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Uni international 300 N. Zeeb Road Ann Arbor, Ml 48106 8318400 Mas’oed, Mohtar THE INDONESIAN ECONOMY AND POLITICAL STRUCTURE DURING THE EARLY NEW ORDER, 1966-1971 The Ohio State University PH.D. 1983 University Microfilms i nternstion&i 300 N. zeeb Road. Ann Arbor, MI 48106 THE INDONESIAN ECONOMY AND POLITICAL STRUCTURE DURING THE EARLY NEW ORDER, 1966-1971 DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Mohtar Mas'oed, B.A., Drs., M.A. ***** The Ohio State University 1983 Reading Committee: )ved By Dr. R.William Liddle Dr. Goldie Shabad Dr. Richard Gunther Adviser Department of Political Science ACKNOWLEDGMENT The process leading to the completion of this work involved various kinds of support and advise afforded by a large number of people. This dissertation, sind my study in the Ohio State University, could not have been finished without such an encouragement. It is, therefore, a great pleasure for me to acknowledge their benevolence. First of all, I should express my gratitude to Professor R.William Liddle, whose teachings have made my academic life more meaningful and whose empathie friendship has made the burden of graduate study much less severe. A deep thankfulness is also for Dr.Colin MacAndrews, whose "maneuvering" five years ago made me landed in this big university. The Rockefeller Foundation and its staff in New York and Yogyakarta, especially Dr.Joseph Black, also deserve a special appreciation for supporting my study here and my field research in Indonesia. The arguments developed in this dissertation have been improved by the advise of my reading committee. Professor Liddle position of seeing Third World politics ii from Third World perspective has made me aware of the danger of judging Indonesian phenomena by applying "un-Indonesian" values. Professors Goldie Shabad and Richard Gunther have also rescued me from the fallacy of economic determinism. While doing my field work in Indonesia, I benefitted from the information and suggestions provided by many people. Among them are; Gen.A.H.Nasution, Gen.T.B.Simatupang, Gen. Abdul Kadir Besar, Dachlan Ranuwihardja, Slamet Bratanata, Frans Seda, Suryo Sediana, T.A.Salim. Dr.Emil Salim, Dr.Suhadi Mangkusuwondo, Professor Sarbini Sumawinata, Dr.Umar Kayam. Dr.Fuad Hassan, Dr.Yuwono Sudarsono, Dr.Dorodjatun Kintjorojakti, Dr.Alfian, Dawam Rahardjo, Adi Sasono and Gunawan Mohamad. I am also indebted to Salim Said, Makmur Makka and P.P.Simatupang for their unselfish support. I have to acknowledge that Salim’s critical views had several times made me rethink about the arguments developed here. To all of these people, I am very grateful. If there is something valuable in this work, it is due to them. Although the sins of commission or omission found in it are solely mine. Finally, I dedicate this work to my "Niek" and our wonderful "three little wild cats": Luki, Alvin and Yulian. Without them, all that I have done would be meaningless. iii VITA October 8, 19^9 • • • Born - Malang, Indonesia 1 9 7 2............... B.A., Gadjah Mada University, Indonesia 1975« • ......... Doctorandus, Gadjah Mada University, Indonesia 1 9 7 5 -1 9 7 8 ......... Assistant Lecturer, Gadjah Mada University, Indonesia I98I............... Mo A., The Ohio State University, Columbus, Ohio PUBLICATIONS "ASEAN (the Association of Southeast Asian Nations): Problem dan Prospek", in Dasawarsa ASEAN (Jakarta: Department of Foreign Affairs, I9 7 8). Perbandingan Sistim Politik (Comparative Political Systems) (Co-editor) (Yogyakarta: Gadjah Mada University Press, 1978). FIELDS OF STUDY Major Field: Comparative Politics Politics of Economic Development. Professor R.William Liddle Comparative Public Policy. Professor Richard Gunther Political Development of Western Europe. Professor Goldie Shabad Minor Field: International Political Economy. Professor Janet Thomasson IV TABLE OF CONTENTS Page ACKNOWLEDGMENTS.................................. ii VITA ........................................... iv LIST OF T A B L E S .................................. vii INTRODUCTION .................................... 1 Chapter I. THE CONCEPTUAL FRAMEWORK .................. 3 -The questions and possible explanations . 3 -Alternative perspective ................. 12 -Explaining New Order politics ........... 24 -Organization of this study........... 34 II. THE SETTING; INDONESIA IN I9 6 5-I9 6 6..... 37 -Structural legacy of the previous regimes . 37 -Inherited crises..................... 57 -Alliance against the Old Order........ 69 III. THE "PANACEA": OUTWARD-ORIENTED ECONOMIC STABILIZATION AND DEVELOPMENT.......... 78 -Primacy of the economy. ........... 83 -The dynamics of economic diplomacy... 95 -The stabilization measures and the debate . 114 -The consequences: the g a i n s ......... 140 -The consequences: the losses. ....... 148 -The protests and the repression..... 162 IV. CREATING POLITICAL ORDER .................. 166 (A) The ideology of developmentalism and the military's "dual-function": two views. 172 -The contending strategies......... 179 -The emergence of the official New Order ideology......................... 185 (B) The structures..................... 192 (1) A tightly-controlled civilian bureaucracy................... I92 (2 ) Integrated armed services .... 196 (3 ) More "responsive" legislatures. 202 (4) Simplified party politics .... 207 -The reorganization of the SEKBER GOLKAR ............. 209 -Gorporatist interest- representation? ....... 213 -Regrouping the parties. .... 224 (5) The Office of the Presidency as the core. ................. 226 -The emergency powers......... 22? -Building the Presidential office..................... 228 -Building the resources for patronage................. 2 3 I (C) The process of governing.......... 237 -The Pelita program and technocratic- bureaucratic policy-making ........ 238 -The INPRES program and the political style of policy-making ....... ' 243 -The business "giants" and clientelistic policy-making..................... 247 V. THE POLITICS OF ECONOMIC DEVELOPMENT. 252 NOTES ...................................... 278 BIBLIOGRAPHY................................ 327 VI LIST OF TABLES Table Page 1. Government Revenue and Expenditure, 1955- 1 9 7 1 /7 2................. 313 2. Indonesian Export Value, 1956-1965 ........... 314 3. Money in Circulation............. 315 4. Cost of Living Index: Jakarta, 1953-1971 .... 316 5. Gross Domestic Product, 1958-1973........... 316 6. Balance of Trade and Balance of Payment on Current Account, I96O-I966 ........... .... 317 6a. Balance of Trade and Balance of Payment on Current Account, 1967-1972 ................... 318 7. Indonesia's Foreign Debt as of December 3 I, 1965*319 8. Foreign Component of the Government Budget, 19 6 7-1 9 7 3 /7 4 .......................... 320 9 . IGGI Aid Commitments and Disbursements, Calendar Year 1968-1972............. 321 10. Foreign Investment Projects in Indonesia, 1 9 6 7 -1 9 7.................................. 2 322 11. Export Values of Three Major Commodities, Trends and Shares, 1966-1971 ................. 323 12. Expected Growth: Repelita I, 1969/70-1973/74 . 324 1 3 . The Performance of the Renelita I: Gross Domestic Product at 1976 Prices. ......... 325 Vll INTRODUCTION This research is based on a broader effort to study the political problems -domestic as well as international- facing Third World countries in their economic development ventures. Conducting such a study in the early 1980s, I have benefitted a great deal from the rapidly