A new opposition emerges
A June, 1984 meeting of the Inter-Governmental Group on Indonesia congratulated General Suharto's government on its performance in 1982 and 1983. The IGGI groups the 13 countries with the largest investments in Indonesia, and it meets annually to review these investments. The 1984 meeting, held at The Hague, pledged some 2.5 billion US Dollars in loans and grants for the 1984/85 financial year. This exceeded the recommendations of the World Bank. (1)
The 13 member countries of the IGGI are: Australia, Belgium Canada, Nethelest ere and ralia, Belgium, Canada, France, West Germany, Indonesia, Italy, Japan, the Netherlands, New Switzerland, Britain and the USA. The World Bank, the International Monetary Fund, Asian Development Bank and the United Nations Development Program are also members.
Indonesia's largest foreign investor is Japan, followed by the USA.
But all is not well with the country's economy. Like other Third World countries, it has suffered severely from the effects of the capitalist world recession.
Indonesia recorded 10 per cent annual economic growth in the late 1970s as a consequence of a flood of international investment following the consolidation of General Suharto's "New Order" regime which came to power after the bloody suppression of workers' and peasants' organisations in 1965-66. (2)
industry and related services and infrastructure. Oil and gas revenue accounts for 60% of government income and 65-70% of foreign earnings. But the decline of oil prices in recent years has hit hard. Real Gross Domestic Product growth fell to 2.25% by 1982 and has declined even further since then.
What aroused the IGGI's admiration last June was the Suharto regime's response to this"difficult" situation. In the eyes of the imperialists, Suharto set an example to other Third World countries by adopting an austerity budget, slashing subsidies for domestic oil products, devaluing the rupiah and rationalising taxation and laws and regulations on finance and investment.
The brunt of these measures fell on the workers and poor farmers who make up the great majority of Indonesia's population of 160 million. These people had not shared in the 1970s investment boom. By 1982 some 40% of the population shared less than 10% of the national income, and fell below the official poverty line. This marked a sharp decline from the late 1970s. (3)
Sixty per cent of the population depends on agriculture for its livelihood while agriculture accounts for 30%, or less, of national income. Additionally, much of this income does not go to the people on the land.
Driven by poverty, growing landlessness and underemployment, millions of people have taken to the already overflowing cities in the vain hope of finding
However, most of this investment Michael PETERSON
The new austerity measures were introduced in March 1983, shortly after General Suharto was "re-elected" president by the largely appointed People's Consultative Assembly (MPR).
The rupiah was devalued to increase paper earnings from oil exports, to discourage imports and to make Indonesian exports more competitive. But the ultimate effect was to increase living costs for the vast majority of Indonesians.
The April 1983 budget cut the domestic oil subsidy, sending petrol and kerosine prices skyrocketting. Prices for lower grade fuel rose by up to 70%, while the increase for higher grades was around 11%. Following this, bus fares rose by 20%. (4)
The cut in oil subsidy hit large numbers of people who rely on kerosene for cooking and lighting. Fertiliser costs increased, putting more pressure on millions of subsistence farmers.
Government workers' salaries were frozen for the second year in a row, and no new government housing was to be built. So, even before the full effects of the revaluation were felt, millions of people's living costs had increased dramatically.
already overtlowing cities in the vain hope of finding went into the oil work.
The 1984/85 budget maintained the general austerity measures, but granted government employees a 15% pay rise. It further reduced domestic fuel oil subsidies. The World Bank wants the government to end all subsidies for fuel, fertilisers and public enterprises. (5)
One result of these measures was higher inflation up from 10% in 1982 to around 15% in 1984. Suharto also rescheduled 48 major projects involving foreign investment worth some 20 billion US dollars.
The austerity measures, together with a slight upturn in commodities prices in the second half of 1984, helped the government reduce the current account deficit by 2.9 billion US dollars. The deficit had been around 4.2 billion US dollars in mid-1984.
