View Point

Friday, June 19, 1998

Why the U.S.
should care about chaos
in Indonesia

By Richard W. Baker

INDONESIA is facing its gravest crisis in the 32 years since the upheaval of 1965-66 that cost up to 500,000 lives and brought to power the "New Order" regime of General Suharto. It is the worst casualty of the regionwide financial turmoil triggered by the run on the Thai baht in mid-1997.

Indonesia's rupiah has lost three-quarters of its value and the country's economy has ground to a virtual halt. Protests by students, and riots and looting by the poor, have verged on open revolt.

Mounting criticism and opposition led to the resignation of President Suharto on May 21, only the second transfer of power in the country's 50 years of independence. The successor government under former Vice President V.J. Habibie is now struggling to meet the twin challenges of economic recovery and political reform.

But, other than humanitarian considerations, why should the United States help Indonesia? Why should Indonesia's problems matter to us?

The basic answer is that Indonesia's problems are important because Indonesia is important. With over 200 million people, it is the fourth largest country in the world by population, ranking behind China, India and the United States.

It has nearly half the population of the entire Southeast Asian region. It moved into fourth place not so much through population growth but because Indonesia remained unified while two larger countries, Pakistan and the Soviet Union, broke up.

Indonesia's population is more diverse than those of Pakistan or the Soviet Union, with several hundred ethnic and language groups and at least five major religious traditions. The maintenance of unity and nationhood alone has been a major achievement.

Particularly noteworthy is the fact that the overwhelming majority of Indonesians are Muslims. Indonesia has the largest Islamic population of any country in the world, more Muslims than live in all of the countries of the Middle East. But Indonesia remains a secular state, and thus provides a model of the ability of Islam to co-exist with other religions and with economical and social modernization.

Indonesia occupies key location

Furthermore, Indonesia's geographic location, combined with its size, gives it strategic importance. Its nearly 14,000 islands, spread across an area equivalent to that of the United States, sit astride the crossroads of trade between the Pacific and Indian oceans. The oil that fuels much of East Asia passes through straits bordering or bounded by Indonesia.

There is more. Indonesia's size and location are matched by vast natural wealth -- including oil and gas, minerals, forests and rich agricultural land. In fact, a major achievements of the Suharto government was economic development.

During the 25 years prior to the 1997-98 crisis, Indonesia's growth averaged 7 percent a year. With its resource base and an increasingly educated and skilled workforce, Indonesia could one day become the Japan of Southeast Asia.

Discussion of Indonesia in the U.S. in recent years has tended to focus on the growing internal problems of the Suharto regime, particularly in the area of human rights. These include restrictions on freedom of the press and political opposition, the suppression of independent labor movements, independence struggles in East Timor and elsewhere, as well as on corruption and nepotism.

However, we should not overlook that, since 1965-66, Indonesia has played a responsible and important regional and international role.

The adoption of a cooperative approach toward its neighbors made possible the establishment in 1967 of the Association of Southeast Asian Nations (ASEAN), of which Indonesia is the largest member and tacit leader.

Indonesia also played significant roles in the establishment of the Asia-Pacific Economic Cooperation forum (APEC) in 1989 and the ASEAN Regional Forum for security consultations in 1994.

Free trade strongly encouraged

President Suharto's personal support of the concept of free trade and investment in the Asia-Pacific region first discussed at the Blake Island APEC summit of 1993 made possible the adoption of this visionary goal by the APEC members at their meeting in Indonesia in 1994.

Despite differences over human rights and other issues, Indonesia has been an important partner to the United States.

In addition to cooperation on a wide variety of regional issues, the two countries have strong economic ties. Bilateral trade has been running at more than $12 billion a year, and the United States is the second largest source of Indonesia's imports.

The U.S. is also a major source of foreign private investment in Indonesia. Its economic potential led the Clinton administration to designate it as one of the 10 major emerging markets in the world.

In the largest sense it is not an exaggeration to say that Indonesia is the key to a stable, more democratic and economically open Southeast Asia, which in turn is one of the keys to creating and sustaining a progressive, peaceful and prosperous community in the larger Asia-Pacific region.

Bailout serves U.S. interests, too

Economic collapse or political disintegration in Indonesia would have serious consequences for the broader region and for the United States.

That is why the Clinton administration, like many other governments, has been watching the developments in Indonesia with great concern and is urging Indonesians to resolve this crisis peacefully and through a widened political dialogue and fundamental structural change.

The United States is also contributing to the International Monetary Fund's $43 billion bailout/reform package, providing trade credits to American firms to help restart the Indonesia economy and participating in a World Bank-led program supplying food, medicine and other basics to relieve human suffering.

The U.S. alone cannot determine events in Indonesia. However, given its importance, for good or ill, to the future of the region as well as our own interests, the United States must support both the immediate recovery effort and longer-term process of economic and political reform.

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Richard W. Baker, a senior fellow at the
East-West Center in Honolulu, is a former diplomat
with service in Indonesia.