Indonesia: Towards Transition

Abstract

The economic crisis which swept through East Asia in the second half of 1997 was a sobering reminder that markets have little respect for national politics or national borders. In Indonesia the crisis in large measure reflected the fundamental shortcomings of a political system that has failed to keep abreast of economic and social developments. Likewise with the forest fires that sent palls of smoke billowing over much of Indonesia and its immediate neigh bours. The fires were partly due to the El Nino cycle but they also demon strated lax enforcement of environmental management laws. Both events fol lowed the general elections of May 1997 which gave the government an over whelming vote and defused opposition to President Soeharto's re-election for another five-year term in March 1998. Quick to recognize the possible implications of an economic downturn for his re-election, Soeharto has once again shown his innate survival instincts by accepting assistance from the International Monetary Fund (IMF) and the mild reform package associated with it, but it is doubtful that he will, or can, implement the fundamental changes required to harmonize the regime with the social and economic changes of the last thirty years. Nevertheless, his residual political authority will probably see him re-elected. It might also see him select a vice-president with the credentials to assume the leadership mid term or at the will of fate.