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The Techno-Politics of the Indonesian Crisis:
An Opportunity Lost
by Songok Han Thornton
March 2, 2005

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Fragile Miracle

The Asian Crash of 1997 is often referred to as the Asian financial crisis, as if non-economic forces can be effectively bracketed out of consideration. This study holds, conversely, that such bracketing had a part in the making of the Crisis. A more comprehensive view of development, such as Amartya Sen’s, would allow us to see the Crash as the flip side of the so-called “Asian miracle.”  The real miracle was that corrupt and repressive regimes could pass themselves off for decades as engines of development.

What is missed in the typical economic focus is the liberatory dimension of the Crash.  Notwithstanding its tremendous economic trauma, the Crash also opened the door for sweeping reform throughout the Pacific Rim. Unfortunately, the global institutions which rushed in to stanch the “financial crisis” not only did much to turn a recession into a depression, but also obstructed political development. What they actually stanched was the one positive effect of the Crash: the escape it afforded from developmental authoritarianism. [2]

This was especially the case in Indonesia, where pent-up reform energies held out the prospect of a developmental paradigm shift, if only the domestic reform dynamic could run its course unimpeded.  That of course was not to be. As in the previous “miracle” years, the new agents of political stasis would be Western educated technocrats and their affiliates. Once again this Trojan Horse was rolled in to guarantee the “stability” that was required for a “healthy investment climate.” From a broader developmental perspective, however, that stability was purchased at the price of political regression.

Those who blame international institutions for their misdiagnosis and exacerbation of the crisis are actually optimists.  They seem to assume that these institutional blunders were exceptions to the rule, while in fact they fit a global pattern.  In good times, IMF and World Bank lending policies have consistently stimulated growth at a terrible political, social and environmental cost; [3] and once a crisis strikes, as inevitably it will, these institutions rush in with counter-Keynesian policies that serve “market” interests at the expense of indigenous working classes.

Consider, for example, the global debt crisis of 1982, which was spawned when lending to the Third World jumped from $2.7 billion in 1970 to $8.7 billion in 1978, and finally to $12 billion by 1981. [4] The result was Latin America’s “lost decade,” which was invidiously contrasted with the East Asian boom of those same years.  This effectively vaporized the geocultural premises of dependency theory.  Unlike Latin America, however, the Asian Pacific economies enjoyed geopolitical advantages that ensured not only continued capital flow throughout the 1980s, [5] but a tolerance for trade imbalances that was tantamount to massive economic aid.  For this, of course, a heavy price was paid in terms of national autonomy.  Was it worth even a fraction of that price?  Although Washington-based institutions like to take credit for much of the Asian success story, one of the region’s fastest growing countries clung to protectionist financial policies yet was no worse off for having bucked the system: Malaysia never surrendered to World Bank and IMF auspices. [6]

Indonesia likewise favored protectionist measures where possible.  It had been blessed with cheap labor and inflated prices for its vast oil reserves, and given its ostensive stability in the post-Sukarno years, foreign investment was easy to obtain. [7] Only after the collapse of oil prices in the mid-1980s did the nation have to work hard to attract these funds.  This pushed it into the waiting arms of neoliberal restructuration.

This was not unfamiliar territory.  To placate the West, liberalization policies had been implemented as early as 1967, with capital accounts opened to foreign investors in 1970. [8] Jakarta sought foreign capital by repeated devaluations of the rupiah: 10 percent in 1971, 50 percent in 1978, 40 percent in 1983, and 32 percent in 1986. [9] Coupled with exchange rate liberalization, these measures attracted a large influx of capital, but little attention was given to the fact that what flowed in could also flow out.  Huge currency conversions could easily deplete domestic savings. [10] Heedless of all warning signs, technocrats pushed for further financial liberalization. [11]

Rise and Fall of the Technocrats

By 1988 neo-classical economists such as Professors Widjoyo Nitisastro and Ali Wardhana had taken over economic planning.  But Indonesia’s technocrats (Rizal Sukma calls them “the Berkeley Mafia” [12]) rarely wielded power in their own right.  Their success, rather, always rested on their alliances.  They worked closely with the Army and became a bulwark of Suharto’s New Order.  The Armed Forces of the Republic of Indonesia (ABRI)––now the Indonesian National Military (TNI)––needed civilian partners to disguise its double function (“dwifungsi”) of politics cum security.  In this way it increasingly dominated state enterprises such as oil companies. [13] From the early years of the New Order, the technocrats implemented policies to secure foreign aid, loans and investment, especially from the US and Japan. [14] And thanks to the interpenetration of military and civilian institutions, aid that was not earmarked as “military” could still promote the militarization of the New Order and the de-pluralization of Indonesian politics.

This techno-military Order was strongly anti-communist and pro-development––two sides of the same coin, since power politics and economics were inextricably linked.  This explains why Indonesia would be one of the largest recipients of US funding in Asia. [15]  Needless to say, America would be Indonesia’s major supplier of arms. [16]  The first priority of New Order foreign policy was to clean up Indonesia’s international image so as to attract capital.  Loaded down with foreign debt, the regime came to depend upon this infusion of capital for its very solvency. [17] The military therefore backed the technocrats, who in turn became rubber stamps for ABRI policies. [18]

Two groups competed with the technocrats in this rubber-stamp capacity: economic nationalists, who held that the government should tightly manage the economy, and Suharto’s cronies and relatives, who simply wanted their share of the take.  Friction with the nationalists can be divided into three phases.  In the first, from 1966 to 1974, the technocrats were at the helm of most economic policymaking; for their international connections were in great demand at this time of acute dependency.  Their influence waned, however, when the global surge in oil prices provided Indonesia with the relative autonomy that came from windfall revenues reaching US$4.2 billion in 1974.  The second surge of 1979-80 pushed government revenues to US$13.4 billion in 1981.  This enabled the nationalists to seize the helm and press for heavily subsidized new industries.  However, when oil prices dropped from US$30 a barrel in 1984 to US$10 in 1986, [19] the technocrats were back in vogue.