The government was hoping to further 1. Indonesian Embassy press release (Australia) June 8, 1984. 2. Between 500,000 and one million people were slaughtered because they were suspected members of the Indonesian Communist Party (PKI) or the mass organisations which the party led or influenced. Thousands were arrested and detained without trial for over a decade. Suharto and other right-wing generals launched the bloodbath using the pretext of an abortive revolt by a group of pro-Sukarno army officers on October 1, 1965. After the army and its supporters thoroughly destroyed the existing offset the deficit with inflows of foreign capital.
However, offsetting the deficits of recent years with more borrowing has left its mark. According to the World Bank, Indonesia's foreign debt was a third of all outstanding external debt in East Asia and the Pacific at the end of 1981. The Suharto regime has a total public debt of 27 billion US dollars (nearly 36 billion dollars if undisbursed loans are included). To this must be added a private sector debt of 6-8 billion US dollars.
The World Bank does not consider this a problem because the loans are mostly medium-to-long-term and at relatively low interest rates. However, in 1983 the bank estimated the ratio of debt-service payments to export income at 19%, approaching what is considered workers' and farmers' organisations, the Sukarno government was effectively replaced by military rule, although this was not formally consolidated until later. 3. According to Mubyarto, a lecturer in economics at Gajah Mada University, Jogjakarta, quoted in the Australian Financial Review, February 8, 1985. 4. Far Eastern Economic Review Asia Yearbook, 1984, p. 183.
"Born Again New Order," a regional report on Indonesia in the London-based report on Indonesia in the London-based magazine, South, January 1985, p. 11.
International Viewpoint 25 March 1985
the critical level of 20%.
According to an editorial in Merdeka, a nationalist newspaper, Indonesia's Minister for Finance, Professor Ali Warhana admitted late in 1983 that debt repayments had reached 24% of export earnings. (6)
Last April's budget also marked the start of the government's fourth five-year development plan, Repelita IV. The plan optimistically projects a growth in Gross Domestic Product (GDP) by an average of 5% over the next five years. It also promises economic restructuring to develop the manufacturing sector. Agriculture still accounts for 20-30% of GDP while manufacturing accounts for 15%. Frustration among unemployed youth
Indonesia's problem is charactersitic of most Third World countries. Foreign capital tends to invest in the raw materials area and adoptcapital-intensive techniques. The entire national economy rises or falls with the prices of these raw materials. The foreign investments do little to develop the local economy and create very few jobs.
On the other hand, there are considerable negative effects in localities where major foreign investments are situated.
One major project is a large scale industrial complex at Lhokseumawe, built around a natural gas field in Aceh, northern Sumatra. Most of the employees are foreign, living and working in high income enclaves in the midst of poor local populations.
As a result, the local population is subjected to land speculation, price-rises and a drain on the existing services network. The government is worried about the security of such enclaves due to growing local resentment.
Repelita IV seeks to resolve such problems by greater use of domestic capital to develop secondary industry around the foreign investment projects. But to date, most big local capitalists have preferred to invest their money overseas or in areas like property development. The Suharto like property development. The Suharto regime's promise of looser regulations and tax reorganisation did have some effect on local capital. There were reports of a boom in office block development in the capital Jakarta, last year! That's unlikely to last for long without new investment in more productive industry.
Another dampener on development of a manufacturing industry is poor local demand, a product of the sheer poverty of the majority of Indonesians. In times of recession, this demand declines even further.
The recent decision by the Organisation of Petroleum Exporting Countries (OPEC), of which Indonesia is a member, to cut the price of Minas crude oil by 1 US dollar per barrel will cost the Indonesian government 280 million US dollars this year.
This places even more pressure on the Indonesian economy and has caused the Australian Financial Review to comment International Viewpoint 25 March 1985 on fears of a worsening of "recent social and political tensions" in the country?
The reference is to bombings of Chineseowned businesses and riots in Central Java late last year. These were the most overt signs of the growing mass reaction to the economic situation, but must also be viewed together with the rise in labour disputes and organisation among the urban poor.
