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The Modern Political Economy
New York
1993
6. The January 15 "Disaster"
The rice crisis that began in 1972 and extended through 1973 left the government highly vulnerable to its critics. These included such national figures as former Vice President Hatta and former Defense Minister Nasution. But the most vociferous critics were students of the major universities, notably the University of Indonesia. And their voices were amplified by the press in the capital city. Foreign aid and investment were benefiting only a few, the critics complained. The Japanese were exploiting the Indonesian economy. Local Chinese businessmen were profiting. The government itself was riddled with corruption. These criticisms came to a violent focus on the visit of Japan's Prime Minister Kakuei Tanaka in January 1974.
Tanaka arrived in Jakarta during a tour of Southeast Asia that already had generated hostile student reactions in the capital cities of Thailand and Malaysia. In Bangkok he was burned in effigy, and in Kuala Lumpur was found guilty in a mock trial on the university campus. 1 The reception in Indonesia's capital was to prove the most hostile of all.
Arriving after nightfall, Tanaka and his party were met by eight hundred students and a powerful array of police and troops in battle dress. Some students had broken through the security cordon and were on the airfield itself just before Tanaka's arrival. Others attempted to block his party from the roadway to the city. A decoy convoy provided distraction, and, as troops cleared the way, the official group sped through the crowd. 2
The following morning, students of three universities in the city, rejecting army appeals to call off their plans, held a large protest march. While this was in progress, bands of youths, many in their teens, began to form in various parts of the city. On major thoroughfares, they halted Japanese-made vehicles, deflating their tires and setting the cars on fire. At the Astra Toyota showrooms, windows were smashed and the entire stock of new cars set ablaze. At the President Hotel, which was operated by Japan Air Lines and was housing the Japanese press corps accompanying the prime minister, security forces stood off several waves of demonstrators attempting to storm the building. In the main square, near the state guest house on the palace grounds where Tanaka was staying, a crowd variously estimated at 20,000 to 100,000 was dispersed by troops in armored cars. 3
For the most part, according to reporters on the scene, police and soldiers did not attempt to stop the rioters. Adam Malik, the foreign minister, said the security forces could not control the crowds because President Soeharto had ordered them not to shoot. At one point during the day, Malik himself, a one-time youth leader, and General Soemitro, the deputy commander of the armed forces, addressed crowds of young people in the streets, urging them to go home. By late afternoon warning shots were fired over the crowds, and as night fell a curfew was imposed on the city. 4
The scale of the protests was much reduced the following day, but one particularly violent incident occurred. At Pasar Senen, a major shopping center, thousands of youths smashed and looted shops and set them on fire. At least eight youths were shot dead. The entire shopping complex went up in a spectacular blaze. 5
At dawn on January 17 Tanaka was whisked to the airport by helicopter from the palace grounds, where he had remained since his arrival. 6
Later in the day the government issued its first official statement on the affair to the press. The demonstrations in the streets, the statement said, had threatened to lead to anarchy; they would no longer be tolerated. The government would "put in order" the life of the universities and schools so they could not be used for political purposes. The government also would "put in order" the reporting of news in the press. The same day troops occupied the campus of the University of Indonesia. 7
In the days that followed, intellectuals and student leaders were arrested. Six daily newspapers and four weekly magazines, among them the country's leading news journals, were charged with publishing material that tended to incite public unrest and were ordered closed. Meetings of five or more persons were banned. It was subsequently announced that eleven youths had been killed and more than a hundred injured during the two days of demonstrations and rioting. Almost 1,000 vehicles had been damaged or destroyed, and 144 buildings had been burned or otherwise damaged. Some 820 individuals were arrested. One group, numbering 472, were "caught in the act" on January 15 and 16; they included 14 university students, 83 high school students, 41 youths, 250 laborers, 28 peddlers, two becak (pedicab) drivers, 1 unemployed person, and 26 loiterers. A second group of 330 were arrested for taking radios, television sets, and the like from shops. A third group included four members of parliament and several officers of the armed forces. 8
Before the end of the month, reflecting the widespread support his student critics had obviously attracted, Soeharto acted on three student demands. He abolished the posts held by four senior army officers in his personal staff, including Ali Moertopo; he announced a series of measures to protect indigenous enterprise; and, finally, he issued orders designed to moderate the extravagant life-styles of senior military officers and civil servants. He also removed General Soemitro from his post as head of public security and dismissed General Sutopo Juwono as head of central intelligence. In March Admiral Sudomo, chief of staff of the public security command, announced to the press that several individuals detained in the aftermath of the riots would be tried for subversion under a 1963 law. He charged that the riots were part of a plot by "radical socialists" to overthrow the government. The "intellectual brains" behind the plot, he said, were former members of "banned political parties." The conspirators had questioned basic tenets of the regime, such as the "dual function" of the armed forces, had tried to create the impression of division within the armed forces, and had launched issues designed to obstruct the government's development strategy. The Tanaka visit was only the "spark" the plotters had used in their attempt to create a revolutionary situation. 9 These, then, were the issues in what came to be known as Malari , the acronym coined from the Indonesian for "the January 15 disaster." The "disaster" was a watershed in Indonesian public life. The government had been shocked to its very roots by its inability to maintain law and order during the visit of an extremely important foreign guest. The reverberations were to run through the political and economic life of the country for many years. The affair raised a host of questions, beginning with why the rioting had occurred. That was to prove the most difficult question of all.
Events Leading up to January 15
The Tanaka visit came at a time of considerable ferment in Indonesia. The economy had suffered a serious setback as a result of the rice crisis of the previous months, inflation was the most serious it had been in years, and the government's whole economic development strategy was coming under increasing fire. Racial and religious feelings were in a heightened state. On the previous August 5 a traffic accident had occurred in Bandung in West Java between the Indonesian driver of a becak (pedicab) and the Chinese driver of an automobile. The story quickly spread that the becak driver had been killed. Although this was not in fact the case, thousands of young people were only too ready to believe it and went on a rampage through the main business district of the city, a district of largely Chinese-owned shops. Within several hours, one Chinese was killed and twenty-three hospitalized, and damage to property was estimated at $3 million. Two senior Siliwangi officers were relieved of their commands, and nineteen officers and men were arrested. It was suggested that the division's leaders had delayed ordering their troops into action because they knew that many junior officers and their men were sympathetic to the rioters. 10
Meanwhile Islamic leaders, already offended by the recent proliferation of bars, night clubs, and massage parlors in the capital city, were angered by a government marriage bill they viewed as secularist. Hundreds of Muslim students stormed the floor of Parliament when the Minister of Religion spoke in support of the bill on September 27.
The chief catalyst of the January events, however, might well have been the fall of the military government of Thailand in October. The first in a series of massive student demonstrations occurred in Bangkok on October 14; many other members of the middle class joined in as the demonstrations continued. The army was divided in its support of the government, and on October 20 Field Marshal Thanom Kittikachorn, prime minister for almost a dozen years, was forced into exile.
