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  •   Nepotism, Cronyism Undercut President

    By William Branigin
    Washington Post Staff Writer
    Thursday, May 21, 1998; Page A01

    As Indonesia's strongman for the past 32 years, President Suharto marched his sprawling country from widespread poverty to the brink of relative prosperity. The years of steady economic growth seemed to justify the title the former army general bestowed on himself in the 1980s: the "Father of Development."

    Highlights of Suharto's Career

    1921: Born June 8 to poor farmers in Godean village near Yogyakarta, about 280 miles southeast of Jakarta.

    1940s: When Japan invades and defeats the Dutch in World War II, becomes a battalion commander in the Japanese "self-defense corps."

    1960s: Rises to power in relative obscurity as a middle-ranking army officer after helping to crush an abortive but bloody leftist coup.

    1965: Leftist military officers try to seize power from President Sukarno. Suharto and other anti-communist officers counterattack. In aftermath of coup attempt, hundreds of thousands of leftists are killed.

    1966: Takes over temporary power.

    1968: Named president. Develops strong government party, restricts opposition and allies country with the West.

    1960s: Starts building the Suharto financial empire with the Salim Group and the Nusamba Group. First big money-making venture is the Bogasari flour mills, which mills wheat from the U.S. Food for Peace program.

    1970s and 1980s: Suharto's six children build their own conglomerates, which now include banks, car manufaturing, airlines, cement factories and palm plantations. Family fortune is estimated at tens of billions of dollars.

    1975: Indonesia invades East Timor as Portuguese rule there collapses; annexes area in 1976. Suharto has ruthlessly suppressed continued Timorese opposition to Indonesian rule.

    1990s: Presides over economic boom, with private foreign investment building up the manufacturing sector. Economic growth rate reaches 8 percent in 1996.


    July: Overextended by foreign borrowing, corruption and an exaggerated building boom, Asian countries hit currency crises. Indonesian rupiah plunges 70 percent between July and January 1998.

    October: International Monetary Fund unveils bailout package for Indonesia worth $43 billion and attaches strict austerity measures, many aimed at Suharto family interests.


    January/February: Protests begin over rising food prices. Students protest peacefully at Jakarta University.

    March: Suharto reelected by his handpicked assembly to a seventh five-year term.

    April/May: Students, particularly in Jakarta, demonstrate, calling for Suharto's ouster.

    But the undeniable progress and the transformation of his capital from a Dutch colonial backwater into a bustling metropolis studded with gleaming high-rises left open the question of what more could have been achieved without the rampant corruption, monopolies, nepotism and crony capitalism that also marked his rule.

    It was those failings that helped push Indonesia to the brink of economic collapse amid an Asian economic crisis and undermined Suharto's authority, ultimately forcing him to resign as president today in the face of widespread protests, civil disorder and rioting.

    And it was another shortcoming -- his failure to groom a viable successor -- that still leaves him vulnerable as he turns over power to his handpicked vice president, B.J. Habibie, a somewhat divisive figure who may be too close to Suharto to assuage the protesters for long.

    For Suharto, who turns 77 next month, the end of a long political run comes barely two months after he began a seventh five-year term. He had hinted years ago that his previous term might be his last, but, like many strongmen before him, he proved unwilling to walk away from power until forced to do so by events beyond his control.

    Born in June 1921 to a poor farming family near the ancient town of Yogyakarta, about 280 miles southeast of Jakarta, Suharto acquired little formal education but used an innate shrewdness and an ability to play rivals off one another to begin his rise to political power.

    When Japan invaded the country and defeated Indonesia's Dutch rulers in World War II, Suharto seized the opportunity to strike a blow against colonialism. He became a battalion commander in the Japanese-organized "self-defense corps."

    He used that foothold to become a career army officer after Indonesia gained independence but seemed destined for obscurity in the middle ranks of the armed forces. It was during that time that Suharto formed working relationships with ethnic Chinese businessmen -- ties that led to fabulous wealth for both Suharto and his coterie of cronies.

    Behind his placid countenance beat a driving ambition, however, and he managed to rise through the army ranks to head the Strategic Reserve Command in Jakarta, a prestigious unit that held the keys to the capital. A staunch anti-communist, he used that command to crush a 1965 coup attempt attributed to Indonesia's pro-Chinese Communist Party.

    The abortive coup, much of which remains shrouded in mystery to this day, prompted a military backlash against the 3 million-member party and resulted in the deaths of up to 1 million people, as soldiers and civilians vented their wrath against Indonesia's ethnic Chinese minority and settled personal scores.

