Head of state and government: Presidents Suharto and, from May 21, Bacharuddin Jusuf ("B.J.") Habibie

Indonesia’s New Order came to an end in 1998. For 32 years the country’s political system had served President Suharto (see BIOGRAPHIES), but then during 10 days in May it abandoned him. On May 12 security forces opened fire on unarmed students at Jakarta’s Trisakti University. Angered over Suharto’s handling of the Asian economic crisis, student demonstrators had been calling for him to step down. Four students were killed, and dozens of others were injured in the incident. Within 24 hours the killings had sparked massive riots and an anti-ethnic Chinese pogrom that turned Jakarta into a war zone. More than 1,000 persons died in the riots; dozens of women were believed to have been raped; and some 40 malls, 2,400 shops, and 1,100 cars were looted or destroyed. It took days for the military to quell the violence, but it flared up again later in the year.

By May 19 thousands of students occupied the parliament building, and soldiers guarded Jakarta’s city centre. Many of Suharto’s political allies threatened to unseat him, and his Cabinet ministers promised to quit. More important, however, public opposition to his rule had grown so strong that Suharto could no longer count on the military’s support. On the morning of May 21, he announced his resignation in a live television address from Jakarta. The man who had ruled Indonesia for nearly a third of a century ceded power to Bacharuddin Jusuf ("B.J.") Habibie, who had been his protégé for decades but had served as his vice president for only two months. After Suharto’s address General Wiranto, commander of Indonesia’s armed forces, promised that the military would back Habibie as the nation’s new president.

Although protesters called Habibie merely a figurehead and expressed concern that Suharto would remain Indonesia’s de facto leader, Habibie assumed office promising to heed the calls for substantial political reform. He appointed a new Cabinet that included members of Indonesia’s two main opposition parties. He fired Suharto’s eldest daughter as social affairs minister and Suharto’s longtime friend Mohamad ("Bob") Hasan as trade and industry minister. He named a committee to draft less-restrictive political laws, allowed a free press, promised parliamentary elections in June 1999 and presidential elections by the end of the year, and agreed to presidential term limits (two five-year terms). Habibie also granted amnesty to 104 political prisoners, though not to East Timor independence leader José Alexandre ("Xanana") Gusmão. He promised East Timor greater autonomy but refused to discuss independence.

In addition, Habibie ordered an investigation into whether there was, as many suspected, a mastermind behind the May riots in Jakarta. According to the government’s National Commission for Human Rights, witnesses confirmed that many of the attacks on residents and property had been carried out by organized groups of men, though reports that the military or other security forces were involved could not be conclusively confirmed. Habibie also launched an investigation into the source of Suharto’s wealth, which was estimated in the billions of dollars. In early September Suharto appeared on television to deny allegations that he had diverted funds from charities that he headed and that his six children had made vast fortunes during his term. Habibie’s government audited the charities, however, and said that preliminary investigations indicated there may have been some irregularities. The government subsequently canceled contracts that Suharto’s children held with state companies. In December Suharto was suspected of corruption related to a tax-free car import scheme headed by one of his sons. After Habibie oversaw the successful renegotiation of repayment terms for $80 billion in private debt, the International Monetary Fund, which had pledged $43 billion in assistance to Indonesia but had temporarily suspended disbursements at the time of the riots, resumed making incremental payments.

Reforms undertaken by the military included reducing its presence in East Timor. In other provinces where secessionist movements still showed some signs of life, activists were able for the first time to discuss human rights violations openly. The military not only considered the possibility that the Jakarta riots had been organized by someone within its ranks but also conducted an investigation into the kidnappings of at least a dozen political activists between February and May. Several senior officers were questioned; Suharto’s son-in-law, Lieut. Gen. Prabowo Subianto, head of an elite special forces unit, was discharged. Nevertheless, the credibility of the military was tarnished, and its dual political and security roles were challenged. The military relinquished 20 of the 75 seats reserved for it in the legislature.

Although Habibie at first called himself a transitional figure, by year’s end he had indicated that he would run for another term as president. Hopes for democratic change in Indonesia received a boost in July when Golkar, the country’s dominant political party, elected reformer Akbar Tanjung as its new chairman over Edi Sudradjat, a retired army general and a former defense minister who was backed by supporters of Suharto. Akbar, a close Habibie aide, was the president’s personal choice for the party chairmanship, and his victory greatly improved Habibie’s ability to set the political agenda and remain in office at least until the end of 1999. The most prominent opposition parties included the National Mandate Party, headed by fierce Suharto critic Amien Rais; the National Awakening Party, led by Muslim leader Abdurrahman Wahid; and the Indonesian Democratic Party, a faction of which was led by Megawati Sukarnoputri, the daughter of the country’s founding president.

Indonesia’s economic situation remained grim in 1998. At the end of the year, the rupiah was worth just 25% of its value 18 months earlier, and inflation had risen to at least 80%. The economy contracted by 13.6% in the first nine months of the year, and most observers expected that it would ultimately shrink by 15-20% by year’s end. The government expected 22% of the workforce, or 20 million people, to be unemployed by the end of 1998. It was possible that as many as 100 million people--one-half of the country’s population--would fall below the poverty line in 1998. Spurred by the economic troubles, Indonesia’s crime rate rose significantly. General Wiranto acknowledged that much of the unrest stemmed from increasing poverty. There was an expected shortage of 3.1 million tons of rice; food that was available was priced beyond the reach of many Indonesians.

Business also slowed dramatically. After the May riots, many foreign investors and ethnic Chinese--traditional mainstays of the Indonesian economy--fled the country. Both groups were reluctant to return--the foreign investors because of political and economic uncertainties, the Chinese because of safety concerns.