This event reverberated almost immediately in Jakarta. On October 24 the student council of the University of Indonesia, in a ceremony at the national heroes' cemetery, announced a resolution protesting corruption, abuse of power, rising prices, unemployment, extralegal activities by the president's assistants, and a lack of political institutions through which the people's views could be expressed. 11
By November students were picketing and distributing leaflets at the National Planning Agency, the Bank of Indonesia, the Miss Indonesia contest, and assorted night clubs. 12
In mid-November J. J. Pronk, the Minister for Development in the government of the Netherlands and chairman of the Intergovernmental Group on Indonesia (IGGI), the consortium of governments providing economic aid to Indonesia, arrived on an official visit. He was greeted by student demonstrators who handed him a statement that declared: "We do not take pride in the results of foreign aid and foreign capital in the form of tall buildings and hotels, Coca Cola, nightclubs, etc. In the meantime more people are without jobs, homes, and land, our small textile industry has died, our forests have become barren, and our oil fields depleted." 13
At about the same time General Soemitro, then both deputy commander of the armed forces and head of the public security agency, began a series of visits to major university campuses. His general theme was the need for "two-way communications" between the government and the people. In Jogjakarta he told students that "hide-and-seek leadership" was to be replaced by "social leadership and social communication." This initiative was received with cynicism. An editorial in Kompas , a leading Jakarta daily, said it was "naive" to think that "our problems can be solved by public officials patiently and amicably listening and giving answers." 14
On November 30, at a meeting in Jakarta, a manifesto critical of foreign capital was signed by a group of prominent dissidents, including former Vice President Hatta.
In December, after the Tanaka visit was announced, students began appearing at the Japanese embassy and at outlets for Japanese-manufactured goods, carrying placards accusing the Japanese of exploiting the Indonesian economy. On December 31, at a "Night of Concern" sponsored by the student councils of the major universities of Jakarta, Bogor, and Bandung, Hariman Siregar, chairman of the student council of the University of Indonesia, declared that economic development had become "a new political myth." Economic development, he said, "means the expropriation of land, forced sales of rice to the government, and increasingly difficult life in the villages." For a "small group in power," he said, the economic strategy of the government was providing "the means to accumulate wealth and satisfy passions for luxury commodities." 15
On January 2 Soeharto held a meeting with General Soemitro and his personal political adviser, General Ali Moertopo. Afterward, Soemitro met with the press. He had no personal ambitions in speaking of a new type of national leadership, he said. It was, moreover, not accurate to suggest, as some had, that he was opposed in any way to Ali Moertopo. All this talk was "strange and cruel." 16
Also early in January students in Jakarta issued a further statement, entitled "Three Demands of the People," echoing the student protest of January 1966, and now demanding that Soeharto dismiss his presidential assistants, bring down prices, and bring an end to corruption. 17
On January 12, just two days before Tanaka's scheduled arrival and after some days of student pressure to do so, Soeharto met for two hours with a hundred student leaders representing thirty-one Indonesian universities. The meeting ended with no specific promises, but Soeharto did pledge to take the students' views into account in the future.
Thus the students had taken considerable initiative in expressing their grievances, and they had been relatively free to do so. Their complaints were broadly political, as well as economic, and were focused increasingly on the presidential office. Yet, they had been able to meet, hold demonstrations (although these were illegal), and have their views reflected in the daily press. The government had responded with patience, given the students their head, and gone to rather unusual lengths to give the young people a hearing. Soeharto and other senior figures in the government seem to have believed that this should have been enough. Yet, the students rejected their appeals for patience. In a political system that was plainly authoritarian, and a society in which deference to persons in authority was expected, the students' aggressive behavior created consternation in official circles. And the scale of the rioting was totally unexpected. With the recent events in Bangkok in the background, questions about the students' intentions and their possible support among army officers quickly surfaced.
The Question of a Plot
The official view that a plot had existed to overthrow the government was laid out in some detail in an editorial that appeared in the Monthly Review , published by the Centre for Strategic and International Studies, a think tank which had been founded by Gen. Ali Moertopo, and which itself had been surrounded by hostile demonstrators on January 15. The Review was scornful of statements made by the student councils of many universities, including the University of Indonesia, deploring the violence. The student demonstrations were undisciplined, the Review said, unlike the student actions of 1966 against Sukarno, in which there was no burning of cars or destruction of buildings. The students "did not seem to have a good organization (or) good leaders with high motivation and orientation to the national interest." 18
But not only students were involved:
Surely not only the students, who had created a lot of agitation by their discussions, petitions, statements, dispatch of delegations, and demonstrations, before all these reached their culmination on 15 and 16 January, but also a large part of the press, which had generally given support and encouragement to the students' actions by their distorted and biased reporting and writing without being critical[,] thereby fomenting the situation, and certain individuals, particularly a number of intellectuals and former members of the PSI and the Masyumi party, who had instigated the students and taken part in their various activities, thereby exploiting the students and their issues and obscuring the genuine issues and grievances of the students to criticize and oppose the government for their own political ends, should be held responsible for what happened and for the consequences thereof. 19
The problem went even deeper than the press and former party leaders, however:
A mention is to be made of the State apparatus for the maintenance of security and order, which should also share the responsibility for the actions of the mobs that got out of hand . . . It would seem hard to tell whether or not they were actually prepared to face the eventuality of a riot on those two days. At any rate, for some unknown reasons, neither the police nor the soldiers on guard took any meaningful action to prevent the burning and destruction of cars, shops, and other buildings and properties. Still it is not as yet clear whether or not there has been an organized movement involving the students and certain former members of the outlawed PSI and Masyumi backed by a number of Army officers to topple the government. This has been the issue of the day in the country since the affair. 20
So there it was all laid out. The students had grievances. A large part of the press had supported them. Individuals associated with banned political parties had encouraged them. The question was whether all these had been part of an organized movement, backed by army officers, to bring down the government.
For their part, student leaders later claimed to have been completely surprised by the violence. Without informing their student followers, they had privately alerted security authorities of exactly what they aimed to do; they did not want any clash with the military. What they had genuinely feared was that they would be set upon by thugs in the hire of domestic security agencies. They had had that experience on one previous occasion. But no such violence occurred during their demonstration on January 15. The march had gone off without incident, and the rioting had taken place elsewhere in the city. 21
The students and other young intellectuals did believe they had the moral support and perhaps the protection of like-minded military officers. Many ties between the two groups had persisted since 1966. Army officers, from generals to majors, had come to the meetings of the student discussion groups that were proliferating on the campuses, and while some officers were angry and berated the students, others were sympathetic and offered help. According to leaders of the "discussion group" movement, these offers were rejected. Later, when students were interrogated, they were pressed particularly about their sources of funds. But times had changed. Students now had funds, the movement collected dues, and the student leaders had money of their own for travel and communication. Their error, one leader later suggested, was their failure to analyze correctly the forces arrayed behind them and against them. Or, as another put it, they had a sense of invincibility arising from the moral force of their ideas. They also were impelled by a sense of urgency, by the conviction that time was running out, that the country was heading for autocracy. Undoubtedly they hoped to spark a series of events that, if not capable of bringing down the government altogether, would at least put a brake on the growth of presidential power. 22
The principal targets of government ire among the press were three of the capital's leading daily newspapers. Others the government had shut down were permitted to resume publication after their editors promised to be more careful in the future, but these three did not appear again. One of these was KAMI , the sometimes irreverent student daily, which had survived the demise of the student action front of the same name. The two other papers were even more serious losses. Pedoman and Indonesia Raya were edited by two of the most widely respected figures in Indonesian journalism, Rosihan Anwar and Mochtar Lubis. Both natives of West Sumatra, they had already seen their papers closed down once before, by Sukarno, and had spent more than half of the 1960s in prison. When they resumed publication in the late 1960s, Pedoman and Indonesia Raya were the most forthright of the Jakarta papers in their reporting of political developments. A fellow Sumatran in government acknowledged his respect for one of these editors: "You have to give him credit; he called a spade a spade." 23 In the circle of Javanese generals around Soeharto, however, that was at the very least impolite, and at its worst, subversive. It seems likely that more than one member of the presidential circle had been looking for an opportunity to silence these critics for some time. From the point of view of the press also, antagonism was deepening. Many journalists were former student activists, intellectuals in their own right, and their sympathies were clear. It did not require a plot for many journalists to share the students' criticisms of the government and to support their demands.
