Indonesia: May 1998 Political Crisis and Implications for U.S. Policy

Indonesia: May 1998 Political Crisis and Implications for U.S. Policy

98-468 F
Updated May 18, 1998
CRS Report for Congress
Received through the CRS Web
Indonesia: May 1998 Political Crisis and
Implications for U.S. Policy
Larry Niksch
Specialist in Asian Affairs
Foreign Affairs and National Defense Division
Summary
After years of mounting political tensions and amidst acute economic difficulties,
the shooting of students by Indonesian riot police and massive rioting in Jakarta,
Indonesia’s capital, in May 1998 has moved the crisis into a more uncertain period. The
political crisis centers on demands from anti-government activists, supported by large
numbers of university students, for political changes including President Suharto’s
resignation, a clarification of presidential succession, an end to corruption and economic
privileges, open elections, and independence of parliament and political parties from
government control. Another key issue is the influential role of the military in
Indonesia’s politics and government. Several scenarios or outcomes are possible in the
near term: a Burma-style military crackdown on anti-government elements, the initiation
of limited political reforms by Suharto, action by the military to oust Suharto or reduce
his powers, and a “peoples power” revolution. The new situation affects U.S. policy by
bringing the issue of political reform into the center of U.S. decision-making and
making the ability of the United States to influence the Indonesian military as the key
determinant of U.S. influence. This report was written before President Suharto’s
resignation and will not be updated.
Background
The shooting of students by Indonesian riot police and massive rioting in Jakarta on
May 13-14, 1998, has moved Indonesia’s economic and political crises into a new stage,
more uncertain and volatile. Political discontent with the government of President
Suharto emerged in the early 1990s. After a period of relaxed controls on civil liberties
in 1993, the government imposed new restrictions on the press and other institutions in
mid-1994. Sporadic, localized outbreaks of violence began in mid-1995. In July 1996,
a riot broke out in Jakarta as a result of the Indonesian government-instigated ouster of
Megawati Sukarnoputri from her position as head of the Indonesian Democratic Party.
The Democratic Party (PDI) is one of two “opposition parties” the government has
allowed since the early 1970s. The government has closely regulated and restricted these
Congressional Research Service ˜ The Library of Congress

CRS-2
two parties, and it feared Megawati’s aim of converting the PDI into an independent
political party. Acts of violence rose again prior to parliamentary elections in May 1997.
The elections were held under severe government-imposed restrictions on campaigning.
Political turmoil declined after the elections but grew again in 1998 in response to
the collapse of Indonesia’s currency, the rupiah, the inability of Indonesian companies to
service over $60 billion in private sector debt, and rising inflation and unemployment.
University students took the lead in organizing protests that increasingly called for
President Suharto’s resignation. President Suharto responded in early May 1998 that
there would be no political reforms until the end of his presidential term in 2003.1
Tensions mounted in early May when the government began to lift subsidies from
fuel and electricity, as mandated by the government’s agreement with the International
Monetary Fund (IMF) for a package of IMF-facilitated aid of $43 billion. A riot took
place in the city of Medan on the island of Sumatra the first week of May. On May 13,
Indonesian riot police (a branch of the armed forces) fired on students from Trisakti
University, who had moved a protest from the campus to the streets.2 In reaction, a
massive riot broke out in Jakarta.
Until the Trisakti incident, the Indonesian military had allowed students to protest
on campus and had not used lethal force against off-campus protests. In early May,
President Suharto and General Wiranto, the Defense Minister and armed forces
commander, had warned of tougher measures against protesters. The military also had
been accused of a series of disappearances of anti-government activists since January
1998. General Wiranto denied that the military command was involved in the
disappearances, and he stated that the military was prepared to discuss political reforms.3
The Contentious Political Issues
Suharto’s status: President Suharto has been in power since 1967. Student leaders
and other anti-government activists have placed Suharto’s resignation at the top of their
demands.
Presidential succession: Suharto, who is 77, never has named a successor. He was
re-elected President in March 1998 for a five-year term. This has raised political and
economic uncertainties as reports of health problems surface periodically. Speculation
has grown that he seeks a dynastic succession, possibly through his daughter, Siti
Hardijanti (known as Tutut), who is expected to assume the top position of Golkar, the
ruling, pro-government political party, in October 1998.4 Under the constitution, Vice
President B.J. Habibie would succeed Suharto if Suharto left office before his term ended.
Habibie has been a close confidant of Suharto. Some analysts interpreted his selection
1 Shiner, Cindy. Indonesia’s Leader Stands Tough. Washington Post, May 2, 1998. P.A1.
2 Landler, Mark. Indonesian Riot Police Open Fire at Protests, Killing Six Students. New
York Times, May 13, 1998. P.A1.
3 Richburg, Keith. Military’s Role Seen as Key to Indonesia’s Fate. Washington Post, May
10, 1998. P.A19.
4 Emmerson, Donald K. Indonesia: Will Suharto Survive? PacNet, May 8, 1998.