Frustrations among the growing ranks of unemployed youth can only grow. Even before the OPEC price cut was announced, the regime's planners forecast that by 1990 there would only be 6.1 million jobs for a workforce of 9.3 million people. This optimistic figure accepts an unemployment rate of 34.4%. Current official figures put the unemployment rate at 26%.
Indonesia's deepening economic crisis is giving rise to growing dissent. And the crisis is being worsened by imperialism's demands for rationalisation of Suharto's "New Order" regime itself. The character of the new opposition in Indonesia today is being shaped by these two related processes.
While the ability of the Suharto regime to restructure the economy is dubious, some real restructuring is taking place in the ruling regime.
The Suharto military regime took shape under the popular nationalist Sukarno government, which ruled Indonesia from independence in 1949 to the 1965 military coup. Sukarno's rule was based on an uneasy truce between a right-wing dominated military and a militant independence movement. In this movement, the world's third largest Communist Party (PKI) operated openly alongside more moderate nationalists.
Under the leadership of Abdul Haris Nasution, the head of the Supreme War Administration (Peperti), army officers were appointed as managers of confiscated Dutch estates and enterprises. The army took over the Sumatran assets of Royal Dutch Shell. In 1957, the army was given control of the state oil company, Permina (now Pertamina). Permina (now Pertamina).
During the 1950s, and later, there were several further important nationalisations of foreign businesses. Sometimes these began when militant workers seized plants, but in every case the military moved in, evicted the workers, and took over administration of the nationalised businesses.
So, when the military seized full power in 1965/66, it represented not just the interests of imperialism (the great majority of senior officers were trained in the US), but an important economic agency through which all foreign investors had to deal. (8)
The bread and butter of Suharto and the other generals around him were the bribes and "kickbacks" that had become standard in the country's business operations. The "New Order" , as the Suharto regime named itself after the coup, resulted in a partial rationalisation of this corruption.
Under the New Order, all foreign investors have to work through a local agent or partner, who commands a 2-7% commission on large contracts (above 50 million US dollars). For smaller contracts, commissions can reach 10% or more. (9)
On top of that, there are bribes that must be paid to secure various licences. General Suharto's wife, Madame Tien Suharto, became commonly known as "Madam Ten Per Cent"
The system's total corruption shows up clearly in taxation. A complicated system of taxes provides officials with the means to extract enormous bribes. But very little tax is collected. In 1982 there were only about 600,000 taxpayers in the entire population. Now, the government says it plans to simplify the taxation system and actually start collecting tax.
Merdeka, November 3, 1983, translated and reprinted in Inside Indonesia, No. 2, May 1984. Published in Canberra, Australia, p. 19.
Australian Financial Review, February 8, 1985. 8. Many commentators have pointed to evidence that the CIA cultivated Indonesian military officers from the 1950s on. Some even suggest that the events of 1965/66 were planned and carried out under Washington's direction. cf. Southwood & Flanagan, Indonesia: Law, Propaganda and Terror, Zed Press, 1983. 9. South, January 1985, p. 12.
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Kup.ung domis was pressure to elect Murtopo vice-president, a position that entails no power but would have made him the successor should Suharto die or resign.
Murtopo was a former Suharto protege who became too powerful. Control of the secret police gave Murtopo's faction access to massive extortion rackets run through the secret police. These may be marked for trimming in the present economic situation.
General Amir Machmud was another whose fortunes declined. A former longtime minister for home affairs who left his portfolio to become speaker of the MPR, his ministerial powers enabled him to appoint provincial governors and subdistrict heads. This enabled him to build up a massive patronage network.
Also demoted was General Mohammed Yusuf, former defence minister and armed forces commander-in-chief. He did not have a developed faction, but was a powerful military figure. He was also a suggested candidate for the vice-presidency.
In the end, a Sudanese general, Umar In the end a Sudanese general. Umar Wirahadikusuma, a Suharto crony from 1965/66, became vice-president.
Also displaced was former vice-president, Adam Malik, one of the few civilian leaders who remained in power after the overthrow of the Sukarno government. He died not long after the purge. Suharto attempts to ensure his survival
Suharto is now the only survivor in power of the "generation of 1945", the leaders of the struggle for independence from the Netherlands.