The principal suspect cast in the role of "mastermind" of the alleged plot was apparently Soedjatmoko. 24 He was certainly an intellectual, and he had been a leading figure in the Socialist Party. But he also had impeccable social and political credentials. Soedjatmoko was the son of a medical doctor who had attended the household of the royal family of Solo; was a member of Sjahrir's underground during the Japanese occupation; and, while still in his early twenties, had been sent to the United Nations in New York to seek support for Indonesian independence. Thus, while Rosihan Anwar and Mochtar Lubis spent the later Sukarno years in prison, far from their families in the capital, Soedjatmoko had remained at home in Jakarta, with only restrictions on his travel. Soeharto appointed him in 1968 as ambassador to the United States, where he was much admired. In January 1974 Soedjatmoko was engaged as a consultant on social and cultural affairs to Widjojo at the National Planning Agency. This record was not enough to save him from some months of house arrest and interrogation. He was told that his name had surfaced early in the interrogation of student leaders; asked where they had gotten their critical ideas, they had readily named him as a prominent source. Soedjatmoko had made no secret of his opinion that development was failing in Indonesia for lack of the people's involvement, especially in the villages, and for lack of rapport with the country's youth, many of whom were unemployed or underemployed--the result of government policies, he believed. Much sought after by students, Soedjatmoko was a frequent visitor to the nation's campuses. And he was increasingly apocalyptic in his views: "We may be sitting on a time bomb," he told a visitor at the time, "or maybe, more accurately, a volcano." 25 No charges were ever brought against him, and eventually the restrictions on his travel were removed.
The principal army victim of the affair was General Soemitro, a rotund, affable man, popularly known as "fat Soemitro." Born in East Java, he had climbed the ranks of the Brawidjaja Division there, was serving in East Kalimantan at the time of the attempted coup in 1965, and from shortly thereafter held a series of posts in Jakarta. He was, in the opinion of many, the second most powerful person in Indonesia when the riots occurred. A man who liked to theorize about the larger meaning of events, he was attracted to officers with an intellectual turn of mind, officers of the sort often labeled "PSI." He counted himself a friend of Suwarto of staff college fame, for example, and of Guy Pauker of the Rand Corporation in the United States. His public security assignments brought him in touch with others in this circle, such as Sutopo Juwono, who had taught at the staff college and was head of the intelligence agency at the time of the riots. Soemitro had a reputation for being blunt, self-confident, and politically ambitious. So he was well removed by background and style from the long-serving Central Javanese aides to Soeharto, and his ambitions set him against them as well.
Many thought at the time that Soemitro's highly publicized visits to the campuses represented an independent move to challenge the members of Soeharto's inner circle. Soemitro has said this was not so, that the campus visits were Soeharto's idea. But Soemitro does appear to have been committed to a moderate approach. He might have shared the students' concerns to some extent. And he had feared that a large demonstration against Tanaka would lead to violence, as had occurred in Bandung. Student leaders have said that he called them in and urged them to cancel their plans to demonstrate on these very grounds. Had he succeeded in stopping them, he might well have enjoyed the political career he seemed to be aiming for. When he failed, Soeharto removed him as head of public security, taking on the job himself for a time, and Soemitro resigned from the armed forces. 26
Soemitro's principal army rival was Gen. Ali Moertopo, one of Soeharto's four personal assistants at the time of the riots, Soeharto's principal political adviser, and deputy head of central intelligence. Moertopo was born in Central Java, had his early army experience in the Diponegoro Division, was Soeharto's intelligence officer there, and followed him to Jakarta. Moertopo carried out secret operations during the confrontation against Malaysia; provided liaison with student leaders in 1965-66; managed the successful UN-supervised vote in West Irian that completed West Irian's formal integration into Indonesia; and organized Golkar's successful campaign in the 1971 elections. As his record suggests, he was a man of considerable intellectual capacity. But his principal asset was his proximity to the president. He was thus Soeharto's political adviser and agent par excellence. Moertopo had recently renewed his contacts with students out of an interest in providing them with a nonparty association, one organized along professional lines that ran parallel to Golkar; it was an interest shared by many ex-KAMI intellectuals who were concerned to find a structure through which they could continue to be engaged in the political process. But Moertopo's new student "clubs" were meeting increasing competition from the independent "discussion groups" that also were appearing on the campuses. These latter groups were attracting prominent people to their meetings, people such as former Vice President Mohammad Hatta, former Prime Minister Ali Sastroamidjojo, General Nasution, Soedjatmoko, and intellectually minded army officers such as Sutopo Juwono. Students active in the "discussion groups" were much attracted to the "dependencia" literature coming out of Latin America at the time; they saw Japan as coming to play the dominant economic role in Southeast Asia, and this was a prospect they believed should be resisted. Students sharing these views were beginning to dominate the student senates on the major campuses across the island of Java and were even moving into Moertopo's "clubs." Considering the speed with which the "discussion group" movement was growing, and the prominence of the people who were attracted to it, Moertopo had some reason to suspect that the students might not be acting entirely on their own. Moertopo was later accused of having instigated some of the initial rioting in order to discredit the student radicals and, perhaps in the process, General Soemitro and other moderates. According to a student leader arrested after the Malari riots, he met young toughs in jail who claimed they had been working for Moertopo at the time, had started the burning, and had been picked up along with other rioters. A senior intelligence officer friendly to Soemitro said later that he believed this was indeed the case. 27
A variant view at the time was that Americans might have been involved in encouraging the dissidents. The possibility was pursued for a time by army interrogators. University teachers were largely American-trained, and visiting American academics had sat in on some of the student meetings. Moreover, Soedjatmoko was by this time a trustee of the Ford Foundation in New York. According to one figure at the center of the "discussion group" movement, "The interrogation actually went so far as to try to establish the truth of David Ransom's thesis--that is, that there was a long-term American plan to dominate us through Ford Foundation financial support of the Faculty of Economics--though I don't think it ever got anywhere." 28
Other leads were never pursued at all. The students had meetings in the weeks before January 15 with a number of army officers. But student leaders have said they were never asked about the army contacts, although the authorities must have known about the meetings. Possibly the interrogators themselves were divided in their loyalties.
Whatever the facts of the case, the interrogations slowed over a period of months, and then ceased altogether. Several of General Soemitro's army associates were transferred, and he eventually went into private business. Three young intellectuals were tried in court: Hariman Siregar, leader of the student council of the University of Indonesia, who was sentenced to six years; Aini Chalid, a student leader at Gadjah Mada University in Yogyakarta, who was sentenced to four years; and Sjahrir, a young economics lecturer at the University of Indonesia, who was sentenced to six-and-a-half years. All three were released before serving their full sentences. Siregar returned to his studies and became a medical doctor; Sjahrir completed a doctorate at Harvard. Rosihan Anwar and Mochtar Lubis turned to writing and editing books. Soedjatmoko became rector of the United Nations University. Ali Moertopo and Soedjono Humardhani remained close associates of the president, and Ali went on to become a cabinet minister. No official report on the affair ever appeared. One prominent participant, himself among the detainees, reflected on the history with more regret than anger. "The result," he said, "is that people on all sides of the affair feel that they never got to the bottom of it." 29
If there was a "bottom" to the affair, it was not in a plot by any civilian members of the elite. The government might not have believed the charge even when it was made; no evidence to support it was ever made public, and the inference has been drawn that none was ever found. There was ample evidence of miscalculation--by the students, by Soemitro, by Moertopo, and by army officers aligned with one or the other. The indications of division within the armed forces were only a sign of the times, however. What was principally made evident by the events of January 15 and 16 was that Soedjatmoko had been right, that the elite was sitting on a volcano, and that the ordinary youth of the capital were deeply disenchanted with the regime. There was thus substance to the student protests, to the misgivings of army officers, and to the popular disenchantment. The issues had to do mainly with the growing presence of the Japanese in the Indonesian economy, with the position of the local Chinese in the economy, and with alleged corruption on the part of people close to the president. In the view of many, these issues were of a piece.