To generate foreign exchange, they reversed the nationalist preference for import substitution and adopted a more liberal development strategy. To boost export competitiveness, they devalued the rupiah in 1986, and soon foreign investment poured in, lending credibility to technocratic logic.  But storm clouds soon began to appear on the horizon.  Indonesia’s money supply increased more than two and a half times between early 1989 and 1992.  This fueled inflation, prompting Bank Indonesia, the central bank, to step in to control the money supply.  The result was a sharp rise in interest rates, higher costs for Indonesian businesses, [20] and a plethora of bad debts.  Here, as in other Rim nations, mounting debts were covered by still more borrowing.

Foreign debt had stood around $3.2 billion at the beginning of Suharto’s regime, and rose to $130 billion by 1988. [21] Between 1982 and 1991 the debt jumped from 29 percent of GNP to 72 percent.  This was much higher than the debts of Mexico and Brazil at the time of the Latin American crisis in 1981-82: 52 percent and 36 percent of GNP, respectively. [22] Nor was Indonesia unique in this respect.  Throughout the Asian Pacific region such foreign borrowing persisted until the time of the Crash, as companies borrowed at least $700 billion between 1992 and 1997. [23]

Nationalist reaction was sure to follow.  Even in the 1980’s the CSIS group—the research and intelligence wing of the late General Ali Murtopo’s political faction—had demanded close state supervision of capital growth, and especially of foreign capital. [24] CSIS arguments gained credibility as the total foreign debt rose to almost US$80 billion between 1988 and 1992. [25] By the end of 1992 private commercial loans stood at US$23 billion, or about 30 percent of the total debt, which produced a banking crisis in 1993. [26] It was the liberal camp, not CSIS-style nationalism, which put the economy at risk.

The search for solutions led to complete polarization.  Some blamed the technocrats for their precipitous liberalization schemes, while others blamed Suharto for not allowing the technocrats greater sway. [27] Western critics would later blame indigenous corruption and “crony capitalism” for Indonesia’s economic trauma, but—for good reason—Western neoliberalism found solid support from these very cronies.  They became converts to the technocrat’s way of thinking as soon as they realized that opening up the banking sector would increase the flow of capital to themselves. [28] It was this inner circle of globalist converts that Laksamana Sukardi, former Minister of investment and state enterprises, condemned as “predators” who “stole billions from state coffers.” [29]

The popular belief that Asia’s “crony capitalists” were evil nationalists locked in mortal combat with neoliberalism is a tendentious myth.  To accept this notion was to guarantee that the cure for the subsequent crisis would be sought in still greater neoliberalization.  Far more than nationalist protectionism, two main causes of the Crash were wasted foreign investment—especially in real estate—and mounting private debt, which jumped from US$23 billion in 1992 to nearly US$80 billion in 1997. [30]

The Suharto Mire

It only made matters worse, when, in the mid-1990s, Suharto turned to his technocrats for a solution.  Their specialty was economic acceleration.  They had no idea how to apply the brakes, and in any case their economic leverage had abated.  They were no longer the crucial magnets for foreign investment.  Foreign investors were now tripping over each other in their rush to win favor with Suharto cronies for projects worth billions [31], on paper at least.  Far from offering advice on braking techniques, international institutions joined the investment frenzy.  The World Bank organized donors’ conferences to rake in billions more, even knowing that an estimated one third of this money would be lost to Golkar Party corruption. [32]

The IMF, meanwhile, put no pressure on Suharto to stop public subsidies for schemes such as Tommy Suharto’s national car project or B. J. Habibie’s efforts to manufacture aircraft domestically.  So too the IMF failed in its primary function of easing economic trauma.  Rather it served the interest of international finance.  Previously Southeast Asian economies had tended to enjoy low inflation, budget surpluses, and rising foreign exchange revenues, but between 1993 and 1996 investment banks and international money market managers went on a lending binge. [33] Even free-market proponents such as George P. Schultz, William E. Simon, and Walter B. Wriston blamed the IMF for the global financial meltdown that followed. [34] Likewise economist Jeffrey Sachs accuses the IMF of worsening the Crash by closing banks and slashing public spending, at a time when the private sector was already deflated. [35]

To add insult to injury, the World Bank and the IMF exhibited stark orientalist prejudice by treating Suharto’s corruption, cronyism and nepotism as natural expressions of “Indonesian culture.”  The US role in the making of Suharto’s operation and the unmaking of his enemies was kept under wraps.  But of course this was an old story.  For years the US had refused to suspend Indonesia’s tariff advantages under the Generalized System of Preferences, despite Jakarta’s crackdown on unions and its failure to ensure decent working conditions.  Industries linked to gross human rights abuses and environmental destruction got full US backing. [36]