    Once the coup was crushed, Suharto assumed effective power from the father of Indonesian independence, the charismatic President Sukarno, in March 1966. Suharto gradually eased Sukarno out, and formally replaced him as president the following year.

    Firmly entrenched in power, Suharto then launched his "New Order" program aimed at developing the country and putting Sukarno's anti-Western posture behind him. The outwardly pleasant and modest army veteran, known as Indonesia's "smiling general," inherited a country ravaged by poverty and dependence.

    Well into the 1970s, more than 60 percent of the population lived in poverty, per capita income hovered around $70 a year, and the country had the dubious distinction of being the world's largest rice importer.

    Then came the oil boom. Indonesia, an oil producer and member of the Organization of Petroleum Exporting Countries, began to reap windfall profits with the steep rise in oil prices. Money flowed into Suharto's development programs but also into the pockets of his family and friends.

    His administration managed to reduce the poverty rate to 15 percent by 1993 and nearly halved that to 8 percent before the latest economic crisis. Per capita income rose to more than $600 a year and, adjusted to purchasing power, stood at more than $3,000 annually before the crisis hit. Indonesia attained self-sufficiency in rice, its staple food, in 1984, a major milestone for the son of Javan farmers.

    By the mid 1990s, economic growth had averaged more than 6 percent annually for well over two decades, and billions of dollars in foreign investment was pouring in. Suharto was able to diversify the oil-based economy somewhat, and illiteracy, population growth and infant mortality all declined during his tenure, he boasted.

    At the same time, however, ostensibly charitable "foundations" established in Suharto's name -- and exempt from audits and taxes -- were raking in fortunes estimated at up to $3 billion by the early 1990s. In addition, the regime allowed his six children to build a family financial empire worth billions more, largely through monopolies, sweetheart deals and control of an estimated 260 separate companies.

    Along the way, the nation of 200 million people and more than 13,000 islands accumulated a heavy foreign debt, a bloated bureaucracy of 4 million people and massive underemployment estimated recently at more than 40 percent. Revenue from Indonesia's 1.5 million-barrel-a-day oil production continued to fuel development, but endemic corruption made it a high-cost economy.

    Among the major targets of the latest turmoil have been businesses owned by Suharto's children, who used their influence to penetrate practically every sector of the economy, from the production of pungent kretek cigarettes to banking to operation of toll roads.

    While enriching his family and friends, Suharto also managed to hold together politically a diverse archipelago spread across 3,000 miles. He often did this through brute force, crushing those who dared to assert autonomous demands and threaten -- in his view -- the integrity of the nation.

    A decade after taking power, he moved swiftly to head off what he saw as a leftist move to make the Portuguese colony of East Timor independent after Portugal abandoned the territory. Fearing creation of a state that could destabilize surrounding Indonesian provinces, Suharto sent in troops to crush the movement and annexed East Timor. Thousands of people died during the fighting or starved to death in the aftermath of the takeover. Yet the tiny territory continued to be a thorn in Indonesia's side, with separatist sentiment persisting despite more than two decades of Indonesian occupation.

    Today, East Timor represents another question mark for the post-Suharto era. Without his strong rule, will the territory -- and possibly other provinces -- succeed in going their own way? It is a challenge that the Indonesian military, preoccupied now by events in Jakarta, may yet have to face.

    In the capital, the political unraveling of Suharto's presidency seemed to have been foreshadowed in 1996, when Megawati Sukarnoputri, the daughter of Sukarno, began to mount an open and vocal opposition to the long-ruling general.

    Then, last summer, the Indonesian currency, the rupiah, went into free fall, panicking investors and prompting the International Monetary Fund to organize a $40 billion bailout package. Suharto agreed to economic reforms as part of the deal but largely reneged on them. Riots began to erupt in January over rising food prices and gradually intensified despite violent police efforts to put them down.

    In March, Suharto was "reelected" without opposition by the People's Consultative Assembly, a rubber-stamp body largely appointed by the president himself. Student protests broke out, and calls mounted for him to step down. However, Suharto seemed to respond to his critics with a slap in the face by announcing a new cabinet that included his eldest daughter, Siti Hardijanti Hastuti, known as Tutut, and several political and business associates of his family.

    With chaos mounting this month and the capital rocked by rioting and looting that left more than 500 people dead, Suharto's political machine finally fell apart. On Monday, a close Suharto associate, parliamentary speaker Harmoko, publicly called on Suharto to resign. He did so three days later.

    © Copyright 1998 The Washington Post Company

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