Indonesia - a family affair

President Suharto may have stepped down, but he and his cronies still own and run the nation, writes James Putzel

THE PROTESTS and rioting that led to the resignation last week of one of the world's longest-serving dictators, President Suharto, were precipitated by an economic crisis that is far from over.

The Suharto family empire permeates every corner of the economy. Jusuf Habibie who has stepped into Suharto's place is practically a member of the family. Suharto and his six children and other extended family members have interests in everything from automobiles to cloves. Their pervasive influence over the years has meant that anyone who wanted to do business in the country had to deal with the family, including British investors.

After coming to power in one of modern history's most neglected acts of genocide (anywhere between 600,000 and a million people were killed between 1965 and 1967 as Suharto established his New Order), the regime was led by the need for legitimacy at home and abroad to devote considerable energy to national economic development.

Bolstered by export revenues from oil and timber, the government invested heavily in infrastructure and basic services and presided over long periods of growth, bringing about a considerable reduction in poverty in the world's fourth most populous country. But even from the early days the President's late wife, Tien Suharto (known as "Madam Tien Per Cent"), looked after the family's long-term business interests. The military, which catapulted General Suharto to power and remained the pillar of his regime, also became enmeshed in state corporations like the oil monopoly Pertamina and the food monopoly Bulog.

While the New Order regime imitated aspects of the "developmental states" of North-east Asia (South Korea and Taiwan), Suharto built what was essentially a patrimonial regime, where political and economic power in state and society emanated from his personal authority. He was closely allied with a few wealthy Chinese families, whose fortunes rapidly expanded in the Suharto years. Most prominent among them was Liem Sioe Liong, whose Salim Group, which owns First

Pacific Holdings in Hong Kong, is now one of the biggest conglomerates in Asia. Suharto first met Liem in the 1950s.

After seizing power in the 1960s Suharto granted Liem lucrative monopolies in flour and clove imports. When First Pacific was set up in 1986 Suharto's cousin, Sudwikatmono, represented the family's interests. Liem has teamed up with other family members: he is co-owner of the country's largest private bank, the Central Asia Bank, with Suharto's eldest daughter, Siti Hardiyanti "Tutut" Rukmana, and eldest son, Sigit Harjojudanto.

As a result of the pattern of colonial rule in Indonesia, businesses not owned by colonial interests were largely Chinese-owned. The Suhartos and the military were keen to keep the Chinese business community at the mercy of the political authorities. Some 60 per cent of business is still owned by Sino-Indonesians, though few enjoy wealth on the scale of Suharto's cronies. By keeping alive anti-Chinese animosity, the Suharto regime has been able both to prey on Chinese businesses and use them as scapegoats in times of economic difficulty.

In a cheap imitation of Malaysia's New Economic Policy, which sought to redress the balance between the wealthy Chinese minority and Malays, Suharto launched a programme to "empower" the primbumi, or indigenous people, by favouring their acquisition of assets.

For Suharto the favoured primbumi were mainly his children and friends. By teaming up with tycoons such as Liem and the timber king, Bob Hasan, the Suharto children amassed wealth to establish their own businesses. His youngest son, Hutomo Mandala (Tomy) Putra, controls the sixth-largest conglomerate, the Bimantara Group, which is in everything from cloves to airlines, chemicals, media, infrastructure, telecoms and hotels.

Bambang Trihatmojo, Suharto's second son, controls the Citra Lamtoro Gung Group, the 11th-largest conglomerate. Siti Hutami Endang Andyiningsih, the third daughter, has businesses in retailing, infrastructure and stock brokerage and is partnered with National Power and the Bakrie Group conglomerate.

Foreigners doing business in Indonesia have sought partnerships with Suharto family companies. In November 1996 the UK trade minister, Lord Fraser of Carmyllie, answering a question in the House of Lords about British investment in Indonesia, proudly answered that "the total UK direct investment in Indonesia between 1967 and March [1996] was $21.33bn spread across 181 projects" making it "the second-largest foreign investor after Japan".

The region's financial crisis has affected Indonesia most profoundly, precisely because of the deep-rooted system of "patrimonial capitalism". For many years foreign companies have collaborated with the Suharto empire, just as foreign governments tolerated the country's human rights violations and occupation of East Timor. This has made reform and democratisation particularly difficult.

The new president is intimately involved in the family network and unlikely to win the confidence of reformers. In fact, not so long ago, Suharto mused about standing aside and playing the role of an elder statesmen. It would seem that a Habibie presidency was part of that scenario. Further reform will require the collaboration of the military and their endorsement of a cabinet that would include major opposition figures. But for that to happen there will have to be a shift of power in the military. One of its top commanders, General Prabowo, is married to Suharto's second daughter Titiek. The family is still very much in power.

q James Putzel is senior lecturer in Development Studies at the London School of Economics.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
A picture taken on February 11, 2014 at people walking at sunrise on the Trocadero Esplanade, also known as the Parvis des droits de l'homme (Parvis of Human Rights), in front of the Eiffel Tower in Paris.
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
News
Scientists believe Mercury is coated in billions of years’ worth of carbon dust, after being ‘dumped on’ by passing comets
science
News
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
News
people
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
music
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Accounts Assistant

£30,000 Annual: Sheridan Maine: A fantastic opportunity has arisen for a perso...

Richard Bishop: Accounts Payable Clerk

£11 - £13 Hourly Rate: Richard Bishop: Are you looking for a purchase ledger r...

Jemma Gent: Management Accountant

£250-£300 Day Rate: Jemma Gent: Are you qualified accountant with previous exp...

Richard Bishop: Accounts Payable Clerk

£11 - £13 Hourly Rate: Richard Bishop: Are you looking for a purchase ledger r...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor