-day politics must be curtailed. Finally, as one political analyst in Jakarta put it, "We must find a way to never again have a 30-year president. Once is enough."

Since a stable Indonesia is vitally important to the entire region's security, concern is growing in neighboring countries over the uncertain succession. A period of turbulence in Indonesia could well disrupt the political cohesion of the region and retard plans for regional economic integration.

But change will necessarily be difficult in a country where political institutions are mere husks and normal political debate and negotiation are forgotten arts. Goenawan Mohamad, the editor of the banned newsweekly Tempo, says with a mixture of hope and trepidation, "When Suharto goes, everything will have to be reinvented."

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  • Adam Schwarz, Jakarta correspondent for the Far Eastern Economic Review from 1988 to 1992, is the author of A Nation in Waiting: Indonesia in the 1990s. He is currently a Visiting Fellow at the Paul H. Nitze School of Advanced International Studies at The Johns Hopkins University.
  • More By Adam Schwarz