The Japanese Presence
Indonesia was the principal country on Tanaka's itinerary, according to an aide, although he visited all five ASEAN countries. The reason was that Indonesia was the principal supplier in Asia of resources to the Japanese economy. At the time, 13.7 percent of Japan's oil imports was coming from Indonesia; in the wake of events in the Middle East, Tanaka had gone to Jakarta to protect the stability of Indonesian oil supplies to Japan and to promote the development of supplies of liquified natural gas. 30
Oil also figured in the student plans for demonstrations in Jakarta against the visit. Some time before the visit was announced, information was leaked to student leaders that Pertamina, the Indonesian state oil company, had provided "kickbacks" to two Japanese oil companies authorized to buy Indonesian oil, in order to provide funds to finance the ruling Liberal Democratic Party. Where the story originated is not known; some believe it might have come from the faction of the LDP headed by Tanaka's archrival Fukuda. In any event, the story seemed to the Indonesian students to be a revival of the Sukarno-Dewi connection, and when the Tanaka visit was announced, they began to organize demonstrations against the Japanese. It was only in the last days, however, after students had demonstrated against Tanaka in Bangkok, that the student leaders of several other universities in Jakarta decided to join forces with those of the University of Indonesia, thus considerably enlarging the scale of the march.
Japan was at the time providing one-third of Indonesia's foreign economic assistance, matching that of the United States, as it had been doing from 1967 on. In May 1973 the Intergovernmental Group pledged $876.6 million in aid to Indonesia for fiscal year 1973-74. Japanese aid was thus large and visible, and that much of it was tied to the purchase of goods manufactured in Japan was widely known and criticized. It was assumed, not only in Jakarta, that the principal aim of the aid was to develop markets for Japanese products. 31
Japanese private investment was a relatively new phenomenon. Japan had not been a factor at all in the Indonesian leadership's thinking when the new law on foreign investment was put in place at the beginning of 1967. Japan still faced a balance of payments problem, and private investment abroad was under tight government control. The Indonesians expected most private investment to come from the United States, and indeed the United States was initially the major source, primarily in the fields of oil and hard minerals. Through the late 1960s, however, Japan experienced a series of annual trade surpluses and, with these, rising reserves of foreign exchange. To avoid a drastic revaluation of the yen, which would have worked against exports, the Japanese government began in 1969 to grant automatic approval of investments abroad by private Japanese corporations, at first of small-scale investments, and from 1971 on without regard to size. At the same time rising land and labor prices in Japan were causing Japanese manufacturers to encounter increasing price competition in foreign markets, and they began to take a growing interest in moving some of their production abroad. 32
Another consideration was the continuing Japanese search for markets for parts and semifinished goods; a Ministry of International Trade and Industry survey in 1974 showed that Japanese affiliates engaged in manufacturing in Indonesia depended on their parent companies for 46 percent of their inputs, the highest ratio in Southeast Asia. Within a few years of Indonesia's opening its economy to foreign investment, the Japanese had multiple reasons to respond to the opportunity. 33
Although Japanese investment had a late start in Indonesia, it grew with great rapidity. During the 1971 fiscal year $30 million was invested in Indonesia, and the total by the end of that year exceeded all Japanese investment in Thailand, even though the latter had a history of more than a decade. In the following two years Japanese investment in Indonesia continued to increase, coming close to $100 million in 1973 alone. By the end of that year total Japanese investment stood at about $185 million, about twice the total in Thailand and about nine times that in the Philippines. 34
Japanese investors were in an extremely strong bargaining position in Indonesia during these years. The foreign investment law obliged them to enter into a joint venture with a local partner, but the partnership was often more nominal than real. The Japanese partner often provided the equity capital, the management, the technology, and the operating capital. It was not uncommon that the only contribution the Indonesian partner made was the land on which the factory was to be built; foreign nationals could not own land in Indonesia. As the value of the land was usually not sufficient to provide the Indonesian share of equity capital required by law, it was common practice for the Japanese partner to provide the Indonesian partner with a loan; all the Indonesian-held shares were then pledged as collateral.
Panglaykim, a prominent Indonesian business economist, described the situation that resulted in these terms: The Indonesian partner usually "had no choice but to surrender all the managerial and organizational power to the Japanese partner." The Japanese partner imported equipment and materials from Japan at "their own set prices . . . which were probably considerably higher [than] those of other suppliers." Other services, including factory design and layout, and insurance coverage, also were provided by Japanese companies affiliated with the Japanese partner. "It would not be unfair to say that in many cases, the Japanese partner had already calculated his risk . . . and had . . . taken his profits in advance." 35
The Case of Textiles
The Japanese investment in Indonesia was, in addition, highly concentrated. Of the $185 million of Japanese investment by the end of 1973, $122 million, or about two-thirds, was invested in textile production, and 94 percent of this latter amount was concentrated in the production of synthetic fibers and in integrated textile mills. Numerous reasons have been advanced to explain the phenomenon. Japan had a long history in the textile field, and Indonesia was the last country with a large population and a potentially large market available for penetration. In addition, the production of man-made fibers was highly concentrated within Japan itself; in 1972, the five top producers accounted for 90 percent of Japan's production of nylon, 85 percent of its polyester, and 93 percent of its acrylic. As opportunity beckoned, these firms were unusually well positioned to respond with vigor in a sector of the industry that depended on high technology and large amounts of capital. 36 Major Japanese trading companies were active participants in the effort to establish Japanese firms in the textile industry throughout the region, including such houses as Mitsui & Co., C. Itoh, and Marubeni. Two major Japanese producers of synthetic fibers, Toray Industries and Teijin, by early 1974 accounted for 83 percent of the total investment in synthetic fiber production in Southeast Asia. 37
The existing textile industry in Indonesia was in no condition to withstand the onslaught of the big Japanese firms. Centered in Bandung and the towns and villages of West Java, the industry had been only partially modernized before World War II; while some six thousand looms were power-operated in 1940, almost sixty thousand were operated by hand. The subsequent Japanese occupation and national revolution inflicted enormous damage on the textile industry; only 25 percent of the prewar looms survived to 1950. Textile self-sufficiency was therefore put on a par with rice self-sufficiency in the early years of the republic, and a series of government subsidies and regulations followed. Despite much inconstancy in government policy, the industry prospered and by the early 1960s was supplying 44 percent of the country's total textile consumption. By 1966, however, many and perhaps most textile enterprises were suffering serious shortages of capital, materials, parts, electricity, and even labor. 38
Under the pressure of adverse press reports and student demonstrations, Indonesian policymakers had begun in 1968 to develop a program to promote domestic industry. Medium- and long-term loans were made available to Indonesian citizens for up to 75 percent of the capital requirements of new investments. In 1971 a further step was taken with the creation of a government corporation that insured up to 75 percent of bank loans to small and medium-scale enterprises engaged in a wide range of fields. In 1972 a new financial institution was created to specialize in financing medium-sized and small-scale industry. In 1973 yet another specialized institution was established to provide up to 12.5 percent of the equity financing of new local enterprises, along with managerial assistance when it was needed. In December 1973 the government announced a long-awaited program of further "credit indigenization," which provided small amounts of fixed investment and working capital to new local enterprises on liberal terms, including a waiver of minimum collateral.
