Suharto sticks to his cronies as Indonesia crisis deepens

UNTIL about eight months ago, news of a reshuffle in the Indonesian cabinet would have ranked as an item of topical interest somewhere below a snowstorm in Greenland. For 32 years, Indonesia has been a country without politics as far as the outside world is concerned, dominated by the personality and power of one man, the president and former general Suharto.

As a stalwart anti-communist during the height of the Cold War, Mr Suharto was the object of quiet gratitude among Western governments; as the man behind the brutal invasion and oppressive occupation of East Timor, he was more of an embarrassment. In his stewardship of Indonesia's remarkable economic growth, he was admired and respected. But the question of who advised him rarely arose; it is a measure of how far Mr Suharto has fallen that the announcement of his cabinet yesterday was being anxiously watched in capital cities all over the world.

In making his choices, Suharto has fallen still further - his cabinet confirms the worst suspicions about the president's weakness for cronies and yes-men. His golf and fishing partner, the millionaire timber tycoon Bob Hasan, is in charge of trade and industry. The new social affairs minister happens to be his daughter, Tutut. Appointees to the other portfolios are noted more for their uncritical loyalty to the president than their talent as innovators and economic managers. Once, this would have mattered very little outside Indonesia; suddenly it does, as the international financial markets will no doubt remind the president tomorrow, when the Indonesian rupiah can be expected to begin another turbulent week.

"We are going through an era filled with changes," as the president himself noticed last week. "In fact, some of them are quite often faster than we thought, while others are even beyond our imagination." It is a measure of how bad things are in Indonesia that even Suharto, not a man noted for frank self-analysis, should publicly acknowledge the about-turn which his country has undergone. He has every reason to feel lost and baffled, for Indonesia's collapse represents more than just the failure of one country, or even one leader. It is looking more and more like the failure of an entire philosophy - the doctrine, fuzzy in its details but clear in its outlines, known as "Asian values".

During his 32 years as president, Indonesia has been one of the most striking and successful arguments for Asian values - the view that Western- style democracy can be the enemy of economic development.

Singaporeans and Malaysians may be richer individually, but no south- east Asian country has overcome such huge challenges as Indonesia, a nation of 200 million people scattered across 13,000 islands. Under Sukarno, its mercurial founding president, there were periods of freedom and tolerance, but they ended in the mid-1960s in chaos and bloodshed. Under Mr Suharto, Indonesians lost their political rights, but gained previously unknown prosperity. In 1965 half the population lived in poverty, and barely one third could read and write. Now literacy is universal; until last year, poverty had been reduced by nearly 80 per cent. Though poor by Western standards, most Indonesians are richer and happier than before Mr Suharto's ascent to power. "Until the last six months," says Ben Fisher of the World Bank's Jakarta office, "there were few better decision makers in the world."

To the proponents of Asian values, Mr Suharto's authoritarianism and economic success were directly linked. His long-serving state secretary, the former General Murdiono, asked: "Shall we go the way of Pakistan, India and the Philippines, the so-called democracies in the region? No, because multi-party democracy will not solve the real problems that we face like creating jobs or building schools. So is it for the sake of democracy that we will ruin this country?" But Indonesia has been ruined anyway, and in a manner which undermines the Asian values argument.. The crisis has shaken the whole region, but three governments have suffered more than the rest and been forced to turn for help to the International Monetary Fund. Two of them are democracies, one is a dictatorship. Two have recently voted out discredited governments and elected new leaders; one has known no other leader for 32 years. The former are Thailand and South Korea which, after a painful start, have accepted the IMF's recommendations, and seem to be beginning their slow recovery. The latter is Indonesia, which sinks further every day into economic, social and political crisis. As the IMF's Asia Pacific director, Hubert Neiss, said, "Thailand has turned the corner, along with Korea ... [Indonesia] is still in the intensive care unit. We have to wait until the political situation gets clearer to predict a full recovery."

Authoritarianism, which once looked like Indonesia's economic strength, is now its greatest weakness. The problem is one of market confidence: foreign banks, having lost faith in the government's handling of the currency crisis, are reluctant to lend to Indonesian companies. Having failed, repeatedly, to implement the economic reforms required by the IMF and with no institutions or individuals strong enough to steer him in a different direction, Suharto has become the problem rather than the solution. "We can learn from the South Koreans," says Mohtar Masud, a professor of sociology at Gaja Mada University in the city of Yogyakarta. "When they began to adapt to the crisis, they changed their president. They have the mechanism to carry out that change, but in Indonesia we don't have that."

"Democracy and the market economy are two sides of a coin or two wheels of a cart: if they were separated we could never succeed," said Kim Dae Jung, the lifelong dissident and democracy campaigner on his inauguration last month as South Korean president.

"Every nation that has embraced both democracy and a market economy has been successful. Nations ... that have rejected democracy and accepted only a market economy have ended up suffering disastrous setbacks."

TOUGH TALKS: anxious to increase its role in containing Asia's financial turmoil, the European Union is intensifying pressure on Indonesia to bow to the requests of the IMF - or else risk re-igniting the crisis across the entire region, writes Rupert Cornwell.

Key to the new strategy is next month's Europe/Asia summit in London, only the second of its kind, which will be attended by leaders of all countries embroiled in the crisis. Tony Blair will chair the meeting. With some Asian countries already voicing unhappiness at the lack of input and help from Europe, the last thing the British hosts want is for proceedings to degenerate into name-calling fuelled by fresh financial chaos across the region.

But this is exactly what the Government fears, unless the markets are sent a strong and reassuring signal by President Suharto in Jakarta. Hence the unexpectedly trenchant line of the EU foreign ministers, gathered this weekend for informal talks in Edinburgh.

Like it or not, Indonesia had to accept that the IMF was "the only show in town", said Derek Fatchett, the minister of state at the Foreign Office and recent bearer of a personal letter from Mr Blair, representing the EU presidency, to the Indonesian leader.