This pattern of American indifference, or worse, would be recycled after the Crash.  Washington’s initial response to the Thai crisis of August 1997 was lethargic.  As of October 26, former Secretary of the Treasury Robert Rubin still ruled out an Asian bailout.  So too, both he and Larry Summers vehemently opposed the Japanese “Asian Monetary Fund,” which they saw as a potential competitor of the IMF, and hence a challenge to American interests in Asia. [37]

Only when Rubin realized that American corporations were in serious jeopardy did he start to shift his position, announcing on October 31 that “Financial security around the world is critical to the national security and economic interest of the United States.  These countries are not only key markets for U.S. exports, but are also crucial to our efforts to promote growth, peace and prosperity throughout the world.” [38] A $40 billion bailout package was finally arranged for Indonesia alone. [39]

As usual, this action conspicuously cut the political strings that could have tied the bailout to progressive reform.  The Clinton administration can fairly be criticized for supporting IMF packages that left Suharto alone.  This political malfeasance can be explained in one (or both) of two ways.  Either the US was content with authoritarian regimes which could be controlled better than unruly democracies, or it was assumed that puppet dictators like Suharto well represented the political cultures of Southeast Asia.

Let us assume that the lesser of these two evils applies––that the US operated on the belief that democracy is an exclusively Western value.  This interpretation would allow that US policy was not designedly imperialistic, but was simply orientalist.  Suharto certainly encouraged this perception. In Civil Islam, Robert Hefner derogates Suharto’s espousal of “Asian values” and his attending belief that liberal objectives like democracy and human rights are incompatible with Indonesian culture. [40] In the name of Asian difference, the government did all it could to crush progressive forms of difference within Indonesia itself.  The vaunted “stability” of Suharto’s New Order was rooted in the 1965-6 massacre that eradicated the political pluralism that is so vital to Indonesian democracy. [41] Afterwards the regime did its best to maintain an authoritarian grip on all the country’s political and economic institutions. [42]

Suharto’s greatest difficulty was the flip side of his seeming success.  Tension set in as economic development not only outpaced political development, but served as a barrier against it.  Although the regime’s political legitimacy depended on rapid economic growth, that very growth could be destabilizing as newly affluent sectors of society began to covet a political voice that was denied them.  The result was growing middle-class disaffection. [43] The centrifugal force of Indonesia’s geographic expanse and ethnic diversity rendered it especially prone to such pressures.  While real per capita GDP trebled between 1965 and 1990 [44], the regime’s political power ebbed after the mid-1980s. [45]

This alone was not enough to turn the political tide, for the middle-class was too satisfied with the economic status quo.  The fate of democratic reform rested, therefore, with another suppressed sector of society: the Muslims who comprised 90 percent of the population. [46] As in many Islamic countries, the mosque became the locus of oppositional politics.  Realizing the growing importance of Islamism, Suharto shifted his position in the last twelve years of his regime.  For twenty years he had obstructed organized Islamic activities, but now he encouraged them, so as to counterbalance powerful military leaders such as General Benny Murdani, who openly confronted Suharto over the issue of his family’s corruption. [47] This contributed to a split between ABRI and Suharto over the choice of Golkar chairman Sudharmono as vice-president. [48]

ABRI challenged that choice during the 1988 election, which in turn prompted Suharto to actively court tractable elements of the Muslim community. [49] His creation of the Indonesian Association of Muslim Intellectuals (ICMI) in December 1990 was a blatant attempt to control Islam by exploiting the divide between the Nahdlatul Ulama (NU) traditionalists and the Muhammadiyah modernists. [50] The ICMI co-opted ultraconservative Muslim organizations such as the Indonesian Council for Islamic Predication, or DDII, at the expense of other groups. [51] Many ABRI officers admitted that Suharto’s sponsorship of ICMI was a shrewd means of controlling Islamic radicals. [52]

Not surprisingly this had a divisive impact on Muslim politics. While modernist Muslims tended to welcome ICMI, the NU leader and later president, Abdurrahman Wahid, stood his ground.  He proclaimed his loyalty to the official state ideology of Pancasila and the Constitution, yet declared the ICMI a Trojan Horse. [53] He further infuriated Suharto by questioning the motive behind his Islamic turn.  Just as Suharto had successfully turned techno-reformists into reactionary modernists [54], he now sought to turn Islamic reformists into a “new order” of cronies.  It was in this divide-and-conquer context that B. J. Habibie, the minister of research and technology, was put in charge of ICMI, so as to marginalize moderate independent Muslims like Dawam Rahardjo.

Nonetheless Muslims would play a key role in the reform coalition that finally toppled Suharto.  Nowhere in the Muslim world, Hefner concludes, have Muslim intellectuals been so politically engaged in the reformation of civil society and democracy as in today’s Indonesia. [55] No one knew this better than Suharto, who devoted his last years in office to undermining the democratic instrument of civil Islam.  By uncritically supporting Suharto, global institutions helped to suppress substantive democratization during the “miracle” years, when political development might have been accomplished with little material sacrifice.

Nor was globalization’s economic impact any less pernicious. Capital export from Western countries did much to stoke the “Asian miracle,” which in turn did much to revitalize faith in global capitalism.  Again it had to be learned the hard way that what flows in can also exit.  The Crash, in that sense, afforded a kind of remedial education. The rapid exodus of capital from Asian NICs, coupled with policies that turned a mere recession into a regional depression, signaled a crisis of globalist ideology.