CRS-3
as Vice President as a tactic by Suharto to sideline Habibie as a potential rallying point
for anti-Suharto elements. His relations with the military have not been close, but the
military did accept his elevation to the Vice Presidency in March 1998. He was
controversial as Minister of Research and Technology where he initiated programs and
advocated policies that appeared contrary to the economic policies advocated for
Indonesia by the IMF and the World Bank. Habibie’s views on political reform are
uncertain. An organization he chairs, the Association of Indonesian Muslim Intellectuals,
issued a statement on May 5, 1988, criticizing the government’s position on political
reforms as “vague, too little and too late.”5
“Crony capitalism”: Speculation of a dynastic succession is controversial partly
because of the extensive economic monopolies that President Suharto has granted to Tutut
and his other children and to close friends. Anti-government critics have called for a
6
n
end to “crony capitalism.” The IMF also has called for a dismantling of several of the
monopolies as part of its financial assistance program.
The role of the parliament: The 500 member House of Representatives has been
viewed generally as obedient to President Suharto. Suharto appoints 75 members from
the military, and he plays a role in selecting most of the others. Any discussion or debate
over political reforms will focus on the relationship of the parliament to the executive.
Elections and political parties: A key element of the Suharto political system has
been to restrict the number of political parties to three (including Golkar) and control the
other two political parties, including restricting their campaigning during parliamentary
elections. President Suharto’s successive re-elections in the 1970, 1980s, and 1990s have
been insured by his control over the Peoples Consultative Assembly, which elects the
President every five years. The Peoples Consultative Assembly has 1,000 members,
composed of the 500-member House of Representatives and 500 chosen by the
government. The importance of this issue was demonstrated by the struggle between the
government and Megawati Sukarnoputri over control of the PDI in 1995 and 1996.
Role of the military: Since Indonesia gained independence from the Netherlands
in 1949, the armed forces has acted in accordance with a doctrine known as the dual
function. Under the dual function, the military has both a defense role and a political-
governmental role. Besides enforcing internal security, the military is integrated into the
civil administration of the country, occupies 75 seats in the House of Representatives
(formerly 100), and participates in the top levels of Golkar.7 Military officers have said
that the military expects to choose Suharto’s successor.
5 Richburg, Keith B. Jakarta Protesters Angry, Organized. Washington Post, May 8, 1998.
P. A33.
6 Thoenes, Sander. Taking Aim at Asia’s ‘Crony Capitalism,’ Christian Science Monitor,
January 21, 1998. P.1.
7 Cronin, Patrick and Ott, Marvin. The Indonesian Armed Forces (ABRI). Strategic Forum,
Number 26, August 1997; Mydans, Seth. To Some Indonesians, Army is Rock of Nation, New
York Times, February 16, 1998. P.A3.

