Indonesia: Recent Developments

# May 1998: Violent demonstrations by students lead to the resignation of President Suharto; 1,200 people are killed and many more injured.

# November 1998: Indonesian troops fire on student protesters during a special meeting of the National Assembly. Fifteen people are killed and hundreds wounded.

# December 1998: Ethnic violence erupts between Muslims and Chinese; 14 are killed and 22 Christian churches and schools torched. Villagers force soldiers from a bus and hack 7 to death with machetes. Media reports mass graves found in the province of Aceh, the apparent result of a military campaign to suppress supporters of an independent Islamic state.

# January 1999: Daily protests, riots, ethnic clashes, confrontations with the military and food shortages plague Indonesia as the New Year begins.

The violent ethnic clashes in Indonesia suggest that similar political and civil unrest may occur in Malaysia, in light of the recent political instability there.

Is Malaysia a hotbed of ethnic turmoil waiting to be ignited? Although a change in the Malaysian political system appears imminent, the threat of widespread violence and ethnic troubles appears less likely because: 1) the Malaysian military is not a political instrument and has no role in governing; 2) Malaysia has better democratic foundations and stability; 3) a history of ethnic peace; 4) a higher standard of living.

Background

The two neighbors share a similar pattern of development and a common heritage. Both countries were ruled by European colonial powers until their independence and are characterized by a heavy Muslim influence in their social structures. The two countries have been ruled by autocratic leaders who came into power promoting change.

In Indonesia, General Suharto led a military ouster of then President Sukarno in 1968. In Malaysia, Prime Minister Mahathir returned from political exile in the late 1960s, rallied support for his ideas calling for changes in the government, and eventually became Prime Minister. During this period, Mahathir played a role in developing the New Economic Policy plan, a preference system that favors indigenous Malays (Bumputras) for educational opportunities and high-level government jobs and ensures that power will remain in the hands of Bumiputras as opposed to the ethnic Chinese or Indians.

Both President Suharto and Prime Minister Mahathir oversaw rapid economic expansion driven by exports, direct foreign investment, as well as heavy government involvement in the daily operations of the economy. Their Asian miracle resulted from the close association between the government and the financial and business sectors. It is also known as crony capitalism, as family members and politically well connected associates benefitted immensely. Suharto became one of the wealthiest men in the world, and his children are each worth at least several hundred million dollars. Mahathir and his family have also profited greatly over the years.

Troubled Waters

The Asian flu that started in the Summer of 1997 revealed structural weaknesses in the financial sector of each nation, creating political and economic instability. For Suharto, the crisis led to a bloody end to his 32-year reign, and now threatens to plunge Indonesia into chaos.

In Malaysia, a series of street protests erupted in response to the firing and subsequent arrest of Deputy Prime Minister Anwar Ibrahim on corruption and sexual misconduct charges. Many Malaysians saw the charges as fabricated and politically motivated. These protests, the first major incidents since the race riots of 1968, upset many people and are unprecedented in a country that values stability. In addition, ethnic Chinese and Indians were angry at the capital controls (instituted by Mahathir) that effectively choked off all foreign investment in Malaysia. These groups believe Mahathirs economic policies are just cosmetic measures to restructure the corporate and financial sectors, and blame him for the current crisis that has destroyed decades of high growth.

Mahathirs popularity continues to decline in the wake of the economic recession and revelations of police corruption and brutality at Anwars trial, which has destroyed Malaysians confidence in the judicial system.

Mahathir will attempt to win re-election during the next national election (which is to be held within the next 15 months), however, the reform movement and opposition parties appear poised to mount serious challenges to his leadership.

Many flashpoints exist that could plunge Malaysia into riots and ethnic violence, including the outcome of Anwars trial, continued discontent with Mahathir, and rising tensions between Indians and Chinese against ethnic Malays over the preference system. However, there are several key differences between Malaysia and Indonesia which appear to lessen the chances for widespread civil unrest.

Key Differences

1. Military: Indonesia under Suharto was basically a military dictatorship operating under the poorly disguised veil of a democracy. Suharto seized the presidency from a democratically elected Sukarno with the backing of the military. The Indonesian military occupied a large role in the 1,000- member People's Consultive Assembly (MPR), which elects the president and helps establish policy.

Suharto used the military to solidify his power and control dissidents. Today, Suharto's legacy of corruption and ethnic manipulation have left the presidency and the military in ruins and the country on the verge of violent collapse. The militarys reputation is under attack for its involvement in the disappearances and deaths of political opponents and students.

In Malaysia, the military is neutral and not a political instrument used to create fear among people. The military has no role in forming or implementing policy, and they did not intervene during the recent street demonstrations.

2. Democratic Institutions: Opposition political parties existed under Suharto's reign, but in reality had very little power. People did not vote for a president, but instead elected the House of People's Representatives (DPR), a 500-member body that comprises one-half of MPR. The other 500 members of MPR were politically appointed by the president or allocated to parties based on their membership in DPR. This structure didn't allow for challenges to Suharto; and under this system Suharto was unanimously elected president six times out of six.

Indonesia faces the prospect of having to build democratic institutions from scratch. More than 100 political parties have registered to compete in the general elections scheduled for June 1999, the first free elections since Suharto took power. Unfortunately, this many groups vying for political control, coupled with already high ethnic tensions, is a recipe for violence.

While Malaysia is not considered a bastion of democracy, its institutions are at least grounded in the democratic process. Mahathir and his ruling UMNO party were elected by the people in freely contested elections. Although UMNO dominates Malaysian politics, opposition groups are prevalent and have occasionally presented a serious challenge to Mahathir's rule. The political process in Malaysia is relatively free and open.

3. No Ethnic Violence: In Indonesia, tensions between poor Muslims, who resent the success of ethnic Chinese, ignited last year and led to numerous violent clashes between the two groups. Adding to the volatile mix are several secessionist movements that appear to be gaining strength. Problems such as unrest in East Timor date back decades, and new movements such as in the province of Aceh have developed.

In Malaysia, Mahathir preaches racial harmony, cooperation and stability as keys for long term economic growth and prosperity. He has used the Indonesian crisis to stir fears among Chinese about ethnic violence to gain their political support. The recent protests showed no signs of ethnic overtures, although many Indians and Chinese remain unhappy with the Bumiputra preference system.

4. Higher Living Standards: Indonesia teeters on the brink of chaos despite two decades of impressive growth. Government corruption, a failing economy, widespread poverty and food shortages have contributed to violence and ethnic tensions.

The Asian crisis pushed Malaysia into a recession in 1998. However, Malaysia has a standard of living and a per capita GDP that is three times higher than in Indonesia. For now, Malaysians are content to work together to solve social problems.

Conclusion

The widespread violence in Indonesia resulted from years of pent-up frustrations with Suharto and rising ethnic tensions, exacerbated by the economic crisis. In Malaysia, Mahathir struggles to hold onto power in the face of discontent with his handling of the economy and firing of the popular Anwar. Chinese and Indian unhappiness with the Bumiputra preference system continues to rise. The volatile situation in Malaysia has many potential flash points that could ignite civil unrest and should be closely monitored by companies with business dealings in the country.

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