The Post-Suharto Malaise

Indonesia of the early 1990s seemed to be a land of enormous promise, as the booming economy attracted ever more foreign investment. Yet economic technocrats knew this promise depended on political stability.  The question of succession therefore cast doubt on the future of the not-so New Order. [56] It was whispered that to avoid a political upset Suharto should relinquish power before the 1998 election. [57] Even prior to the Asian Crash, a viable pro-democracy movement was taking shape across a wide spectrum of moderate opposition: NGOs, intellectuals, and campus activists as well as PDI and NU members.

The regime had to react, but there was no consensus as to what response was appropriate––retrenchment or accommodation.  This question hinged on the position taken by a set of supposedly neutral players within the New Order: the technocrats.  Habibie, for example, looked to technology as a developmental panacea, with special stress given to electronics, telecommunications, and transport industries. [58] After the currency collapse of 1997—as the rupiah plummeted from 2,500 against the dollar in early 1997 to 13,450 in June 2001 [59] -- three groups jousted for influence within the cabinet: economic technocrats, followers of Habibie, and followers of Suharto’s daughter Tutut. [60] When key technocrats finally caught on to the fact that economic development barren of political development was a ruse, Suharto summarily fired them.  These outcasts then formed a group called the “Front of the Broken Hearts”—belated reformists who dropped their façade of technocratic neutrality and proposed a “new morality” in opposition to Suharto’s “state criminality.” [61]

Thus technocrats were divided between moderate reformists like Habibie, who stuck with the geriatric New Order, and more radical factions such as the “Broken Hearts.”  Early in his career Habibie had gained control of many state-owned strategic industries, including an airplane construction factory, naval shipyards and armaments manufacture.  After he joined parliament as a Golkar member in 1982, his family, like Suharto’s, began to forge its own business empire.  Centered around the Timsco Group, this enterprise was run by Habibie’s brother Suyatim Abdulrachman.  It came to be worth at least $60 million, engaging in everything from construction and chemicals to transportation and even crocodile farming. [62]

Thus, when Habibie talked about technological strategies to enhance competitive advantage [63], it was not clear whose advantage this would be –– his country’s or his family’s.  Clearly he was no enemy of Suharto’s political enterprise.  Though he was forced to make some changes during his seventeen-month administration –– e.g., he released hundreds of political prisoners and allowed a free election in 1999 [64] –– these alterations were hardly satisfactory to reformasi activists.  Habibie’s administration, after all, retained half of Suharto’s cabinet.

As a technocrat, Habibie lacked a broad power base, whereas Wahid was closely linked to the Islam of rural Java.  So too Megawati Sukarnoputri drew support from the legend of her father’s nationalism, while Amien Rais found a following in urban, modernist Muslims. [65] Habibie’s only solid support came from the armed forces of General Wiranto and the funding garnered by his minister Ginandjar Kartasasmita, the technocrat who steered Indonesia’s compliance with the IMF restructuration package.

The absence of stable government and Habibie’s lack of credibility made the economic crisis even more injurious.  He did, however, improve the country’s image by ratifying a number of UN conventions on human rights.  He also signed the UN’s Ocean Charter to protect the seas and use maritime resources in a sustainable way. [66] So too he lifted the restrictive press law that Suharto imposed between 1994 and 1995, when three of the most respected newsweeklies –– Tempo, DeTik and Editor –– were summarily shut down. [67]

Ironically, these three magazines would actively investigate Habibie’s budget after his purchase of East German navy vessels [68], and would vocalize the public’s call for real reform.  Tempo even invited Benedict Anderson, who had been banned from entering Indonesia since 1972, for a candid interview. [69] To his credit, Habibie yielded to the public’s demand for free and fair elections. [70] 48 parties competed in the general election of June 7, 1999, and on October 20 the MPR (People’s Consultative Assembly) chose Wahid as the nation’s fourth President. [71] Habibie’s greatest service to his country was to let himself be voted out of office.

Wahid’s leadership, however, was compromised long before these elections were held.  Having shocked his allies with his 1996 détente with Suharto, which many saw as rank opportunism, Wahid proved his critics right by reversing his course once again.  When the economic crisis worsened in late 1997, he jumped back on the opposition band wagon, moving to the center of the reform movement against Suharto; and by July 1998 he was seeking a new alliance with Megawati. [72]

Given these vacillations, it should have come as no surprise that as president Wahid would fail to deliver the main item on the reform agenda: the principle of civilian supremacy over ABRI.  Many analysts believe that the retired army general and future president Susilo Bambang Yudhoyono was already in charge of security matters [73], as he would be under Megawati. [74] Meanwhile Wahid found himself hostage to an emerging alliance between Megawati’s Indonesian Democratic Party for Struggle and the former ruling Golkar Party, led by Akbar Tanjung.  Together the two parties held 273 of 500 lower-house seats. [75] Megawati and Tanjung (who would later become embroiled in a $4 million corruption scandal) [76] shot down Wahid’s proposal to appoint a single coordination minister, pressuring him to name two instead. [77]

Wahid’s desire to please everyone was reflected in his motley cabinet. Clifford Geertz is not alone in his lament that Habibie and Wahid squandered Indonesia’s chance of starting over after Suharto. [78] It was under them that residual Cold War politics gave way to an equally regressive politics of globalization.

