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  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.Reuse content