From Silkworms to Bungled Bailout: International Influences on the 1998 Regime Change in Indonesia

Working Papers

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CDDRL Working Papers

July 2008

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In this paper, we argue that although international influences played a significant role in Indonesia’s democratic transition, Soeharto’s demise was not the consequence of diplomatic pressure or other democracy-promoting interventions. For much of his rule, Soeharto had enjoyed considerable support in Western capitals, which appreciated him as a reliable anti-communist ally, a stabilizing factor in the security of Southeast Asia, and a pragmatic economic manager open to foreign investment. Even the end of the Cold War, which had led to increased criticisms of Soeharto’s human rights record and growing external support for Indonesia’s civil society, had not seriously threatened the New Order regime. The condemnation of Soeharto’s repressive methods by Western powers remained rhetorical in nature, and foreign donors in Indonesia concentrated mostly on politically harmless development projects (ridiculed as “silkworm programs” by some aid officials). With political pressure ineffective, the real threat to Soeharto’s autocracy grew in the form of Indonesia’s increasing integration into the world economy. While initially a source of strength, Indonesia’s exposure to the global markets eventually turned into a liability. The Asian economic crisis was clearly the trigger for the events that caused Soeharto’s fall, and although it constituted an unexpected external shock, it was unintentionally aggravated by the intervention of the IMF. Accordingly, Indonesia’s democratic transition was not a case of a regime change successfully induced by external threats, sanctions or incentives. Rather, it was in large part the by-product of a regional economic disaster and the bungled implementation of the IMF aid package. Beyond that, domestic players dominated the scene.

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