Having displaced the major factions leaders, Suharto set about further centralising his control of the military. A number of organisational changes were introduced, chief of which was appointment of General Benny Murdani as commander of the armed forces and of Kopkamtib. Formerly these two positions were not held by one individual. However, it must be noted that Murdani remains under direct control of Suharto, the supreme commander of the armed forces.
Being a Christian, Murdani is unlikely to make common cause with the powerful Muslim and Javanese factions against Suharto.
Murdani's background is mostly in the intelligence services. He also has a reputation for heading some of the most brutal campaigns in Indonesian-occupied West Papua (Irian Jaya).
Murdani is one of a batch of younger army officers who were promoted (some over the heads of older officers) in the latest "regenerasi" of Abri. The word "regenerasi" refers to the process of bringing in a new generation of leaders, and this provides the rationale for Suharto's moves against the other factions.
But rather than grooming successors, Suharto is trying to ensure his own survival. Promotion of Murdani, a Murtopo protege, was a way of undermining Murtopo's faction.
International Viewpoint 25 March 1985
This has been welcomed by the IGGI.
The history of the state oil company, Pertamina, provides several more illuminating examples of the regime's methods. Pertamina commands millions of dollars, but does little work itself. It operates by contracting foreign oil companies. Seventy-five foreign oil contractors work for Pertamina.
When the military regime first came to power it was an alliance of a number of generals, each of whom maintained an "empire" based on a government department or wing of the military. These "empires" were held together with bribery and patronage.
After the 1965/66 coup, two such generals emerged as possible military leaders, Nasution and Suharto. Suharto's control of combat units and the strategic command enabled him and his supporters to prevail. General Nasution lost his important positions and his supporters found themselves transferred to positions which left them little real power.
Since then, Suharto and a small group of his supporters have worked consistently to isolate and eliminate competition, even within the military.
Suharto consolidated his position in 1969 by reorganising the armed forces (Abri) under his operational control. He became supreme commander. Commanders of the navy, airforce and police wings lost much of their autonomy and power.
Behind this purge seems to have been Suharto's determination to protect his position from any possible challenge. But a political difference was also involved. The group around General Nasution, while anticommunist, wanted a return to some form of civilian rule after the left was destroyed. Suharto disagreed.
He defined a new role for the military, summed up in the concept of "dwifungsi" (dual function). The military, besides its usual function, was to lead the nation in all fields.
But not even the armed forces were to be without control. The command for 9L 16 the restoration of Security and Order (Kopkamtib) was a "temporary" extraconstitutional martial law body set up in 1965. It had the power to override police and even the defence department. It has become a permanent feature of the New Order.
When elections were reintroduced in 1971, the most undemocratic aspects of Sukarno's "Guided Democracy" were retained. But only anticommunist parties were allowed to participate.
1983 saw the beginning of a new reorganisation of Abri under pressure from the changed economic situation, and once again in order to eliminate any challengers to Suharto. Dubbed "regenerasi" (rejuvenation), it heralded a general restructuring and rationalisation of the entire New Order regime.
During the oil boom, there was a lot of money around to support widescale corruption. And in those days foreign investors felt that this was a small price to pay for Suharto's services in destroying the militant workers' and peasants' movements.
But with the recession things have changed. The regime has been forced to trim some excess fat. The demand for greater efficiency in production also requires streamlining and centralisation of corruption. Unbridled corruption can breed intolerable levels of inefficiency.
The latest purge disposed of all the remaining factions in the army apart from Suharto's. It was consummated in March 1983 when the new cabinet was "elected" by the MPR. Three longstanding New Order leaders lost their positions.
Lieutenant-General Ali Murtopo was one of the casualties. A former minister for information, whose faction was built around the secret police (BAKIN) and the top-secret intelligence agency, OSPUS (Special Operations), he played a key role in secret negotiations with the Malaysian government during the "confrontation" between the two countries in 1963. In the lead up to the cabinet selection there
Suharto also claims that the reorganisation is a means of reducing waste and fighting corruption. In a sense, it is, but after the latest purge, the only corruption left to fight is that of his own faction. That, of course, is out of the question. So as the economic crisis continues, the regime will have to launch further attacks on the living standards of workers and farmers.