Megawati’s Full Retreat

For many years reformist storm clouds had been building within the middle-class public.  Lacking any of the leadership qualities of rivals such as Amien Rais [79], Megawati won the presidency on the strength of her family legacy and her largely symbolic opposition to Suharto’s corruption. She had no idea what to do with her victory.  To win public trust and distinguish herself from Suharto she was advised to seed her administration with technocrats and other relative independents. [80] Thus the posts of the Finance Minister and Economic Coordination Minister went to seasoned technocrats: the ex-Bank Indonesia director, Budiono, and the ambassador to the US, Dorodjatun Kuntjoro-Jakti. [81] For the moment, at least, technologism and populism seemed to be playing on the same team.

That moment would be short-lived.  Even if Megawati had sincerely wanted reform, her technocrats would have had to negotiate the minefield of a parliament where two-thirds of MPs answered to recalcitrant party bosses. [82] Critics rightly saw these appointments as her attempt to duplicate Suharto’s method of leaving the economy in the hands of technocrats while keeping a firm grip on security matters and the legal system. [83] This time, however, it was the old order that held her solidly in its grip.  By no accident Megawati kept in her cabinet the Supreme Court Chief Justice Bagir Manan, who had served in Suharto’s infamous judiciary throughout his career.  The country was fast returning to the authoritarian devil it knew.  At least Suharto’s regime had been effective in maintaining a semblance of national unity in its economic programs, and of winning investor or donor confidence. [84] Repression under Megawati lost on both fronts. Its political recidivism, moreover, was matched by a failure “to make the trains run on time.”

Clearly technocracy was more the problem than the solution.  The economic crisis, as Geertz recognized, provided a unique opportunity for Indonesia to establish the rule of law, basic human rights, governmental transparency and accountability –– all the ingredients that Western critics found wanting after the Crash.  Arief Budiman believes this was the time for Indonesian intellectuals to intervene decisively rather than entrust the reform process to technocrats who regard reform as a top-down enterprise.  At best they see democracy as a “loan” to the people by the state [85], and at all times they give it a lower priority than economic development or national stability. [86]

This attitude, which in good times helped to allay investors’ fears of unruly populism, ultimately created a climate of contingency that put those same investors on edge.  Andrew MacIntyre sees the Indonesian crisis as precipitated by a sudden loss of confidence on the part of both foreign and local investors.  He stresses, however, that there was little objective reason for such distress.  Indonesia’s inflation was moderate relative to other hard-hit ‘miracle’ economies, and it suffered less of a bubble effect than most.  The prime reason for declining confidence was the increasingly unpredictable behavior of Suharto’s government.  The same iron fist which had made for an image of “stability” now became a huge liability, for it was obvious that no institution or set of political actors could restrain Suharto’s dictates. [87] Thus the malady behind the Indonesian Crash was more “political” than economic.

Under Megawati, unfortunately, Indonesia rapidly returned to dwifungsi. The threat of terrorism was used to justify an undeclared war on civilian autonomy.  Once again, and with obvious US complicity, the military was very much in charge. [88] In fact, Megawati gave the TNI more independence than it had ever enjoyed under Suharto.  In the absence of effective domestic or international pressure for reform, civilian rule lost by default.  This removed any chance for peaceful negotiation with the Free Aceh Movement, or GAM [89], which like the Moro Islamic Liberation Front in the Philippines had been getting support from foreign Islamists, especially out of Malaysia.

It is important to note, however, that the Acehnese are anything but the rabid extremists that the Bush administration imagines.  Most are civil Islamists who disdain the brutal mobs that operate under the Laskar Jihad label. GAM leader Teuku Kamaruzzaman (one of two peace negotiators who in October 2003 got 13 year prison sentences on charges of “treason and terrorism”) [90] pointed out that “We have Christian churches here and none have been attacked.” [91] As in East Timor before, it is the Army which has been responsible for the worst brutality in Aceh. [92]

Far from reducing radical violence, government action has accomplished the very opposite, smothering the civil Islam which could have provided a natural dike against more radical foreign imports. [93] The health of civil Islam is ultimately tied to the political development of the community in general.  That prospect came under attack when Megawati declared martial law in Aceh on May 18, 2003, and sent some 50,000 Indonesian troops to combat 3,000 lightly-armed separatists. [94] Meanwhile senior government officials continued to downplay or flatly deny the operation of real terrorist organizations in Indonesia, such as Jemaah Islamiyah, which was known to have Al Qaeda links.  This indifference stood in glaring contrast to the TNI’s frequent execution of unarmed civilians in Aceh. [95]

It was none other than the new president, Susilo Bambang Yudhoyono (“SBY”), in his capacity as Megawati’s security minister, who approved the crackdown on Aceh that cost more than 2,000 lives.  Student protesters and human rights groups well remember him from his similar activites under Suharto.  He also served as a commander in East Timor at a time of heinous human rights abuses; [96] yet the fact that he was running against the even more notorious General Wiranto helped him to pass himself off as a military reformer.  So too he sold himself as the essential anti-terrorist.  In fact, it was on his watch that thousands of militant Javanese Islamists joined foreign insurgents in an assault on Christians in Maluku Province, while the TNI looked the other way. [97]

SBY’s tough image comes as good news for the world of “free market” capital flows.  His hard-line tactics are accepted as the necessary price for stability.  Foreign investment is likely to rebound, spurred by the World Bank’s decision to return Indonesia’s loan status to a “high case” priority, qualifying it for loans up to $1.2 billion annually from 2005 to 2007. [98] Meanwhile a new crop of technocrats, having forgotten the lesson of the “Broken Hearts,” will be there to manage the next round of boom and bust economism.