Given time, these programs of incentives might have worked. But time was not on their side. Obliged to compete with the powerful new foreign producers, many existing Indonesian textile firms went bankrupt. Out of a desire to open the economy to foreign capital and technology in the interest of modernization, and a determination to focus on financial incentives rather than bureaucratic controls, Indonesia's economic policymakers had permitted the destruction of one of the few modern industries the country already had. By the time the government did act, the political crisis required dramatic action. With the wide range of restrictions imposed on foreign investment in early 1974, the rush to invest in Indonesia came to a rapid end. 39 In the decade that followed, the bulk of investment flowed instead into neighboring Thailand, Malaysia, and Singapore. 40 And while the Indonesian restrictions applied to all foreigners, regardless of national origin, the Malari riots contributed to a particularly sharp retreat by the Japanese. The number of Japanese firms doing business in Indonesia peaked at forty-five companies in 1973, at least into the latter years of the decade. 41
Why Indonesian policymakers held so firmly to their open-economy position regarding textiles is not clear; as we have seen, they had compromised that position in regard to rice from the very beginning. One possible reason is that the textile industry was in a weak political position after 1966, composed largely of firms that had been favored by Sukarno or by one of the political parties of the Sukarno period. Indonesian officials probably also were eager to avoid a quarrel with the Japanese because of the value of Japanese aid, which in volume was much larger than private investment. In Thailand, which was much less dependent on the Japanese for economic assistance, government officials appear to have modulated the pace of Japanese investment more effectively.
Additional differences between the Indonesian and Thai cases also help explain the difference in behavior and outcomes. In January 1974, at the time of the Tanaka visit, Thailand was in the early stages of a new "democratic period," and the students who were demonstrating against the Japanese were strongly progovernment. In Indonesia, on the other hand, the students were critical not only of the Japanese, but were deeply critical of the regime as well.
Still another difference was the position of the Chinese in the two countries. In Thailand, anti-Chinese feeling was very much a thing of the past. It had been a significant element in the events that had led to the end of the absolute monarchy in 1932, but considerable assimilation had occurred by 1974. If most of the Japanese partners in Thailand were Sino-Thais, that did not figure in the student protests there. In Indonesia, the racial element was crucial.
The Role of the Chinese
The bulk of the local partners of Japanese investors in Indonesia were unquestionably Chinese. A Japanese embassy official put the figure at 70 percent. It was not only the Japanese, however, who found the Indonesian Chinese more attractive partners than indigenous businessmen; American and European investors were thought to have selected their local partners in about the same proportions. Moreover, many of the non-Chinese partners were not private citizens but state enterprises or other quasi-public entities. The result was that indigenous Indonesian businessmen tended to be excluded from the principal opportunities that government policies were making available.
Senior officers of the Department of Defense and Security were known to view the growing gap between the Chinese and indigenous business communities as a potential threat to political stability. The Chinese issue troubled Soemitro and other security officials concerned with the Tanaka visit; the racial incident in Bandung was still fresh in their minds. Moreover, anti-Chinese sentiment was strongly implied in the student protests on behalf of "Indonesian" industry. As events demonstrated, security officials had had reason to be concerned; the damage in Jakarta on January 15 was chiefly to Japanese-made goods, but the goods were largely Chinese-owned. As the government moved to respond to the substance of the student protests, therefore, it faced not only the question of the Japanese role in the economy, but that of the Chinese as well.
The Chinese had become well established in Indonesian industry in colonial times. The textile industry offered an example that was not unrepresentative. Chinese merchants in the towns controlled a large portion of the hand-weavers in the villages by contracting work to them. More than half of all the looms in the organized part of the industry also were owned by Chinese, both before and after the war. As fashions changed and village people stopped wearing sarongs and other garments of coarse fabrics, the Chinese influence grew still stronger. Of all the broad power-looms suitable for modern textiles, the share owned by Chinese was 75 percent. 42
A fundamental problem that the government programs of the late 1960s and early 1970s confronted was the relatively small number of indigenous entrepreneurs with some experience. A senior economist who had much to do with foreign investment in this period said the problem was too basic to be resolved within a few years. Simply too few genuine entrepreneurs existed among the indigenous population, and most of these were over sixty years of age. "Most got their start as small traders before the Japanese occupation," he said. "Some were already in textiles, but that was a handful. Most of them were deal-makers, looking to make a killing." Younger businessmen had started out after independence. "So they started with some political support. But their history was largely one of instability; when their political support was lost, their fortunes declined." There were a few exceptions, but generally no well-known houses existed, only individuals. "The Chamber of Commerce and Industry is full of rich Indonesian businessmen," the former official said, "but there has been almost no institutionalization. . . . All the bigger groups are Chinese, and they have all grown up since the New Order began." 43
An added disability indigenous businessmen suffered was that they had no financial networks of their own. Most indigenous businessmen seem to have been unable to mobilize even the 25 percent of capital required by the new government credit programs, and so were precluded from taking advantage of them. The Chinese, on the other hand, had well-established systems of self-financing that extended along family, clan, and regional lines. Although no records were made of the race of loan recipients, it was widely believed that the bulk of state investment credits were going to Chinese-Indonesians. 44
In the immediate aftermath of the Malari riots, as the government moved to protect local interests, it also acted to protect indigenous Indonesians. During the month of January 1974 the government issued a series of decrees and regulations. Regulations requiring the hiring of local personnel by foreign firms were tightened. Foreign investors in the future would be obliged to select "indigenous" Indonesians as the partners in their joint ventures, and the controlling interest in these firms was to be turned over in stages to the local partner. Furthermore, medium-term investment credits would henceforth be given only to "indigenous" enterprises, which were defined as those in which 75 percent of the shares were held by "indigenous" shareholders, or in which "indigenous" personnel had a controlling managerial interest. These policies presumably were followed for a time. But as later developments were to demonstrate, the role of the Chinese in the economy was not going to be altered by decree.
The Issue of Corruption
Student criticism of corruption in government surfaced early in the Soeharto presidency. In March 1967 the government was already faced with a barrage of criticism regarding the state of the economy. Although no data existed on the point, press accounts gave the impression that domestic industry was slowing down or shutting down completely in the face of the government's austere monetary and fiscal policies. In April anti-Chinese demonstrations in Jakarta brought business to a standstill for several days. By May the demonstrations had spread to the issue of corruption. The government responded to these disturbances with a series of concessions to its critics. It agreed to begin a relaxation of its tight-money policies. It created a state committee to examine and report on the recent anti-Chinese violence. And finally, in December, it announced the creation of a special team, headed by the attorney general, to combat corruption. Thus, the pattern was set that tied criticism of economic policy to complaints against the Chinese, and these, in turn, to charges of official corruption. Also set was a pattern of government failure to respond to the substance of public criticism until demonstrators were in the streets.