CRS-4
Near Term Scenarios
The government and the military will “do a Burma,” fire on protesters, declare
martial law, and institute mass arrests to suppress dissent. Despite the Trisakti
University incident, the military leadership appears to want to avoid such action. Suharto
would have to have united military support for a Burma option. There is speculation that
the military is divided between factions loyal to General Wiranto and General Prabowo
Subianto, Suharto’s son-in law, whom Suharto recently appointed to command the well-
equipped 27,000 Army Strategic Reserve or Kostrad. Exercising a Burma option likely
would suppress the protests but would isolate Indonesia internationally and likely would
result in a termination of the IMF program. However, Suharto and the military could
employ it as a last resort if they fear losing their powers in the wake of mounting disorders
and public opposition. A first step could be the sustained employment of lethal force
against violent rioters, if the government concluded that public fears of rioting would
bring about public approval of strong military measures.
Suharto initiates a process of limited political reform or leads a dialogue on
reform. Suharto’s apparent opposition to political reform leads to a conclusion that he
would have to be persuaded by the military, his children, close friends, or a combination
of all three groups. Such a Suharto initiative could include a clarification of his view of
succession and disavowal of any design for a dynastic succession. It also could include
a plan for consideration of future electoral reforms. Such a Suharto initiative likely
would lower political tensions if his opponents perceived him to be sincere and would be
most conducive to economic stabilization and future recovery. Those opponents who
continued to demand his resignation would lose public support at least in the short term.
The military ousts Suharto or reduces him to a figurehead. A figurehead role
would be similar to the situation of 1965-1967 when the military disarmed President
Sukarno of his powers but kept him in office. Such action by the military would satisfy
the leading demands of the anti-Suharto forces. The military might institute limited
political reforms, such as clarifying presidential succession, reducing the economic
privileges of Suharto’s children and friends, and enlarging the role of parliament.
However, the military probably would not allow a broad democratization, which would
threaten its political and governmental roles. Whoever would lead a military move
against Suharto might seek the presidency for himself. The longer term outcome of the
scenario would depend on whether the military and the anti-Suharto forces could reach
an accommodation on the scope of political reforms.
A “peoples power revolution”. Like the Philippines in 1986and Thailand in 1992,
urban middle and working classes would take to the streets in the thousands, paralyze the
operations of the government and the economy, force Suharto to step down, and bring
about a fundamental political re-structuring toward democracy. The emergence of a
peoples power revolution would require a greater unity among anti-Suharto groups than
presently exists so that protests could be directed rather than descend into violence and
rioting. It also would require the support of the military or key elements of the military,
as was the case in Manila in February 1986. If a peoples power revolution brought down
Suharto, political restructuring would take several years with many uncertainties along
the way, as the Aquino presidency demonstrated in the Philippines after Marcos’ fall.
Potential civilian leaders are inexperienced in running a government, and there are

CRS-5
potential rivalries among them. Their relations with the military could be a potentia
8
l
obstacle to political stability and restructuring. Economic recovery likely would be a slow
process as investors and bankers would act cautiously until the political outlook clarified.
President Suharto will feel pressure in the coming days to decide between a Burma-
style crackdown or the initiation of limited political reforms. If he does not make a
decision and elects to try to muddle through the present crisis, the prospects of a military
move against him or a popular revolution likely will grow.
Implications for U.S. Policy
The turn of events in May 1998 has several implications for U.S. policy. Until the
incident, the Clinton Administration followed a policy of supporting President Suharto
politically, endorsing the IMF’s pressure on Suharto for economic reforms, urging the
Indonesian military to show restraint in dealing with protests, and criticizing the
disappearances of anti-government activists. The new situation will force th
9
e
Administration to decide whether and to what extent the issue of political reform becomes
part of the U.S. policy agenda. It will raise the tactical question of whether President
Clinton will address President Suharto on political reform as he has on economic reform.
Making political reform a visible element of the U.S. policy agenda could create pressures
on the Administration to distance itself from Suharto if he does not take the initiative in
this direction.
The Administration also will have to decide how to react if the Indonesian
government cracks down on its opponents Burma-style. The Administration would have
to decide whether to impose sanctions on Indonesia as the United States did to the
military regime in Burma after the September 1988 massacre of pro-democracy
demonstrators, thus aborting the IMF program. The dilemma for U.S. policymakers is
that economic sanctions and termination of IMF assistance likely would aggravate internal
instability in Indonesia and the possibility of greater violence. The alternative response
would be de facto accommodation to a crackdown similar to the Administration’s
accommodation to the Chinese government, which would be criticized in Congress, the
U.S. media, and by elements of the American public.
The ability of the United States to influence the Indonesian military probably will be
the key determinant of the American ability to influence future political developments.
The military would play the crucial role in all of the above scenarios. Projecting U.S.
influence may require the utilization of U.S. military officials as de facto diplomats, since
the U.S. military, especially the Navy, has had more extensive contacts with the
Indonesian armed forces leadership than have U.S. civilian officials. Moreover, in any
of the above scenarios, the U.S. military could be expected to continue to act in accord
with the vital national security interest in securing the cooperation of the Indonesian
8 Cohen, Margot. Divided They Stand. Far Eastern Economic Review, March 12, 1998.
P. 22-24.
9 Mann, Jim. U.S. Backs Suharto Despite Calls for Reform. Los Angeles Times, March 1,
1998. P. A1; Sanger, David E. and Kristof, Nicholas D. U.S. Set to Back $1 Billion Outlay to
Aid Indonesia. New York Times, May 1, 1998. P. A1; Blustein, Paul. U.S. Urges Suharto to
Show Restraint. Washington Post, May 2, 1998. P.A15.

CRS-6
military in allowing the passage of American warships through Indonesian waters
connecting the Pacific and Indian Oceans to deal with military crises in either the Persian
Gulf or the Western Pacific.