Nov 17, 2018 Last Updated 12:17 PM, Nov 15, 2018

The Twin Towers Effect


Revrisond Baswir

The transition to democracy in Indonesia isn't just a struggle between political factions within Indonesia. We must also consider the relationship with international capital. The New Order of Suharto was the child of capitalism. From CIA documents, we now know of the US involvement in bringing about Sukarno's downfall. The New Order under Suharto went on to establish strong links with international capital. The first laws the New Order enacted in 1967 were about Foreign Direct Investment (PMA). For 32 years the New Order's economic strategy was pro-mainstream, pro-growth or neo-liberal. We should not be surprised that the New Order survived so long. Despite its authoritarianism and corruption, it continued to enjoy the support of international capital - as long as Aceh still had gas to be exploited, as long Riau's oil fields were making a profit, and likewise in Papua.

The presence of the military is also important to international capital. Can you imagine what would happen if Exxon in Aceh had to close, or Caltex was overrun by the people of Riau? And today, who is busier than the representatives of international capital in lobbying the US government to reestablish links with our military?

So whether they were aware of it or not, the pro-democracy movement in Indonesia for thirty years not only had to oppose Suharto, the military and Golkar, but also the challenge of international capital. The question that arises is: with such strong backing, how could Suharto be deposed? Strangely enough, in the last few years before Suharto's downfall a co-existence developed between the pro-democracy movement and international capital. Since the early 'nineties the actions of Suharto and his cronies were proving increasingly problematic for international capital. Foreign investors had to include members of Suharto's family, pay commissions and involve the military. Suharto was becoming 'too expensive'. So they began to support the democracy movement. USAID, for example, began to pay for voter education.

In my opinion, the transition to democracy in Indonesia raises some very serious questions, which we must face honestly. We have to ask ourselves whether the movement that deposed Suharto on 21 May 1998 only got support from, or was it in fact manipulated by international capital? Personally I fear that it was manipulated.

No protest

I have spent a lot of time thinking about the fact that following the fall of Suharto there has been no protest against international capital. Our friends in the pro-democracy movement demand the disbandment of the New Order political party Golkar, which is excellent. Many non-government organisations (NGOs) have been formed to support 'good governance', and they protest the actions of local parliament, local government, and the district heads. But none of them demand the disbandment of the Consultative Group on Indonesia (CGI, a group of governments that make loans to Indonesia), nor the International Monetary Fund (IMF), nor the World Bank and the transnational corporations. This is a very interesting phenomenon. The pro-democracy movement is exploited by, or rather working to the agenda of international capital. The direction of democratic reform in Indonesia is in the hands of global capital. And that is a great tragedy. We have always known this happens within the state and the market, but it clearly happens also within the grassroots movement of national and local NGOs.

This is very clear at the national level, in parliament. For thirty years throughout Suharto's reign the national parliament never dared to make any changes to the government's National Policy Guidelines (GBHN). Yet now when the IMF demands change they simply comply. They can't stand up to the IMF. The same goes for the government, which is very dependent on international investment capital. But the same can also be said of the grassroots movements. For example among the pro-democracy groups in Jakarta, and in oil-rich Aceh and Riau, no one questions the demands of international capital.

A few days before President Abdurrahman Wahid was ousted (on 23 July 2001) I was invited by the British Ambassador to attend the launching of an agreement between the British and the Indonesian Defence Departments. So this was already being prepared while Gus Dur (Wahid) was still president. The Americans and Australians have also restored their support to the military - after it was cut following the destruction of East Timor in 1999. The actions of the IMF, furthermore, played a big role in the removal of Gus Dur. For nine months the IMF refused to release the next US$ 400 million instalment in its huge rescue package, citing Jakarta's refusal to implement reforms. This eventually caused a crisis as the rupiah continued to fall against the dollar. In my opinion parliament only put the 'finishing touches' to the removal of Gus Dur. The ball had been placed in front of the goal by global capital interests. When Megawati took over as president, the money started flowing again. This resulted in a dramatic improvement in the value of the rupiah, which went from 11,300 to about 9,000 to the US dollar in a short time.

It's very clear how international capital behaves. The question for us is, in which direction should we steer the transition to democracy? Is it enough simply to confront the New Order elements still in power, in the military and the government? This is the most important question for the democracy movement. What is our attitude to international capital? In my opinion this question must be answered, and answered very explicitly. If it is not, I fear the democracy movement will continue to be exploited by international capital.

Twin Towers

The problem with being dependent on the international economy has become clearer after the attack on the Twin Towers in New York. The attack has caused a worsening of the international economy in recent days, and this also affects our economy. Furthermore, if America continues to retaliate against Afghanistan there will no doubt be a negative reaction in Indonesia, whether or not it is true that Osama bin Laden was responsible for the Twin Towers attack. If America goes on to strike also against Iraq, Libya, Pakistan, or Egypt, then there will really be problems in Indonesia.

So what am I afraid of? I am afraid that the challenge to international capital in Indonesia will not come from the pro-democracy groups but from other groups. Even before the attack on the Twin Towers, groups were already mobilising in Indonesia to oppose America over its policy towards Palestine and Israel. If America attacks Kabul, Iraq, Libya, Pakistan or Egypt, I am sure there will be opposition to it in Indonesia. Stability will be disrupted, and don't hope that foreign investors will then come back. Before the Twin Towers tragedy there was already a travel warning for American tourists not to come to Indonesia. The threats that are sure to follow further retaliatory strikes will be directed not only at America, but also the British, the IMF, World Bank etc. Our economy will continue to be squeezed by what I call the 'Twin Towers Effect'. Our international markets will be weak, the internal situation will be unstable, and investors will not want to come to Indonesia.

Let's return to my question for the pro-democracy groups. What position will they adopt in this situation? It is a big question. Are we going to take part in large anti-America, anti-capitalist demonstrations? We have to be clear what we want. For me the transition to democracy is impossible without taking a position towards international capital. We must have an answer, or we will continue to be confused and oscillating.

Briefly, I want to suggest a solution. It's a very simple one. As long as our economy remains dependent on international capital it will remain weak. We have to turn around our dependence on global capital as the basis of our economy. Instead of 'waiting for Godot' we need to pay serious attention to our domestic market. The buying power of the people is the springboard of our economy. The revival of Indonesia can't be handed over to the global market, to international investors who may or may not come to our shores. This solution is clearly a dilemma for the current government and cabinet, who are the foot slaves of the IMF and World Bank. So the question remains: is the democracy movement ready or not to challenge not only the forces within Indonesia - the New Order, Golkar, the military, and the present government - but also the might of international capital?

Revrisond Baswir (revrisond@ygy.centrin.net.id) teaches accountancy at Gadjah Mada University, Yogyakarta. Condensed from a presentation at UGM on 18 September 2001.

Inside Indonesia 69: Jan - Mar 2002

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