Corruption was a fact of daily life; everyone was familiar with the problem of government salaries, and small gratuities for the simplest public service were familiar to all. Even collecting one's paltry government salary usually required leaving something behind for the paymaster and his staff. But this was not the corruption that critics had in mind. As the young intellectual leader, Arief Budiman, wrote in an article after meeting the president in August 1970:
Corruption has its limits if they want to survive. The limit is that corruption should not be so great as to obstruct economic development. If it obstructs development to the point, for example, where peasants can no longer grow rice because corruption has made the price of fertilizer extremely high, then it will no longer be only the youth in the cities [who] will take action but also the youth in the villages. This means a people's revolt, a social revolution. Thus, if the corruptors are clever (and in Indonesia they are indeed clever enough), I think they will not violate this "code of ethics." Clever corruptors will not destroy the nation, they will keep the nation alive, although very thin. 45
Clearly the youthful critics were concerned about corruption on a large scale, and that meant corruption at or near the very top of the regime. That inevitably included the top of the armed forces.
Corruption and the Armed Forces
The army itself owned a number of business enterprises. These already had some history before they were reorganized in 1969 as registered private companies and coordinated by a registered private holding company, PT Tri Usaha Bhakti. Firms in the group included an automobile assembly plant, a battery factory, clothing and shoe factories, rice mills, a bank, an airline, and several joint forestry ventures with foreign investors. 46
Independent of this headquarters group of firms was another operated by Soeharto's former command, the strategic reserve, which Soeharto had begun as a foundation in 1964. The Yayasan Dharma Putra Kostrad had joined with Liem Sioe Liong, Soeharto's Chinese businessman friend, to establish a bank, Bank Windhu Kencana, and with credit from the bank established two airlines and operated a number of other subsidiaries in film distribution, building construction, and other fields. 47
This pattern was repeated by the navy, air force, and police, by the territorial divisions of the army, and by local units. In the late 1960s and early 1970s, local military commanders were reported to be raising funds by way of a wide range of legal and illegal activities. Smuggling was common in the early years of the new government, along with the use of military vehicles and naval vessels to transport passengers and freight. But military units also engaged in the operation of legitimate businesses, including bus lines, construction companies, rice mills, movie theaters, and banks. Most of these enterprises were said to be operated by Chinese businessmen on behalf of the military authorities. 48
As accounts of these ventures circulated in Jakarta, an effort was made to justify them in terms of the armed forces' need to meet their budgets. In late 1969 and early 1970 official spokesmen said that the army was receiving only enough from the government to meet 40 percent of the army's budget, and the navy only 30 to 40 percent. An army newspaper said that the armed forces as a whole were receiving only slightly more than 50 percent of their budget from the government. 49
Such fund-raising on behalf of the armed forces themselves might have been tolerated by civilian elements had it not been for the public scandals that implicated senior military figures. Several of these involved the rice agency, Bulog. In the latter part of 1967 a series of private banks crashed; it later developed that Bulog funds had been deposited in one or more of these banks, although Bulog was required by law to deposit its funds only in state banks. Following yet another bank crash in December 1968 Bulog's loss of funds reportedly contributed to a major failure in domestic procurement during the following year. 50 At this point Bulog lacked the organization to buy or sell rice on any terms other than a wholesale basis; it bought rice, and sold it, through middlemen, most of whom were Chinese. Bulog's scale of operations and its continuing performance failures inevitably earned it the reputation of being a center of corruption, as well as incompetence. 51
Press accounts also suggested that government favors were being extended to firms that involved members of the president's family and his long-time Chinese friend, Liem Sioe Liong. A trading firm, CV Waringin, which included among its directors both Liem and the president's foster brother, Sudwikatmono, was reported in 1967 to have obtained approval to export large amounts of coffee beyond its quota, and in 1968 to have obtained large credits to expand its operations. Mrs. Tien Soeharto, the president's wife, established a foundation, Yayasan Harapan Kita, that was reported to own several companies and, in association with Liem Sioe Liong, established PT Bogosari, which set up the first of several flour mills in 1970. In the same year firms controlled by Liem Sioe Liong and the president's younger brother, Probosutedjo, were given exclusive rights to the importation of cloves, an essential ingredient in the manufacture of kretek, the spiced cigarettes widely popular in Java. 52
The biggest scandal of the period involved outright fraud in the use of foreign exchange that foreign governments had made available as aid. In 1968, with foreign exchange still in short supply, the government attempted to reduce controls by selling foreign exchange at a price set by the daily market. At the same time, for the import of goods on an official priority list, it sold a portion of its holdings of foreign exchange at a preferential rate. Predictably, a number of importers bought foreign exchange under this latter system and then used some or all of it for other purposes, doctoring purchase orders and shipping documents to hide the illegal transactions. In August the practice came to the attention of Sumitro Djojohadikusumo, the founder of the Faculty of Economics at the University of Indonesia, who had been invited back from exile and, as a measure to reassure the business community, had recently been appointed Minister of Trade. On learning that fraud was widely practiced in dealings with his new department, Soemitro called in the attorney general. It was reported soon thereafter that $35 million had been misused in a three-month period, or one-third of all the foreign exchange used for imports during that time; the total amount misused during the year might have been as high as $100 million. It was later reported that some thirty-four importers, apparently Chinese, had fled the country; one importer was detained, along with several government officials. But no one was ever charged, and it was widely supposed that senior military men figured in the background. The case was eventually settled out of court.
A year later similar transactions by a Bulog affiliate in Japan led to the arrest of two men by the Japanese government on charges of violating Japanese currency regulations. The detainees were important enough that one of Soeharto's personal assistants, Soedjono Humardhani, was dispatched to Tokyo, met the finance minister, Takeo Fukuda, and obtained the release of the pair. 53
The Commission of Four
Reports of these developments appeared in the Jakarta press, and in the wake of the foreign exchange scandal, and further student demonstrations in January 1970, Soeharto felt obliged to clear the air. On January 31 he appointed a four-man commission to inquire into corruption and advise on ways to eliminate it. The chairman was Wilopo, the former prime minister and National Party leader. The other members were I. J. Kasim, the long-time leader of the Catholic party; Johannes, a physicist and former rector of Gadjah Mada University; and Anwar Tjokroaminoto, leader of a splinter Islamic party. General Sutopo Juwono was appointed secretary of the commission, and former Vice President Hatta was appointed an adviser to both the commission and Soeharto.
At the end of June, after the commission was known to have submitted a series of reports to the government, and as the government continued to give no indication of when the information would be made public, the reports were leaked to Aristides Katoppo, editor of the daily Sinar Harapan , which published the commission's findings in a series of front-page installments in July. The reports revealed that the commission had told Soeharto that the situation was "critical," that corruption was "running unchecked," and that efforts to control it were falling far behind, to the point where corruption had become "a social evil" that was slowing development "in all fields." 54 The commission urged "priority attention" to a number of prominent cases, including the foreign exchange scandals, the Department of Religion, the forestry directorate, and CV Waringin. 55 In addition, the commission submitted two highly detailed and uncomplimentary reports on Pertamina and another on Bulog. 56
In its final report, which sounded a warning of "moral decline"--"people no longer know what is corrupt and what is not"--the commission told Soeharto pointedly that the clean-up "must begin at the top." It urged that "open management" replace the secret use of extrabudgetary funds in the office of the president--"no matter what the excuse." 57
Two cases involving telecommunications and official management of hadj (Islamic pilgrimage) affairs did go to court on the commission's urging. In his address to the nation on the eve of the twenty-fifth anniversary of Independence Day, Soeharto said there was insufficient evidence in the remaining cases. He did order all high-ranking government officials and military officers to prepare statements of their personal wealth. As the commission had urged, he also created a board to oversee the state oil company. And he announced that he was taking personal command of efforts to eradicate corruption.
