Suharto

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Suharto : biography

8 June 1921 – 27 January 2008

Socio-economic progress and growing corruption

Real socio-economic progress sustained support for Suharto’s regime across three decades. By 1996, Indonesia’s poverty rate has dropped to around 11% compared with 45% in 1970. From 1966 to 1997, Indonesia recorded real GDP growth of 5.03% pa, pushing real GDP per capita upwards from US$ 806 to US$ 4,114. In 1966, manufacturing sector made-up less than 10% of GDP (mostly industries related to oil and agriculture). By 1997, manufacturing had risen to 25% of GDP whereby 53% of exports consisted of manufactured products. The government invested into massive infrastructure development (notably the launching of series of Palapa telecommunication satellites), consequently Indonesian infrastructure in mid-1990s was considered at par with China. Suharto was keen to capitalize on such achievements to justify his regime, and an MPR resolution in 1983 granted him the title of "Father of Development".Rock (2003), p.3

Suharto government’s health-care programs (such as the Puskesmas program) increased life expectancy from 47 years (1966) to 67 years (1997) while cutting infant mortality rate by more than 60%. The government’s Inpres program launched in 1973 resulted in primary school enrollment ratio reaching 90% by 1983 while almost eliminating education gap between boys and girls. Sustained support for agriculture resulted in Indonesia reaching rice self-sufficiency by 1984, an unprecedented achievement which earns Suharto a gold medal from FAO in November 1985.Rock (2003), p.4

In early 1980s, Suharto government responded to fall in oil exports due to the 1980s oil glut by successfully shifting pillar of the economy into export-oriented labour intensive manufacturing, made globally competitive by Indonesia’s low wages and a series of currency devaluations. Industrialization was mostly undertaken by ethnic-Chinese companies which evolved into immense conglomerates dominating the nation’s economy. The largest conglomeracies are the Salim Group led by Liem Sioe Liong (Sudono Salim), Sinar Mas Group led by Oei Ek Tjong (Eka Tjipta Widjaja), Astra Group led by Tjia Han Poen (William Soeryadjaya), Lippo Group led by Lie Mo Tie (Mochtar Riady), Barito Pacific Group led by Pang Djun Phen (Prajogo Pangestu), and Nusamba Group led by Bob Hasan. Suharto decided to support the growth of small number of Chinese-Indonesian conglomerates since they cannot pose political challenge due to their ethnic-minority status, but from his past experience he deemed them to possess the skills and capital needed to create real growth for the country. In exchange for Suharto’s patronage, the conglomerates provided vital financing for his "regime maintenance" activities.http://deepblue.lib.umich.edu/bitstream/2027.42/40018/3/wp632.pdf

In late 1980s, Suharto government decided to de-regulate the banking sector to encourage savings and providing domestic source of financing required for growth. Suharto decreed the "October Package of 1988" (PAKTO 88) which eased requirements for establishing banks and extending credit; resulting in a 50% increase in number of banks from 1989–1991. To promote savings, the government introduced the TABANAS program to the populace. Jakarta Stock Exchange, re-opened in 1977, recorded bull-run due to spree of domestic IPOs and influx of foreign funds after deregulation in 1990. The sudden availability of credit fueled strong economic growth in the early 1990s, but the weak regulatory environment of the financial sector sowed the seeds of the catastrophic crisis in 1997 which eventually destroyed Suharto’s regime.http://www.bi.go.id/NR/rdonlyres/A6011CBA-1B4E-49B1-9DDC-CB01AB6C60D0/19386/SejarahPerbankanPeriode19831997.pdf

The growth of the economy is coincided by rapid expansion in corruption, collusion, and nepotism (Korupsi, Kolusi, dan Nepotisme / KKN). In the early 1980s, Suharto’s children, particularly Siti Hardiyanti Rukmana ("Tutut"), Hutomo Mandala Putra ("Tommy"), and Bambang Trihatmodjo, had grown into greedy adults. Their companies were given lucrative government contracts and protected from market competition by monopolies. Examples include the toll-expressway market which was monopolized by Tutut, national car project monopolized by Bambang and Tommy, and even the cinema market monopolized by 21 Cineplex owned by Suharto’s cousin Sudwikatmono. The family is said to control about 36,000 km² of real estate in Indonesia, including 100,000 m² of prime office space in Jakarta and nearly 40% of the land in East Timor. Additionally, Suharto’s family members received free shares in 1,251 of Indonesia’s most lucrative domestic companies (mostly run by Suharto’s ethnic-Chinese cronies), while foreign-owned companies were encouraged to establish "strategic partnerships" with Suharto family’s companies. Meanwhile, the myriad of yayasans run by Suharto family grew even larger, levying millions of dollars in "donations" from the public and private sectors each year.