Indonesia: An Effort to Hold Together

The islands' "guided democracy" is divided by geography, ethnic differences, and religion

The stated goal of the government's every action is, of course, development—the creation of new wealth for Indonesia's people. Its fields of oil and natural gas give Indonesia a big head start over many other developing countries; the question is whether this advantage will merely buy momentary affluence or will become the basis of sustained prosperity.

In the fifteen years since the nation said good-bye to Sukarno, Indonesia has made substantial economic progress. The local currency, the rupiah, was dwindling away to nothing in the middle sixties, a natural consequence of an inflation rate that reached 640 percent in 1966. By 1981, according to the government, the inflation rate had fallen to 6 percent. The output of the Indonesian economy grew by 10 percent, after inflation, in 1980 and has now "slipped" to between 6 and 7 percent a year, a level that would be classified as a boom in the United States.

Indonesia keeps discovering new oil fields—at the rate of several dozen a year—and a major part of the archipelago is yet to be explored. In Sumatra, it is developing some of the largest natural gas fields in the world. Vast coal deposits have been found in Kalimantan and elsewhere. Indonesia has also launched a campaign to promote its non-oil exports, including tin and rubber, local handicrafts, and such products of light industries as those that have brought wealth to Singapore and Malaysia.

In all of its development efforts, from the search for oil to the clear-cutting of jungle, Indonesia has welcomed the participation of major private firms—initially from the U.S. and Western Europe and now increasingly from Japan. It works hard, and with considerable success, to present itself to Western investors as a growth market for the future. But it is hardly a laboratory for free enterprise, since the economy is "private" without being "free."

In reaction to Sukarno's loose approach to public finance, which involved erecting monuments and enacting benefits and then printing rupiahs to pay the bills, the New Order turned to a by-the-book managerial system. It has invested faith—or at least power—in a cadre of economic technocrats, many of them educated at Berkeley or elsewhere in the United States, who methodically apply the theories of import substitution and export development that they learned in graduate schools. Their specialty is the long-range, overall economic plan, known as the Repelita. The technocrats are also fond of adjusting the market through protectionist regulations.

Under the technocrats' guidance, Indonesia, by 1973, first taxed, and then altogether prohibited, the import of fully assembled cars; the idea was to force foreign manufacturers to build their assembly plants in Indonesia. (Many Japanese manufacturers went ahead and did so. American manufacturers, considering the market too small to bother with, did not.) Similarly, in the late seventies, the government issued a schedule under which the export of raw timber would be restricted and ultimately forbidden. If the Japanese, who were the main customers, wanted wood from the forests of Kalimantan, they would have to build sawmills in Indonesia and then export finished lumber. But a man who was visiting Kalimantan at the time told me that the rivers were choked with logs, newly illegal as exports, that were left to rot in the water.

Among the regulations imposed on Indonesia's economy, a large number concern "weak economic groups," often referred to as pribumi. Pribumi literally means the indigenous population; the category exists to distinguish them from Indonesians of Chinese ancestry. The Chinese—as even those whose families have been in Indonesia for four or five generations are called—make up about 3 percent of the population but almost totally dominate the private, "free" business activity in the country.

The economic success of the Chinese is yet another source of cleavage in Indonesian society, much as the Asian traders' dominance of commerce has been throughout East Africa. Because ethnic Chinese make up such a tiny fraction of Indonesia's population, their position is more precarious than that of their counterparts in Malaysia or Singapore. Government spokesmen solemnly proclaim, "We are all Indonesians," but daily life provides frequent counter-examples. In central Java, for instance, a university student conducting a tour of the mammoth Buddhist temple of Borobudur took time to explain to me the economics of the becak business. A becak (pronounced "bay check") is a bicycle-powered cart that serves as a taxi for the local population; to say that a man has become a becak driver is a shorthand indication that he has drifted to the big city from his village and has joined the army of the underemployed. The drivers, who seem to outnumber their potential customers, earn perhaps 200 rupiahs (thirty cents) when they can get a fare. And yet, the university student said, "they must pay 1,000 rupiahs rent for the becak to the Chinese man each day." He meant the story to illustrate the rapacity of the Chinese.

Anti-Chinese riots (and a few against the Japanese, who were brutal and unpopular occupiers of the country during World War II) break out from time to time. Suspicion of the Chinese infects Indonesia's international policies; this fearsomely anti-Communist country is less concerned about the Soviet Union's military menace than about China's. A frequent complaint regarding American foreign policy, usually expressed in tones of bewildered lament, is that the U.S. has been so swept away by its anti-Soviet fervor that it is walking naively into China's embrace. China is at least as great a danger as Russia, Indonesians say, and it is located nearby.

When Indonesians discuss the economic success of the Chinese, which they do neither eagerly nor often, they explain it as an aftereffect of three centuries as a colony of Holland. The Dutch relied on the Chinese as their clerks, middlemen, merchants, and junior administrators; meanwhile, the pribumi were the slaves on their plantations, growing their rubber and tea. "It was not like being a British colony," a man who had family connections among both the colonizers and the colonized told me. "There were universities in India in the 1800s. The Spanish built a university in Mexico in the 1500s. The Dutch built hardly any universities. They made it very difficult for us to go to high school. They did not train us for their civil service. We started from scratch at independence. Do you wonder that many people still feel a sense of inadequacy and inferiority toward Europeans and Chinese?" Others said that many Chinese sided with the Dutch during the struggle for independence, and now were reaping their just reward.

Whatever the origins of the difference, the result is that the Chinese as a group possess more of the tools for economic activity than do the pribumi. The Chinese, with limited opportunities in the government, apply their education mainly to business. But for other Indonesians, the focus of individual ambition often seems to be bureaucratic: the brightest of the young hope after their education to be clerks—or, more grandly, technocrats and officials—rather than entrepreneurs. When fortunes are found among the pribumi, they tend to be those of the political businessmen, the generals and government favorites who have converted their influence into sweetheart deals. The legislation favoring pribumi enterprises is a different version of the same thing. The ambitious young rightly deduce from these signals that they should aspire to connections and appointments rather than to innovations and the creation of new wealth.

"We need someone to wake us up, and first we must get rid of the silly idea of wanting to be government clerks," Pramoedya Ananta Toer, the novelist, wrote in The Atlantic in 1956. Several Indonesians told me that his warning was still appropriate; whether it would eventually be heeded, they were reluctant to guess.

More than that, they were reluctant to be discouraged by any such small-minded analysis of the hazards they might face. Their national experience was of things working out: they had escaped the Dutch, and the Communists; and the oil and gas fields they kept discovering had let them escape the fate of other developing countries. One man said, in a tone once common among Americans, "We have a saying: 'God smiles on Indonesia.'"

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James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

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