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CRASHING INTO A NEW ERA



CRASHING INTO A NEW ERA
Suharto's sudden, dramatic downfall was the most compelling story of 1998. Who
can pick up the pieces?

IN AN EARLIER TIME, he might have expected to be addressed as raden, a title
reserved for Javanese nobility. That is what Suharto's household staff called
him. Two weeks ago, as he testified in Jakarta to a government panel
investigating his wealth, he probably thought at least bapak (father) was
warranted, given his position as ex-president. Instead, his questioners used
saudara (brother), the term used to address an equal. How a man who had risen
to the level of demigod fell so far, so fast is perhaps the most compelling
personal story of 1998. 
The year did not begin smoothly for either Indonesia or its embattled
president. At the behest of the International Monetary Fund, 16 banks were
shut in the last quarter of 1997. That touched off a confidence crisis in the
entire domestic banking system and accelerated a decline in the rupiah's
value. By0 Jan. 1, the currency had depreciated 40% against the dollar in
three months. The jitters were compounded by news of Suharto's health problems
at the end of a string of international trips in November. The day the
announcement came that he would skip ASEAN's 30th anniversary celebration in
Kuala Lumpur, the rupiah dove 10%. 

As the currency continued to slide in the first weeks of 1998, Suharto
recovered in the warm embrace of family and friends. In March, he was elected
to his sixth presidential term. He quickly named a cabinet that included his
eldest daughter, Siti Hardiyanti Rukmana ("Tutut"), and his top crony, Mohamad
"Bob" Hasan. More than $5 billion in immediate assistance from the IMF, the
World Bank and the Asian Development Bank had been put on hold before the
announcements. Suharto chose allies over aid. 

In hindsight, maybe the self-preservation instinct was correct. Suharto had
crafted an elaborate political system for Indonesia based on an ancient model.
He was king, the pakubuwono - nail of the universe. He controlled the army,
parliament, government, even elections. Remove the nail, and everything falls
apart. That was the fear he sought to implant in his subjects. Early in the
year, Suharto must have sensed the nail losing its grip, loosened by forces of
circumstance for which he felt no responsibility. 

The deadly riots that broke out in May might have confirmed Suharto's fear,
but they also exposed the weakness of his strategy to retain power. The
economy was imploding - debt-laden domestic companies falling like dominos,
banks cracking under the weight of bad loans, layoffs by the thousands,
canceled investments, capital flight. Meanwhile, Suharto raised the ramparts
and mustered his nobility. His frequent attempts to marry a modern society
with feudal politics would make a final, desperate appearance. 

The effort failed. Suharto's supporters deserted him, and he bowed to the
reality of defeat on May 21. What was in his mind the day he addressed the
nation and resigned? Perhaps he recalled the glory days: his rise to power in
1966, the heady 8% annual growth of his first 15 years in office, the
successful war on poverty that slashed the proportion of poor Indonesians from
64% in 1965 to 11% two decades later. During that time, Suharto's "New Order"
Indonesia was the Western world's poster child for development. It was
virulently anti-communist. That meant one part of the world, led by the United
States, was willing to look the other way with respect to how Suharto put down
his opponents, like Islamists or democrats. 

But at some point, Suharto's world changed. It was not a matter of violence -
he had been a ruthless leader from the start. Tutut, now 49 years old, turned
31 in 1980. His eldest son, Bambang Trihatmodjo, now 44, was 26. Hutomo
Mandala Putra ("Tommy"), the youngest, was 17. As the three came of age and
were granted the business favors befitting a king's children, a darker phase
of the New Order began. 

Increasingly, Suharto seemed unable to set priorities or separate the
interests of his cronies and his nation. National growth remained strong. But
the nature of the expansion shifted. Manufacturing grew in importance as
foreign investment was funneled to cronies. Banks lent on the basis of
connections over economic fundamentals. The income gap between haves and have-
nots widened. Suharto's power grew from all this, but the legitimacy he
commanded in the early years began to hollow out. Widening discontent awaited
only a spark to burst into flame. 

If the first half of 1998 in Indonesia was dominated by Suharto's fall, the
second was haunted by it. His hapless successor, B.J. Habibie, faced a
violence-prone political culture and a ruined economic landscape. A food
crisis threatened 70 million Indonesians, who discovered how years of
industrial expansion and a strong currency had robbed the nation of its
ability to feed itself while raising its dependence on imported foodstuffs.
Few banks are even close to solvency. And private debt estimated at some $80
billion is strangling business. 

The main catalyst of the devastation may have gone, but the national drama
continues. In 1999, with elections, cynical maneuvering by power groups,
growing divisions between the elite and the masses, and a continuing economic
crisis, violence could easily escalate. The abiding image of Suharto is always
from the back: shoulders hunched, head bowed in a gesture of resignation. This
was the year Suharto left a burning house. Who will douse the flames and build
a new one?
ASIA WEEK - DEC 25, 98