Indonesia is, among other things, the fourth largest country in the world in terms of population and the largest Muslim country. Increasingly it is also referred to as the third largest democracy in the world. It is the newest democracy, and surely one of the most troubled. There is a good chance that democracy, with an elected parliament and president and a choice of functioning parties, will consolidate in Indonesia. A promising start has been made, but the outcome is uncertain. The immediate challenges, especially from elements in the military, will probably be overcome without great disturbance. In the somewhat longer term more systemic problems are likely to emerge. Nor is it clear how deep the roots of democracy are in Indonesia. The big changes since May 1998 are not least a reaction against the corrupt and unjust aspects that seriously marred the previous regime in its later years. Grass-roots politics are still concerned mainly with getting rid of those features of Indonesian life. There is a much wider support base for democratic forms in a better-educated public than there was at the time of Indonesia's last attempt at elective democracy in the 1950s. But now, as then, if the new arrangements do not deliver they are unlikely to prove very durable. As in 1950, a populist shift to a more managed and less parliamentary model could lead to an authoritarian presidency, perhaps next time with a religious rather than a military support base.
What happens in Indonesia matters. It is as large as the rest of Southeast Asia combined, and it is much the most influential member of ASEAN, the Association of South-East Asian Nations founded in 1967. Forty per cent of the world's shipping goes through straits within or bordering on its territorial ambit, including eighty per cent of Japan's oil imports. It is the world's largest producer of liquefied natural gas, and it is a major producer of a range of other resources. With the largest Islamic population, Indonesia is likely to have an increasingly important profile in the Islamic world, and it has always been influential in the councils of the developing countries and the so-called non-aligned movement. But this article is largely concerned with another aspect of Indonesia's importance in the world: as a major test of the acceptability of Western democratic norms and values in a huge, diverse Asian nation. There are thus large international interests involved in the stability and development of Indonesia. The dominant Western view, led by the 'Washington consensus,' is that the stability and development of Indonesia, and the likelihood of its playing a constructive role in the region and the world, are most likely to be secured by the success of the current attempt to create a multi-party parliamentary democracy there.
That attempt derives partly from the position the International Monetary Fund (IMF) and the United States administration took in late 1997 and early 1998 when the financial crisis struck Indonesia. Extremely heavy demands were made for governance reform, especially in the financial sector, as conditions for the emergency assistance that was necessary to prevent the collapse of the rupiah and the wholesale failure of banks and other institutions. President Soeharto was unable to meet some of these and refused to meet others. Over the months of argument and delay the system broke down. Each fresh step negotiated with the IMF was followed by a further fall in the rupiah. Soeharto lost confidence in the process, his authority was eroded, and he was forced from office on 21 May 1998.
Some weeks before, probably by the end of March, it had become clear that there was no way forward unless Soeharto left office.(1) It then became a matter of achieving that as painlessly and as soon as possible. But that leaves some questions over policy towards Indonesia in the preceding months. If the IMF, with strong backing from and the active support of the United States, had gone into the rescue operation with one clear objective - of putting a floor under the rupiah and preventing the collapse of the Indonesian financial system - and if the governance reform programme had been made a longer-term objective, would the crisis have been much shorter and shallower? …