Songok Han Thornton, a Korean citizen, is in the final stages of her doctoral program in interdisciplinary studies at National Sun Yat-Sen University in Taiwan. She has recently published related articles in New Political Science (forthcoming), Development and Society, and CTheory.


1. A shorter version of this article was presented at the ASPAC Conference (the Asian Studies on the Pacific Coast and the Association for Asian Studies), Bellingham, Washington, June 21-23, 2002.

2. William H. Thornton, Fire on the Rim: The Cultural Dynamics of East/West Power Politics (Lanham, MD: Rowman & Littlefield Publishers, Inc., 2002), p. 139.

3. Arturo Escobar, Encountering Development: The Making and Unmaking of the Third World (Princeton, NJ: Princeton University Press, 1995), p. 56.

4. Waden Bello, Shea Cummingham, and Bill Rau, Dark Victory: The United States and Global Poverty (London: Pluto Press, new edition, 1999), p. 5 and p. 13.

5. Ibid., p. 34.

6. That is not to say that Malaysia was economically independent, for its protectionism was made possible by an ample influx of Japanese investment. See Ibid.

7. Adam Schwarz, A Nation in Waiting: Indonesia’s Search for Stability (Boulder, CO: Westview, 2000), p. 41.

8. Mohamed Ariff and Ahmed M. Khalid, Liberalization, Growth and the Asian Financial Crisis: Lessons for Developing and Transitional Economies in Asia (Cheltenham, UK: Edward Elgar, 2000), p. 157.

9. Ibid., p. 159.

10. Ibid., p. 153.

11. Schwarz, op. cit., p. 49.

12. Rizal Sukma, Indonesia and China: The Politics of a Troubled Relationship (London: Routledge, 1999), p. 76.

13. Syed Farid Alatas, Democracy and Authoritarianism in Indonesia and Malaysia: The Rise of the Post-Colonial State (London: Macmillan Press, 1997), p. 137.

14. Dewi Fortuna Anwar, Indonesia in ASEAN: Foreign Policy and Regionalism (New York and Singapore: St. Martin’s Press and Institute of Southeast Asian Studies, 1994), p. 280 and p. 287.

15. Ibid., p. 281.

16. Ibid., p. 283. Benedict Anderson shows that the US knew about the plan to invade to East Timor. Kissinger simply advised Jakarta to “do it quickly.” Some 90 percent of the weapons used in the invasion were provided by the US, in clear violation of US treaty agreements. See The Spectre of Comparisions: Nationalism, Southeast Asia and the World (London: Verso, 1998), p. 133. For more on this US complicity, see Adam Schwarz, A Nation, op. cit., pp. 203-4. Concerning the CIA’s false report and cover-up of the 1965 coup, see Benedict Anderson and Ruth McVey, “What Happened in Indonesia?” The New York Review of Books (June 1, 1978),; and their A Preliminary Analysis of the October 1, 1965 coup in Indonesia (Ithaca, NY: Cornell Modern Indonesia Project, 1971).

17. Anwar, op. cit., pp. 38-39.

18. Sukma, op. cit., p. 77.

19. Schwarz, op. cit., pp. 53-56.

20. Ibid., pp. 74-75.

21. Margaret Scott, “Indonesia Reborn?,” The New York Review of Books, Vol. 45, No. 13 (August 13, 1998), p. 46 (pp. 43-48).

22. Schwarz, op. cit., p. 79.

23. Brian Bremner, Michael Shari, Bruce Einhorn, Moon Ihlwan, Mike McNamee, and Kerry Capell, “Rescuing Asia,” Business Week (November 17, 1997). 

24. Richard Robison, “The Transformation of the State in Indonesia,” in John G. Taylor and Andrew Turton, eds., Sociology of Developing Societies: Southeast Asia (New York: Monthly Review Press, 1988), p. 59 (pp. 48-68).

25. Schwarz, op. cit., p. 78.

26. Ibid.

27. Ibid., p. 74 and p. 342.

28. 3 Ibid., p. 317.

29. Qtd. in Mark Landler, “For Indonesia, Solvency is Political,” The New York Times (April 20, 2001). Hence economic reformers focused their efforts on the control of financial institutions such as state-owned banks. A case in point was the shady financing of Tommy Suharto’s clove agency, BPPC. By February 1992, even Tommy admitted that the BPPC was a total failure. See Schwarz, op. cit., p. 151 and pp. 155-6.

30. Schwarz, op. cit., p. 312.

31. Ibid., p. 316.

32. Abigail Abrash, “Indonesa After Suharto,” Foreign Policy in Focus, Vol. 3, No. 34 (November 1998); and Schwarz, op. cit., p. 316.

33. John Bresnan, “The United States, the IMF, and the Indonesian Financial Crisis,” in Adam Schwarz and Jonathan Paris, eds., The Politics of Post-Suharto Indonesia (New York: Council on Foreign Relations Press, 1999), p. 87 (pp. 87-112).

34. Ibid., p. 102.

35. Schwarz, A Nation, op. cit., p. 339 and p. 341. One of the 16 banks that closed belonged to Suharto’s son, Bambang Trihatmodjo. A week later he reopened his bank under a new name. See Adam Schwarz, “Introduction: The Politics of Post-Suharto Indonesia,” in Adam Schwarz and Jonathan Paris, eds., The Politics of Post-Suharto (New York: Council on Foreign Relations Press, 1999), p. 6 (pp. 1-15).