That was, for all practical purposes, the end of the matter so far as the government was concerned. And so the problem continued to fester. No issue was more central to the growth of the "discussion groups" on the campuses, and none was more powerful in convincing the students that they constituted an essential moral force, that it was their inevitable responsibility to clean the government up.
The Lessons of the Affair
Numerous lessons were drawn from the "January 15 disaster." The Japanese were well aware of the antigovernment and anti-Chinese elements in the event. They also were familiar with the history of the textile industry. The largest newspapers in Japan urged change in the way Japanese aid was being used. 58 A government official was quoted as saying that aid had to be made available through government channels, rather than disbursed through private companies, as was the practice at the time. 59 Saburo Okita echoed this view, saying that Japan had to give up profit as the principal aim of its aid. 60 And indeed, later in the year, the Japan Economic Cooperation Fund was created, and Okita was appointed to the new cabinet-level post of Minister for International Economic Affairs.
One line of thinking in Jakarta had to do with how to deal with the Japanese from a position of greater strength. Daud Jusuf of the Center for Strategic and International Studies, in an article published in 1974, saw the problem in terms of the interface between the national and international economies. Autarchy would lead the country into economic decline; it could not cut itself off from the rest of the world. But the danger in dealing with the global economy was that the colonial experience would simply be repeated, that small Indonesian firms would find themselves dealing with giant foreign firms, and that "the Indonesian partners ... would serve as a mere 'extension' of the foreign companies." To avoid such a repetition of history, Daud proposed "a pattern of close cooperation between the government, bureaucrats, technocrats and businessmen so as to facilitate the development of a power entity on a national scale which can serve as a countervailing power against both multinational corporations and foreign national (read Chinese) enterprises." To be effective, the effort would have to be based on "large-scale national participation" through "national integrated units in the industrial, managerial, commercial and financial fields." These "big business units" would help enterprises that were small and medium in scale by relying on them to supply raw materials and to market finished products. The heart of the plan was a national financial consortium that would "make the maximum use of the creditworthiness that our national financial institutions as a whole actually have among international circles." Foreign banks might then be prohibited from channeling funds into Indonesia except through this national consortium. Daud acknowledged that he was proposing an "Indonesia Incorporated," modeled after the Japanese. 61
The proposal was timely, for it responded to the nationalist and racist sentiments that the riots had expressed. It was immediately criticized by other intellectuals, however, on the grounds that Japanese society had a set of values and a century of experience that were lacking in the Indonesian case. 62 The proposal also ran head-on against the antibureaucratic convictions of Widjojo, who was Minister of Planning, and of Ali Wardhana, who was Minister of Finance. So "Indonesia Incorporated" never became official strategy. Nevertheless, Daud's ideas were highly influential. They provided an intellectual justification for the expansion of state conglomerates such as Bulog, Pertamina, and others that were to follow. And as oil revenues enriched the state treasury, the idea of using the national weight more fully in international economic transactions became increasingly attractive.
A different lesson was drawn from the Malari affair by Dorodjatun Kuntjoro Jakti, who was a young lecturer at the Faculty of Economics, a central figure in the campus "discussion groups," and one of the planners of the January 15 march. He was detained for two years, and then denied permission to travel for some years more, before he was able to return to the University of California at Berkeley. In a doctoral dissertation finally completed there, Dorodjatun argued that Daud's "Indonesia Incorporated" came close to describing the reality of the situation in 1974. Industrial and commercial conglomerates, whether publicly or privately owned, and involving military officers, Chinese businessmen, and others close to the president, already dominated the heights of the economy. He went on to argue that the power and influence of these groups was causing serious imbalances in the nation's development. One of these imbalances was regional; the centralization of power was reflected in a heavy concentration of modern industry in the Jakarta metropolitan area, while other regions of the country were allowed to languish. Another imbalance was social; the new conglomerates were in the hands of a small number of individuals who were becoming immensely wealthy, while the great bulk of the population saw its fortunes improving only incrementally. As he saw it, development in Indonesia had gone seriously awry because of the very centralization of the political process. 63
It was acknowledged by some of Dorodjatun's former teachers, now the leading economic strategists of the regime, that his concerns had some foundation. But they also thought that the social situation was not nearly so polarized as he pictured it, and that the political process was more complex. Not only was wealth being accumulated by a few, but a middle class also was coming into existence, and that was essential to any long-term hope of greater political pluralism. Moreover, as they saw it, economic decision making was becoming less centralized, not more; as the economy grew in a mixed system of public and private ownership, decision making increased in complexity, and this was desirable. In the late 1960s, when foreign aid was at a premium, the economists' expertise was at a premium as well. By the mid-1970s oil exports were worth twice what they had been a few years earlier, the government was meeting a larger portion of its budget from its own resources, foreign private investment had been growing rapidly, and foreign private lending was entering the picture as well. These changes in the sources of finance led to a reduction in the economists' influence, and to an increase in the influence of others. Even the appointment of several economists to the cabinet after the 1971 elections contributed to a shift in influence within the government, as the economists became caught up in administering their agencies. It was readily acknowledged by more than one of the cabinet-level economists that they were often in competition in these years with the generals around the president. But that was why they were needed. The overriding task was to keep the economy growing, to get the policies right and see that they were implemented. In the absence of that, the bulk of the population would never enjoy a better life. Public approval was to be desired, but in competition with these other priorities, it had to come last. The lesson of Malari, the economic strategists concluded, was that they had to stay the course and, so far as possible, hold the government to their views.
At the same time many of those around Soeharto believed he had performed well in dealing with the political crisis created by the riots. The analogy that was chiefly in the minds of Soeharto's aides was the downfall, only three months before, of the regime of General Thanom in Thailand. As they saw it, Thanom had been unresponsive in the face of criticism, had relied on a divided army to defend him, and had been forced to leave the country as a result. In comparable circumstances, Soeharto had acted in a spirit of compromise. He had seriously tried to hold a dialogue with the students, and when that failed he had defused the crisis quickly by giving in to many of the students' demands. To the way of thinking of Soeharto's aides, this was not the behavior of a weak man; it was a prudent performance by a wise one. With a minimum use of force, he had taken the steam out of a tense situation.
Soeharto himself appears to have drawn three lessons from the affair. The most important was that factionalism within the army was a danger to the stability of the entire political system he had spent years constructing. Over the succeeding years, mainly under General Jusuf's leadership, a major reorganization of the army was put in train, ending the practice of long-time service of junior officers in a single territorial division, and making the army a more truly national institution.
Public dissidence was an equally serious matter from Soeharto's point of view. The young intellectuals, driven by the logic of their critique, had come to question not only foreign capital and corrupt behavior, but the very structure of the regime. Beginning with policy concerns, they had come to believe that the country's economic and social problems would not be resolved without a change in the way policy was made. The constitutional institutions other than the presidency were not functioning as they were intended. The parties were cut off from the rural population and from the young people in the cities, and they were not providing any alternatives to the government's development strategy. The legislature was not channeling the views of the public into policy-making, and it was not serving as an instrument of social control over the performance of the executive. They could talk all they liked, young people said, but nothing was going to change as a result.