As in 1969, Suharto retained the support of key military units, but perhaps more important was the powerful economic base that the president has built for himself over the years.
This base depends on close ties with a small group of ethnic Chinese businessmen who dominate local capital in Indonesia. These people have been awarded the building, supply and service contracts for most major foreign-funded and statefunded projects. Suharto and his group have set up a string of partnerships with these local capitalists and have, in fact, become part of the local capitalist class.
Repelita IV is the most open promotion of these interests. The role of local capital has been exalted.
The main way this has been done is through removal of privileges previously extended to "primubi" (native) capitalists. These privileges were introduced by the Suharto regime to cool down the situation during widespread anti-Chinesecapitalist riots in the 1970s. All along it was the poorer Chinese who suffered most. The billionaires retained Suharto's protection.
While this alliance has been to Suharto's advantage in the latest purge, it has for some time provoked much of the opposition to his rule.
Anti-imperialist and anti-capitalist sentiment in Indonesia is often confused and mixed in with anti-Chinese chauvinism. This has its roots in the suppression of the left, occasional active promotion of chauvinism by the New Order regime, and the political origins and present consciousness of many of the leaders of Indonesia's new opposition.
There are two important factors shaping the new oppostion. Firstly the left which grew in the struggle for independence was effectively smashed in 1965/66. Hence the present opposition traces its roots to elements that once supported the New Order regime or which emerged after the coup. Secondly, there has been a massive upsurge in workers' struggles in recent years. To a lesser extent, poor farmers have also begun to revolt.
Those left wingers not massacred in 1965/66, were either demoralised or imprisoned. Some 30,000 of these "Tapols" (detainees) were released in the 25 months up to December 1979. According to the regime, only a few remain in detention, though just how few is disputed by human rights organisations. But the present lot of the former detainees does not allow them to become politically active. They are watched closely, banned from public life and often struggle to earn a living.
Great writers among them, such as International Viewpoint 25 March 1985
Pramoedya Ananta Toer, have their works banned. They only appear legally outside the country.
The terms "class struggle" and "imperialism" have been banned for years. And now it is even forbidden to refer to the "rich-poor gap" • (10)
A few individuals have begun to discuss socialist ideas, though in guarded language. But, in general, the opposition movements frame their criticism in terms of immediate demands and/or the state ideology, "Pancasila" Birth of the "new order"
Pancasila was first formulated by Sukarno. Its five tenets are belief in god, humanitarianism, national unity, justice and democracy based on consensus and representation.
The New Order regime uses Pancasila to legitimise its rule by identifying it with the independence struggle.
The New Order regime claims that its mission is to defend Pancasila and the 1945 constitution. One group which joined the army in its purge of the left was called the Pancasila students. Suspected communists were attacked as being "godless"
In recent years, Pancasila has been pushed like never before. There is Pancasila industrial relations (which means no strikes), Pancasila as the sole political ideology for all political organisations, and even a Pancasila economic system, of which Indonesia is the model!
The fundamental thrust in all these cases is denial of class conflict and total depoliticisation of the masses.
Suharto reserves the right to interpret Pancasila, and in the last few years this has proved a problem. In 1980, for instance, Suharto declared: "Before the New Order was born, we saw and sensed that our national ideology was submerged by various existing ideologies, whether it was Marxism, Leninism, communism, socialism, Marhaenism (11), nationalism or religion.."
Many Pancasila supporters saw this as a contradiction. The last three ideologies were an effective definition of Pancasila. Among the opponents of this interpretation was a group of former elite politicians around General Nasution. Fifty of them submitted a protest petition to the MPR.
Admiral Sudomo, then head of Kopkamtib, branded the Petition of 50 (as it is commonly called) a "constitutional coup" and placed the signatories under
The following year, this group submitted another petition, this time with 360 signatures. While their actions were those of a political elite, they helped set the framework for mass opposition around the 1982 general elections.