36. See Abrash, op. cit.

37. T. J. Pempel, “Conclusion,” in T. J. Pempel, ed., The Politics of Asian Economic Crisis (Ithaca, NY: Cornell University Press, 1999), p. 230 (pp. 224-38).

38. Quoted in Abrash, op. cit.

39. Brian Bremner, Michael Shari, Bruce Einhorn, Moon Ihlwan, Mike McNamee, and Kerry Capell, “Rescuing Asia,” Business Week (November 17, 1997).

40. Robert W. Hefner, Civil Islam: Muslims and Democratization in Indonesia (Princeton: Princeton University Press, 2000), p. xvi and p. 5.

41. Ibid., p. xvii.

42. Ariel Heryanto, “Indonesian Middle-Class Opposition in the 1990s,” in Garry Rodan, ed., Political Oppositions in Industrializing Asia (London: Routledge, 1996), p. 242 (pp. 241-71).

43. Edward Aspinall, “The Broadening Base of Political Opposition in Indonesia,” in Garry Rodan, ed., Political Oppositions in Industrializing Asia (London: Routledge, 1996), p. 226 (pp. 215-40).

44. Ibid., p. 225.

45. Heryanto, op. cit., p. 241.

46. Seth Mydans, “In Indonesia, Once Tolerant Islam Grows Rigid,” The New York Times (December 29, 2001).

47. Hefner, Civil Islam, op. cit., p. 18.

48. See Schwarz, A Nation, op. cit., p. 37.

49. Douglas E. Ramage, Politics in Indonesia: Democracy, Islam and the Ideology of Tolerance (London: Routledge, 1995), p. 85.

50. Schwarz, “Introduction,” op. cit., pp. 9-10. On Jan. 20, 2002 the latest division came with the creation of a new party by members of the United Development Party (PPP), the nation’s biggest Islamic group. The National Awakening Party (PKB), which draws members from the NU, is also subject to factionalism. See Dini Djalal, “Indonesia: Missed Opportunities,” The Far Eastern Economic Review (January 31, 2002).

51. Robert W. Hefner, “Islam and Nation in the Post-Suharto Era,” in Adam Schwarz and Jonathan Paris, eds., The Politics of Post-Suharto Indonesia (New York: Council on Foreign Relations Press, 1999), p. 48 (pp. 40-72); and also see Anders Uhlin, Indonesia and the “Third Wave of Democratization”: The Indonesian Pro-Democracy Movement in a Changing World (Surrey, UK: Curzon Press, 1997), pp. 66-7.

52. Ramage, op. cit., p. 142.

53. Ibid., p. 68.

54. In his autobiography, Suharto describes techno-economists as a necessary evil. See William Liddle, “Indonesia’s Unexpected Failure of Leadership,” in Adam Schwarz and Jonathan Paris, eds., The Politics of Post-Suharto Indonesia (New York: Council on Foreign Relations Press, 1999), p. 23 (pp. 16-39).

55. Seth Mydans qualifies this optimism by noting the rise of religious violence in areas such as Sulawesi, Maluk and Aceh. Islamic politicians, especially the Defenders of Islam, also sacrifice broader influence when they call for prohibitions on drinking, gambling, etc. Accordingly, voters in the 1999 election overwhelmingly chose secular nationalist parties over Islamic ones. See Mydans, op. cit. But Islamic extremists have struck back by calling for an Indonesian Islamic State (NII). See Dini Djalal, “Indoneisa: Forced to Serve,” The Far Eastern Economic Review (April 4, 2002).

56. Michael R. J. Vatikiotis, Indonesian Politics Under Suharto: Order, Development and Pressure for Change (London: Routledge, revised edition, 1994), p. 139.

57. Afan Gaffer, “Indonesia 1995: Setting the Tone for Transition towards the Post-Suharto Era,” in Colin Barlow and Joan Hardjono, eds., Indonesia Assessment 1995: Development in Eastern Indonesia (Canberra: Research School of Pacific and Asian Studies/Australia National University, 1996), pp. 43-4 (pp. 43-57).

58. B. J. Habibie, “Industrialisation and the Technological Transformation of a Nation” (1986), in Ian Chalmers and Vedi R. Hadiz, eds., The Politics of Economic Development in Indonesia: Contending Perspectives (London: Routldge, 1997), p. 177 and p. 179 (pp. 176-81).

59. Samuel Charng Yeong Ku, Indonesia: Politics, Economy and Society (Kaohsiung, Taiwan: Kaohsiung Fu Wen, 2002), p. 65.

60. See “Indonesia’s New Dynamic Cabinet,” Inside Indonesia (March 15, 1998).

61. Margaret Scott, “Indonesia Reborn?” The New York Review of Books, Vol. 45, No. 13 (August 13, 1998), p. 46 (pp. 43-48).

62. See “A Transitional Figure,” South China Morning Post (March 15, 2000).

63. See Hal Hill, The Indonesian Economy Since 1966: Southeast Asia’s Emerging Giant (Cambridge, UK: Cambridge University Press, 1996), p. 248.

64. Anthony L. Smith, “Indonesia: Transforming the Leviathan,” in John Funston, ed., Government and Politics in Southeast Asia (Singapore: Institute of Southeast Asian Studies, 2001), p. 80 (pp. 74-119).