Like Sukarno before him, Soeharto was in fundamental disagreement with the entire way of thinking that lay behind these views. Debate and division were the very problems that the 1945 constitution was designed to avoid. Public disputation had only led to bloodshed, twice threatening the very fabric of the nation. The governing principles of the Indonesian state were not to be found in such foreign values. They were to be found in the Pancasila: unity and harmony were rooted in the philosophy of the Indonesian people, and they were the supreme values of the Indonesian state. It was the function of the state's institutions to reflect these values in their structure and to serve them in their actions. As this seemed not to be understood by young people who had not experienced the country's earlier political history, it was necessary that they should learn. And so a program of indoctrination was undertaken in the principles of Pancasila. Much like Sukarno's program of indoctrination in Nasakom, this one was eventually extended to a large part of the citizenry.
Finally, there was the matter of extraconstitutional means of expression. To his youthful critics Soeharto had left no recourse except the streets and the press. After Malari these, too, were brought under control. It was an outcome costly to all sides. The student councils and the national press had been more of a nuisance than a danger to Soeharto; no one seriously believed that they could bring about a change in the government unless they were supported by military elements. At the same time they had been a valuable source of information that helped the government to track the outcomes of its policies and to know when and where correctives were needed. Moreover, the student councils and the national press were consequential institutions; they articulated and projected elite opinion during a period in which no other institutions were doing so. The repression of the students and the press thus removed significant elements from what was already a highly attenuated political process. The government was no safer without them; it was, rather, less well informed and more isolated.
Note 1: Time , January 21 and 28, I974. Back.
Note 2: Richard Halloran, New York Times , January 15, 1974; Time , January 28, 1974. Back.
Note 3: Halloran, New York Times , January 16 and 17, 1974; Time , January 28, 1974. Back.
Note 5: Accounts of the event differ somewhat. This one follows Crouch, The Army and Politics in Indonesia , p. 315. Back.
Note 6: Ibid.; also Newsweek, January 28, 1974. Back.
Note 7: Ibid.; also Reuters, January 17 and I9, 1974. Back.
Note 8: Panggabean, "Keterangan Pemerintah di depan DPR," pp. 323-45; Sudomo, "Keterangan Pers Kastaf Kopkamtib," pp. 388-91; Anthony Goldstone, Far Eastern Economic Review [hereafter FEER], March 11, I974. Back.
Note 9: Goldstone, FEER , March 11, 1974. Back.
Note 10: Crouch, The Army and Politics in Indonesia , p. 312. Back.
Note 11: Pedoman , November 3, 1973, cited by Crouch, The Army and Politics in Indonesia , p. 311; see also Derek Davies, FEER , February 25, 1974. Back.
Note 12: Goldstone, FEER , January 21, 1974. Back.
Note 13: Indonesia Raya , November 12, 1973. Back.
Note 14: Hansen, "Indonesia I974," pp. 148-56; Goldsone, FEER Back.
Note 15: Frances Starner, FEER, January 28, 1974. Back.
Note 16: Mahasiswa Indonesia , no. 392, January 1974, cited by Raillon, Les Etudiants Indonesiens et l'Ordre Nouveau , pp. 99-100. Back.
Note 17: Starner, FEER , February 4, 1974. Back.
Note 18: Centre for Strategic and International Studies, "January I5 Affair," p. 9. Back.
Note 21: Personal interviews, May 18, June 20, and July 23, 1983. Back.
Note 22: Personal interviews, May 18, I983, and August 20, 1989. Back.
Note 23: Personal interview, June 8, I983. Back.
Note 24: Others arrested were Subadio Sastrosatomo and Sarbini Sumawinata, former Socialist Party leaders, and the latter a professor of economics at the University of Indonesia; Adnan Buyung Nasution, a I966 activist and at this time a young attorney much involved in civil rights cases in the courts; Dorodjatun Kuntjoro-Jakti, a young lecturer in economics at the University of Indonesia, and a principal figure in the "discussion group" movement; Rahman Tolleng, a I966 activist who was by this time an official of Golkar; H. Princen, head of the League of Human Rights; and Sjahrir, who was, along with Siregar, a student leader at the University. Back.
Note 25: Robert Shaplen, "Letter from Indonesia," The New Yorker , April 1, I974 p. 57. Back.
Note 26: Personal interview, June 13, 1983. Back.
Note 27: Among published accounts to this effect, see that attributed to Rahman Tolleng, a young Bandung intellectual, in Raillon, Les Etudiants Indonesiens et l'Ordre Nouveau , p. 103, and that attributed to "many of those who suffered in the aftermath" in McDonald, Suharto's Indonesia , p. 140. Back.
Note 28: Personal interview, May 18, 1983. Back.
Note 30: Asahi Shimbun , A.M. edition, January 17, I970. Back.
Note 31: See, for example, Ryokichi, "Japan, the United States, and Development Assistance tO Southeast Asia," pp. 97-98. Back.
Note 32: Yoshihara, Japanese Investment , pp. 3-4. Back.
Note 33: Ibid., pp. 50, 70. Back.
Note 34: Ibid., pp. 66-67. Back.
Note 35: Panglaykim, Japanese Direct Investment in ASEAN , pp. 70, 71. Back.
Note 36: Yoshihara, Japanese Investment , pp. 67-70, 94. Back.
Note 37: Ibid., pp. 104-6. Back.
Note 38: Matsuo, Javanese Cotton Industry . Back.
Note 39: Nelson, "Foreign Investment Regulatory Framework." Back.
Note 40: Net foreign direct private investment in I984 was $227 million in Indonesia, $409 million in Thailand, $912 million in Malaysia, and $1,458 million in Singapore. (Table 14, World Bank, World Development Report I986 [Washington, World Bank, I986].) Back.
Note 41: Indonesia Research Team, Japanese Transnational Enterprises Research Committee, AMPO, Japan-Asia Quarterly Review . Back.
Note 42: Matsuo, Javanese Cotton Industry , p. 47, Table 39. Back.
Note 43: Personal interview, June 20, I983. Back.
Note 44: Kuntjoro-Jakti, The Political Economy of Development , pp. 218-22. Back.
Note 45: Budiman, "Sesudah Duakali Bertemu Pak Harto." Back.
Note 46: Crouch, The Army and Politics in Indonesia , p. 283. Back.
Note 49: Ibid., p. 274, n. 1. Back.
Note 52: Ibid., pp. 286-87. Back.
Note 53: Ibid., pp. 287-89. Back.
Note 54: Sinar Harapan, July 24, 1970. Back.
Note 55: Sinar Harapan , July 18, 1970; see also Mackie, "Report of the Commission of Four." Back.
Note 56: Sinar Harapan , July 18, 20, and 22, 1970. Back.
Note 57: Sinar Harapan , July 24, 1970. Back.
Note 58: Asahi Shimbun, Mainichi Shimbun, and Yomiuri Shimbun , A.M editions, January 16, 1974. Back.
Note 59: Ibid., P.M. editions, January 16, 1974. Back.
Note 60: Asahi Shimbun , A.M. edition, January 17, 1974. Back.
Note 61: Jusuf, "Knowledge Economy and World Economy," pp. 41-43. Back.
Note 62: See, for example, Koentjaraningrat, "Apakah Kita Bisa Meniru Pola Pembangunan Jepang," (Can we copy the development model of Japan?), Kompas (March 25, 1974) (republished in Mencari Bentuk Ekonomi Indonesia: Perkembangan Pemikiran I965-I98I , ed. Redaksi Ekonomi Harian Kompas aakarta: Gramedia, 1982). Back.
Note 63: Kuntjoro-Jakti, Political Economy of Development . Back.
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