What 'Family Values' Means in Indonesia

On March 11 the Indonesian People's Consultative Assembly is expected to reelect President Suharto for a seventh five-year term and to confirm an aircraft engineer, B.J. Habibie, as vice president. The assembly's decision is not in doubt: One-half of the 1,000 members are appointed by Suharto.

Four days later, on March 15, the International Monetary Fund (IMF) will decide whether to provide an additional installment of the $43 billion promised to the Asian nation following a precipitous fall in the value of the rupiah, the national currency.

Between now and the 15th, IMF authorities must determine the Suharto government's willingness to undertake reforms considered necessary to justify the international assistance. The president's recent actions have created doubts that he is prepared to take the steps necessary to meet the IMF's conditions.

Mr. Habibie, Suharto's choice for vice president, is known for grandiose, expensive projects - inappropriate in a time of belt-tightening. Suharto's recent dismissal of the governor of the Central Bank and consideration of the establishment of a currency board also did not find favor with the IMF.

The Indonesian president has led the nation through 32 years of impressive economic growth - for which he takes much of the credit and is justifiably proud. Believing order and stability essential to development, he has manipulated the political process and discouraged dissent. He has closed bothersome publications and recently restrained the political activities of his predecessor's daughter, Megawati Sukarnoputri.

Indonesia's economic success has created conditions that lie at the heart of today's economic crisis: rapid urbanization, displaced peasants, a growing gap between rich and poor, and above all, a favored position for family and friends. Over the years, in a pattern common in authoritarian regimes, Indonesia has become a Suharto family fiefdom through generous grants of credits, patronage, protection, and import privileges. Investors have understood that their chances of success are enhanced by including a member of the Suharto family in an enterprise. And Suharto is determined to protect that family position.

At the end of his next five-year term, in 2003, Suharto will be in his 80s. He undoubtedly expects to live out his term, but, if he does not, the vice president becomes his successor. Habibie has long been a close associate of Suharto, captivating the president with his technical and industrial enterprises. Through his organization of Muslim intellectuals, Habibie has appealed to Suharto's growing identification with Islam. Of equal importance is the president's confidence that Habibie will protect the interests of the family.

Many Indonesian observers had expected the vice president, as in the past, to be chosen from the Army. The military remains the central stabilizing force in Indonesian politics. But Suharto's choice of Habibie suggests the president did not have the confidence that a military officer would serve the family's interests.

The idea of the establishment of a currency board to stabilize the exchange rate of the rupiah has been promoted by an American economist, Steven Hanke, reportedly introduced to Suharto by two of the president's children. Although other economists believe that this approach to the current crisis might work, many worry that, by offering a fixed exchange rate, it will provide an opportunity for the family to protect its wealth through conversion into dollars.The IMF fears that the currency board concept could result in higher interest rates and a depletion of the country's reserves.

Throughout Indonesia's economic growth, policies have been heavily influenced by a group of US-educated technocrats. The president has listened to them in previous crises. Publicly, at least, they have not been heard from now, suggesting their conservative approaches have lost out to the flamboyant Habibie.

In the time still left before the IMF's mid-March decision, Suharto appears to be modifying his position on the currency board. The fund is likely to maintain its rescue package in Jakarta, but the path ahead will not be easy.

The IMF and others advising the Indonesian government will continue to encounter national pride, Suharto's confidence in his own economic sense, his closeness to B.J. Habibie, and his determination to protect the family's wealth. "Family values" has a special connotation in Asia.

* David D. Newsom, former undersecretary of state, is Cumming Memorial Professor of International Affairs at the University of Virginia.