65. Jose Manuel Tesoro, “Insider-Outsider,” Asiaweek, Vol. 25, No. 52 (December 31, 1999-January 4, 2000).

66. Bilveer Singh, Succession Politics in Indonesia: The 1998 Presidential Elections and the Fall of Suharto (London: Macmillan Press, 2000), p. 242.

67. See Margot Cohen, “Unsilenced: Indonesia Discovers Free Speech,” The New Republic (June 15, 1998); Bruce Grant, “Crackdown in Indonesia,” The New York Review of Books (Oct. 20, 1994); and Catherine Drucker, “Indonesia’s Unfree Press,” The New York Review of Books (July 13, 1995); and Hefner, “Islam and Nation,” op. cit., p. 53.

68. Hefner, “Islam and Nation,” op. cit., p. 55.

69. Scott Sherman, “A Return to Java,” Lingua Franca, Vol. 11, No. 7 (October 2001).

70. Liddle, op. cit., p. 36.

71. Abubakar E. Hara, “The Difficult Journey of Democratization in Indonesia,” Contemporary Southeast Asia, Vol. 23, No. 2 (August 2001), pp. 307-26.

72. Hefner, “Islam and Nation,” op. cit., p. 55 and p. 59.

73. Michael Vatikiotis and John McBeth, “Marching Back,” The Far Eastern Economic Review (October 12, 2000).

74. It did not help that Wahid’s reformist ally, Lt. General Agus Wirahadikusumah, was alienated from his fellow military officers. See John McBeth, “Military Maneuvers,” The Far Eastern Economic Review (November 9, 2000).

75. John McBeth, “Reinventing Democracy,” The Far Eastern Economic Review (August 24, 2000).

76. Dini Djalal, “Missed Opportunities,” The Far Eastern Economic Review (January 31, 2002). 

77. John McBeth and Dan Murphy, “Balancing Act,” The Far Eastern Economic Review (November 4, 1999).

78. Clifford Geertz, “Indonesia: Starting Over,” The New York Review of Books Archives (May 11, 2000).

79 Jamie Mackie, “In the Shadow of Sukarno,” The Asian Wall Street Journal (November 4, 1998), p. 8.

80. John McBeth and Michael Vatikiotis, “Indonesia: Lady in Waiting,” The Far Eastern Economic Review (May 17, 2001); see also “Analysts Hail Megawati’s Economics-Team Appointments,” ASEAN Free Trade Area (December 4, 2001); and see John McBeth and Dini Djalal, “The Puppet President,” The Far Eastern Economic Review (August 2, 2001).

81. John McBeth, “A Parade of Surprises,” The Far Eastern Economic Review (August 23, 2001).

82. Sadanand Dhume, “Economic Recovery Starts Here,” The Far Eastern Economic Review (August 2, 2001); and also Sadanand Dhume, “Debtor Nation,” The Far Eastern Economic Review (September 6, 2001).

83. John McBeth, “Rule of Law’s Let-Down,” The Far Eastern Economic Review (September 6, 2001).

84. See John McBeth on the new economic disunity, “When Jakarta Fails to Act,” The Far Eastern Economic Review (November 15, 2001); and also see Sadanand Dhume on the lack of investor and/or donor confidence, “Donor Fatigue,” The Far Eastern Economic Review (November 29, 2001).

85. Arief Budiman, “The Lonely Road of the Intellectual: Scholars in Indonesia,” inaugural professional lecture on October 9, 1997, at the University of Melbourne in Australia; and, for the earlier development of Nationalism and the role of the intellectuals, see J. D. Legge, Intellectuals and Nationalism in Indonesia: A Study of the Following Recruited by Sutan Sjahrir in Occupation in Jakarta (Ithaca, NY: Cornell Modern Indonesia Project, 1988).

86. Alatas, op. cit., p. 159.

87. Andrew MacIntyre, “Political Institutions and the Economic Crisis in Thailand and Indonesia,” in T. J. Pemple, ed., The Politics of the Asian Financial Crisis (Ithaca: Cornell University Press, 1999), pp. 154-55 (pp. 143-62).

88. Rizal Sukma, director of the Center for Strategic and International Studies in Jakarta, observes that no political party dares to confront the military. See Alan Sipress, “Indonesian Army’s Upper Hand,” The Washington Post (June 26, 2003), p. A10.

89. Ibid.

90. “Two more ex-rebel negotiators sentenced in Indonesia’s Aceh province,” Agence France-Presse, via ClariNet (October 22, 2003).

91. Roger Mitton, “The New Crusade,” Asiaweek, Vol. 27, No. 8 (March 2, 2001), .

92. “Brutal mistakes in Indonesia,” The International Herald Tribune (January 5, 2004).

93. William H. Thornton, New World Empire: Islamism, Terrorism, and the Making of Neoglobalism (forthcoming from Rowman & Littlefield, 2005), Chapter 4.

94. John McBeth, “A Futile Fight,” The Far Eastern Economic Review (June 5, 2003), p. 16 (pp. 16-17).

95. Raymond Bonner, “Report Cites Emergence of New Islamic Militia in Indonesia,” The New York Times (February 4, 2004).

96. Of the eighteen Indonesians convicted of abuses, all have had their convictions overturned. See “Indonesian Wins Appeal Against Rights Verdict,” The New York Times (November 6, 2004).

97. Paul Dillon, “Profile: Susilo Bambang Yudhoyono,” Aljazeera.Net (July 4, 2004).

98. Jane Perlez, “World Bank Again Giving Large Loans to Indonesia,” The New York Times (December 2, 2003).