Indonesia's discontent.

• Author: Runyan, Curtis
• Position: Cover Story

For more than 30 years, the rulers of the world's fourth most populous country have pursued an aggressive and seemingly successful development policy. But the economic crisis wracking the country today is one signal that much of that success has been achieved through a relentless exploitation of the country's rich environmental assets - and its still poor people. Many Indonesians now sense that their course has been an unsustainable one. And in many ways, Indonesia's troubles are a reflection of the world's.

When Indonesia began its economic free fall last year, the New York Times declared that the collapse "surprised almost everyone." Against all expectation, the Asian economic "miracle" simply stalled out, leaving Indonesia and several of its neighbors looking to the International Monetary Fund for multi-billion-dollar bailouts. Private investment in the country had increased by an average of 11 percent annually in the past decade. But Indonesia - the fourth most populous country in the world, and one of the richest in natural resources - was now staggering and threatening to drag down global markets with it.

Together with reports of President Soeharto's failing health, the economic crisis sent investors running. By January 1998 the value of the rupiah had plunged over 70 percent. Food riots, ethnic violence, and protests against the government mounted.

International attention to the country's crisis has focused on the web of bad lending practices by banks, overborrowing by companies, and an economic boom driven largely by overpriced real estate, artificially maintained exchange rates, and speculation. But the underlying truth is that Indonesia has been in trouble for decades, and those troubles extend far beyond bad investments and financial management. Since Soeharto came to power at the height of the Cold War, the country has been kept in a state of increasingly precarious imbalance - between the power of its ruling elite and the marginalization of its swelling majority, and between the country's vast natural and cultural assets and the unapologetic ambitions of its government to exploit those assets in ways that promise to rapidly deplete them.

While the country was dazzling investors with 8- to 10-percent annual growth rates, Soeharto's "New Order," as his 32-year reign is called, had been raiding the country's treasurehouse of natural wealth and cheap human labor, maintaining a veneer of impressive exports and returns on investment, but meanwhile liquidating the country's natural capital - and suppressing its dissent - in order to keep appearances up. Despite reports of bloody massacres in East Timor, Aceh, and West Papua, endemic financial and political cronyism in the capital city of Jakarta, and environmental devastation in the outlying provinces, foreign investment in Indonesian stock had reached $59 billion by January 1997. Over the following year, however, the facade began to crumble. By the end of 1997, the stock market had fallen by more than 40 percent, and social unrest was rising rapidly.

By some measures, Indonesia's progress under Soeharto has been impressive. Average incomes have increased from U.S. $50 in 1967 to U.S. $650 in 1994 (though the averages hide huge regional and ethnic inequities), and adult literacy has risen from 36 percent to 77 percent since 1960. The country was the world's largest rice importer in 1974, but is now self-sufficient in production of the grain. And Indonesia's national statistics bureau has released figures claiming that only 15 percent of the population lives in poverty, down from 60 percent of the population 30 years ago. But these figures, often cited by the World Bank, are considered by many to be misleading. "Jakarta's definition of poverty is questioned by economists," writes the Far Eastern Economic Review. "For city dwellers, the poverty line is fixed at a mere 930 rupiah [roughly 40 cents] per capita per day; in the countryside, it's 608 rupiah [25 cents]." Indeed, Indonesian economist Faisal Basri calculates that 82 percent of Indonesians live on $30 per month or less.(1)

Having risen to power 32 years ago in a country faced with grinding poverty, Soeharto considers himself Indonesia's "Father of Development," and has aggressively and often ruthlessly promoted economic growth. He has been a key proponent of the "Asian Values" vein of thought, which holds communal harmony in higher esteem than individual rights. He has repeatedly implied that paying heed to human rights and democratization at any expense to economic growth is a luxury that developing countries like Indonesia cannot afford. "In Indonesia, we respect and carry out the principles of human rights in accordance with our system and our own understanding," Soeharto told reporters in response to U.S. criticism of his track record in East Timor last year.

One result of Soeharto's development strategy is that an entire generation has been left to languish with little hope for participation or incentive for advancement. Under the glitzy surface of high returns on international investments, plentiful labor, and abundant resources, there has been a dangerous hollow space - an absence of the kind of opportunity for entrepreneurial inventiveness and ambition that can make an open market and a free society thrive. As the Indonesian novelist Mochtar Lubis asks, "How can you expect people to create, to think, if there is no climate of freedom? Without fostering our intellectual strengths, which means letting people say what they think without fear, Indonesians will remain coolies in their own country."

By concentrating all the real opportunity in the hands of just a few people, says Jafar Siddiq Hamzah of the Indonesian Legal Aid Foundation, Soeharto has undermined the country's stability. For three decades, the facade was propped up by the power of the military government to maintain a rigid political conformity and civil order. But the cost of such order has been heavy, says Hamzah: "A strong political elite has meant a weak civil society." To outsiders, civil order was too easily mistaken for fundamental stability, and even experts like World Bank President James Wolfensohn misread the signs. "There is no doubt we got it wrong," said Wolfensohn in the wake of the collapse. "I was not alone in thinking 12 months ago that Indonesia was on a very good path. One thing we should have done was to try to suppress the monopolies and unfair practices [of the Soeharto clan]."(2) It should now be clear to Wolfensohn and other outsiders that Indonesia's crisis will require far more than an economic patch.

A Javanese Empire?

With more than 17,000 islands, Indonesia is the world's largest archipelago. The country stretches across 5,000 kilometers from east to west - the distance from Baghdad to London. Its total land mass of nearly 2 million square kilometers is larger than that of Belgium, Germany, Italy, Spain, Portugal, and the United Kingdom combined. Include The Netherlands, the colonial power that used to control most of Indonesia (see sidebar, page 19), and Indonesia is still larger. It is endowed with a wealth of resources, including extensive oil and natural-gas reserves, rich mineral deposits, and dense forests that cover three-quarters of its land. It is home to 10 percent of the world's tropical rainforest - second only to Brazil's in area - and it may be unequaled by any other country in the diversity of its flora and fauna.

With 209 million people, Indonesia ranks only behind China, India, and the United States in total population. More than 120 million Indonesians live on the central island of Java, making this relatively small island the most densely populated island in the world.(3) The "outer" island provinces of Sumatra to the west, and Kalimantan, Sulawesi, and West Papua (which the government calls Irian Jaya) to the east, have served as resource banks for the country's development. These outer islands are also home to most of the country's 300 ethnic minority groups.

Indonesia's sprawling geography and demography have significantly shaped the history of the country. One of Soeharto's key accomplishments has been patching together such an intensely diverse nation. But in many cases, where the military has violently imposed unification (see map, pages 16-17), it has only added to the simmering tensions now threatening to tear Indonesia apart.

Java, with 60 percent of the population and the majority of political and military power, dominates Indonesia. In this century, says one Indonesian critic of Soeharto's regime, the country merely exchanged the long-distance colonial rule of the Dutch for the internal colonialism of the Soeharto regime. Just as the Dutch once made fortunes shipping teak wood and Mollucan spices from Java to Holland, Java now helps itself to great quantities of oil, timber, coal, and gold from the outer islands.

Provincial leaders from the outer islands have complained that their natural resources are being exploited to benefit the Javanese. For example, in the provinces of Aceh (northern Sumatra) and West Papua, the wealth produced per inhabitant is among the highest in Indonesia, but the income per inhabitant is much lower. Irian Jaya has the sixth highest per capita GDP among Indonesia's 27 provinces, but also has the highest incidence of rural poverty. Much of its GDP is being channeled to Jakarta, and thence to Tokyo, New York, and Melbourne.

The Jakarta regime has been pursuing its own...