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The New Order and capitalism

[This is chapter 5 of the PRD analysis of Indonesian society and the strategy for political transformation adopted at the 1996 PRD congress.]

In the interests of capital

The consolidation of capitalism in Indonesia cannot be separated from the scenarios written by the institutions of international capitalism, such as the International Monetary Fund and the World Bank. A capitalism with weak productive forces and a lack of fresh capital for modernisation has meant the New Order's rulers have been totally dependent on international capital from Japan, the USA, Germany, the United Kingdom, Hong Kong, Taiwan and others. In this respect, it is increasingly clear that the New Order state under the leadership of General Suharto is an instrument used IN THE INTERESTS OF CAPITAL. This means that every power shift within the circle of Suharto and his allies will be connected to the struggle for access to economic assets, especially among the Suharto oligarchy and international capital. It is even possible that major cracks can emerge because of dissatisfaction with the oligarchy and the extent to which economic concessions are concentrated in the hands of the political power centre, and the extent to which specific foreign powers' economic hegemony is established, such as with that of Japan, Europe or America.

During the early period of the consolidation of his power (1967- 73), Suharto managed to make use of foreign loans and investment. The oil boom soon after (1975) meant that the New Order was able to produce "orang kaya baru" (OKB - the new rich) and thus the emergence of local capitalists. The licences that Suharto gave to his friends and allies has allowed them to monopolise export and import activity. This practice fostered the growth of business groups, firstly, that are close to the Armed Forces, and, secondly, the personal cronies of Suharto. The first group included military who are members of the boards of directors of private as well as state owned companies. This was fostered by concessions, in forest timber, for example, being given to foundations connected to the Armed Forces. These two groups were the basis for the formation of factions inside the Indonesian bourgeoisie.

But the drop in oil prices in the mid-1980s has affected the process of crystallisation of factions inside the Indonesian bourgeoisie. The national income, which was dependent for 70% of its revenues on oil, suffered a severe blow when the price of oil on the international market fell. This made Indonesia even more dependent on foreign loans to finance its capitalist development. By 1995, Indonesia's foreign debt had reached US$100 billion with the loans being taken out with many different international finance institutions and banks, on both concessional and commercial interest rates. This increase in debt was also caused by the government being forced to shift its exports from oil and gas to other sectors. The race to expand non oil and gas exports required liberalisation of the economy and greater efficiency in accumulating capital to finance manufacture of new exports. The faction of bourgeois who had enjoyed the benefits and ease of access to business of a privileged position during the oil boom were not able to maintain their position. Only the crony capitalist faction, who had combined building businesses with establishing collusion with the palace family were able to transform themselves into thriving capitalists. The long established relationship between the Suharto family and businessmen Liem Sioe Liong and Bob Hasan enabled the family to transform its businesses into fully fledged business conglomerates. The policy of changing the orientation of exports away from oil and gas was greeted by large scale investment in manufacturing by the Suharto family's cronies, as well as by joint venture capital and overseas capital , especially from Japan, Taiwan, South Korea, Hong Kong, Singapore, Germany, the Netherlands, Australia, the USA and so on.

The working class

This new orientation also brought about a concentration of capital in urban industrial centres. Of a workforce of approximately 86 million, about 10.5 million have been absorbed into the manufacturing sector. A further 30 million have been absorbed into the service and minerals sectors. About 46 million of the workforce are in agriculture, although this does not mean that the peasantry dominates the country's social formation. According to the August 16, 1994 Address of State by President Suharto to a plenary session of the Peoples' Consultative Assembly, the non-oil and gas sector contributed 74% of all foreign exchange earnings. Of this, manufacturing contributed 63.4%. Table 1 shows the rate of growth of the workforce by region according to 1988- 1993 figures.

Table 1. Rate of growth of Indonesian workforce by region in millions of workers

Region 1988 1993 Growth
Sumatra 14.41 17.82 4.4 %
Java 45.6 50.9 2.2%
Kalimantan 3.8 4.7 4.6%
Sulawesi 4.6 5.6 4.0%
Bali and Eastern islands 4.5 5.3 3.4%
Maluku, West Papua & East Timor 1.6 2.0 4.6%
These developments must be studied carefully because they are of great importance for the future of our struggle. We must develop a program and devise strategy and tactics of struggle, forms of organisation and slogans that are in accord with the development of the material basis of society. This is our basic task if we wish to expand the base of the popular progressive democratic struggle quickly, securely, and in a way which will sustain militancy in the long term. The proper strategy and tactics ensures that resistance and fight back will be effective. All resistance -- even of the spontaneous type -- is truly of great value as it is the contraction of a society's muscles in a time of change.

In order to achieve the goals of our strategy and tactics this resistance must be based amongst the most militant sectors. During 1994, the Indonesian working class demonstrated (went on strike) 1,130 times. Approximately 2.8 million work hours were lost worth about 240 billion rupiah (A$150 million). The largest number of actions was in West Java (specifically Jabotabek) with 581, East Java 200 times, North Sumatra 140, Jakarta 126, Central Java 54, Riau 5, West Kalimantan 3, and South Sumatra 1 time. This was a 350% increase on the figures for 1993, where there were recorded 312 demonstrations (strikes). This compares with somewhere over 100 student demonstrations and just over 50 peasant actions.

The emergence of resistance by the people can bring about splits in the Suharto regime itself: between the civilian and the military elements in the ruling party, GOLKAR, between the Indonesian Muslim Intellectuals Association (representing the sector of the Islamic community collaborating with the regime) and the Islamic or the nationalist military. This whole process may also see the pushing aside of the bureaucratic cliques that were originally based around high ranking military officers trying to transform themselves into capitalists as well as clashes between central and provincial government officials. There is likely also to be envy by indigenous business towards Chinese business but the real tensions in this sector will be between the crony capitalists, who usually enjoy a monopoly of one kind or another, and non-crony capitalists. There is no conflict between so-called national and comprador capital as, apart from capital's conflict with labour, capital's other conflict is with competing capital which itself has no nationality. However such conflicts can, in specific places and at specific times, be infused with racial sentiments.

The regime is currently confused about what they must do. The radicalisation of the people since 1994 taking the form of increasing mass resistance points the way to the future in accord with their historical mission, which in turn is useful for determining which social sectors, geographical areas and political instruments we must prioritise. It points to around what issues flames are burning, where the flames are burning and what me must do to fan those flames of struggle so they burn into the very heart of capital.

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