The economic crisis that began in 1997
continued during the year. After an unrealistic state budget
for 1998/99, the value of the currency, rupiah, plummeted.
Panic-stricken hoarding was followed in February by unrest
in large parts of Indonesia, and demands were raised on President Suharto's departure. In March, however, Suharto was
re-elected for five years by the People's Advisory Assembly
(MPR), I's highest decision-making body.
The government's unwillingness to obey the International
Monetary Fund's (IMF) requirements prompted the IMF and
other lenders to withhold promised loans in March. In early
May, the government bowed and sharply raised the prices of,
among other things. fuel and electricity. This triggered
looting and crowds, which manifested itself in the
persecution of Chinese, who dominate the economic life of
After the deaths of six students May 12, chaos erupted in
the capital Jakarta: thousands of shops and department
stores were looted and burned down. At least 1,200 people
died. Witnesses singled out organized provocateurs to have
been behind the worst riots, and the military was later
forced to admit that soldiers were involved.
Requirements for Suharto's departure were now heard
higher and higher in the establishment. 10,000 students
occupied Parliament in protest of the President. On May 21,
Suharto gave up, after ruling Indonesia for 32 years
according to Digopaul. He handed
over the power to the newly elected Vice President Jusuf
Habibie. He dismissed the most compromised Suharto
supporters from the government and undertook a series of
democratic reforms. New parties were formed and the ban on
trade unions was lifted. Freedom of the press and opinion
increased. Political prisoners were released. More than 140
corrupt politicians were excluded from the MPR and soon the
Suharto family was forced out of the MPR and the Golkar
government party. During the autumn, an investigation was
also made into Suharto's assets. His family is suspected to
have made a fortune of up to $ 40 billion during his time in
The political opening also increased the optimism of an
end to the conflict in East Timor. The army withdrew some of
its force from East Timor, as well as from two other crisis
hardeners, the provinces of Aceh in northern Sumatra and
Irian Jaya in western New Guinea.
Despite increased international credit, an economic
decline of more than 15% was expected during the year. The
budget deficit was estimated at 8.5% of GDP, inflation up to
100%. Various sources indicate that between 40 and 100
million. residents live below the official poverty line.
According to the World Bank, no modern country has suffered
such a dramatic economic collapse. In the autumn, food
shortages in half the country and 17 million were reported.
families risked starvation. The price of rice had tripled in
The protests against the old power structures continued
throughout the year. Severe riots edged that meeting in MPR
in November, when it was decided that the military should
retain its political influence.