IGCSE History

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Suharto and Indonesia

After taking power in 1967, Suharto acted quickly to try to restore order. Many officials of the old regime were sacked and economic policies were reformed. He gave his policy the name ‘New Order’ to distinguish it from Sukarno’s Guided Democracy’. At first, Sukarno seemed to offer real hope of a new beginning for Indonesia. Corruption in the government, civil service and army was attacked. Sukarno had repudiated many foreign debts and had seized foreign-owned property. Suharto renegotiated the debts and restored the property. In fact, he wanted to go much further. He was rejecting the anti-Western policy of Sukarno and instead looking to the West for support. The change of policy was reinforced when Suharto made a state visit to the USA in May 1970. In 1971 the first general election was held since 1955 and was won by the government party Sek Ber Golkar.

Suharto had two major advantages when he came to power. One was the support of the army; the other was Indonesia’s increasing income from oil. When oil prices rose by 400% in 1973, Indonesia suddenly became a reasonably prosperous country. At the same time, rice production also increased and this resulted in improved health and standard of living for the Indonesian people. Suharto proceeded to build on these improvements by encouraging industry. Indonesia became a producer of cheap goods for the Western market.

Unfortunately, much of the wealth that began to flow into Indonesia did not reach the people who did the work. Government contracts increasingly went to influential Chinese businessmen and were often controlled by senior figure in the army and the administration. Import licences were created to try to reduce dependence on foreign goods but this soon became little more than a way of creating monopolies for individuals. By 1986, there were more than 1,500 licences in operation. The result was that prices for foreign goods remained high and the profits often found their way into the pockets of the favoured few.

The worst aspect of the corruption that riddled Indonesia was the creation of private empires such as that controlled by General Ibnu Sutowo. He controlled an oil company and began an ambitious investment programme that included purchase of oil tankers and construction of P.T. Krakatau, a steel complex. In the mid-1970s, however, it was discovered that he had brought the firm to the brink of bankruptcy and accrued a debt totalling US$10 billion.

Suharto’s own family was also involved in the corruption. His children were awarded many import licences and he managed to send many millions of dollars out of Indonesia. The main result was increasing frustration with the government of what was to all intents and purposes a one-party state. Major opposition began in 1980 and continued through out the 1980s and 1990s. It was made worse by a fall in oil prices that threatened what economic stability Indonesia enjoyed. Suharto increasingly relied on the army to retain power and protestors were often shot at demonstrations. He was finally overthrown in 1998 and fled into exile.

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