Today the Petition of 50 group is relatively quiet. But its numbers may swell with the "regeneration" of the military. One step the Suharto regime has taken in an attempt to diffuse the political potential of the growing numbers of "retired" officers is to increase their pensions. This might satisfy some of the lower echelons, but it is of little value to former generals who have lived off lucrative corruption networks for many years.
Basic class conflicts have tended to break out among workers and the unemployed in the cities rather than in the countryside in recent years. The exceptions to this are the independence struggles in East Timor and West Papua.
Indonesian rural society is not subject to dramatic class differentiations. There are few big landlords, and agribusiness is not an important part of the economy.
Neverthless, landlessness is a growing problem due to division of land with each generation and some concentration of ownership which accompanied the New Order's implementation of the Green Revolution.
This World Bank and IMF-sponsored campaign to introduce fertiliser and some farm machinery created a broad layer of middle-level farmers who employed a few field workers on a seasonal basis.
This slightly better-off peasant layer received some government-disbursed funding and became an important political base for the New Order. Areas where this layer was prominent witnessed some of the worst massacres of suspected communists, even up to 1968.
Displaced peasants have tended to move to the cities in search of work and it is here that their grievances have tended to develop and be expressed.
The huge populations of the cities helps keep Indonesian workers' wages the lowest in South-East Asia. Yet. as 10. Inside Indonesia, No. 3, October 1984. 11. Marhaenism was Sukarno's own theory for social change, in it he sought to replace class struggle with the struggle of all the poor, suffering and righteous.
### Indonesian farmer (D.R.)
17
already pointed out, this alone is not always a sufficient factor to attract foreign investment into labour-intensive industries.
Most existing labour-intensive industry has developed through government-sponsored attempts at import substitution. Car assembly, building material manufacturing, food processing, cigarette manufacturing and some electronics and clothing manufacturing are about the only major employers other than the public service.
The economic recession has given rise to a dramatic rise in labour disputes. The government admits there were 600 "worker cases" in 1982. The full significance of this figure is only realised when it is revealed that there are near-spontaneous strikes and protests. All unions are "yellow" - compulsory affiliates to the government-controlled union federation, the National Federation of Labor Organisations (FBSI). (12)
'These struggles are continuing despite brutal suppression by the armed forces.
In March 1983, the former head of Kopkamtib, Admiral Sudomo took over the Ministry of Manpower. He immediately annonced that his policy was to maintain a "peaceful" working climate.
To enforce this climate, Sudomo employs techniques he learned from Kopkamtib. One month after taking office he set up a Manpower Crisis Management Centre. It makes policy and runs Action Force Groups whose duty is to "prevent a dispute from spreading and to cope with the dispute on the spot."
Committees for the Settlement of Labor Disputes, a reform won by workers in the 1950s are being replaced by industrial courts, and Sudomo has annonced that Collective Labor Agreements are to be phased out. "This philosophy," he said, "places workers and employers in two conflicting camps, whereas Pancasila democracy necessitates workers and employers to solve their problems through consultations rather than demonstrations."
Sudomo went on to urge workers not to think of themselves as workers! The Indonesian term "buruh" (worker) is to be replaced with the term "katyawan" (employee) or "tenaga kerja" (man power)! In February 1984, Sudomo made an agreement with the FBSI to ban all slowdowns and strikes. by some workers. In June 1984, for instance, 395 workers at the PT Beta Sarana Steel plant in Tanjung Priok struck for two days over the company's refusal to respond to a wage demand. The same month anther 700 workers went on strie at an East Jakarta vehicle assembly plant over the company's refusal to pay the annual bonus. (13)
The absence of real unions forces workers to turn to legal aid bodies and 12. For a detailed account of workers' struggles over the last five years see Indonesian Workers and Their Right to Organise, a publication of the Indonesian Documentation and Information Centre, Leiden, The Netherlands. 1981 witt. annual supplements since then. 13. Inside Indonesia No. 3, October 1984. Inside Indonesia No. 3. October 1984. L 18