Until the Asian economic contagion of 1997-8 Indonesia had enjoyed three decades of economic growth in excess of 4 per cent a year, and was widely characterised as one of East Asia's NIEs. 1 While among the most authoritarian regimes in Southeast Asia, the government of General Soeharto had achieved a degree of national unity and rising living standards that had accorded the regime developmental legitimacy despite widespread acknowledgement of the array of close personal linkages with leading Indonesian commercial conglomerates. As Paul Krugman comments,
Anyone could have told you about the epic corruption - about tycoons whose empires depended on their political connections and about politicians growing rich in ways best not discussed…[y]et most brushed off these well-known vices as incidental to the real story which was about economic growth.
Having borne the brunt of the region-wide contagion in 1998, Indonesia has struggled to restore economic and political stability and has yet to return to pre-crisis levels of growth, investment and output. The country's foreign debt mushroomed from 48.8 per cent of GDP in 1996/7 to 153.5 per cent of GDP by the end of 1998. 2 However, this chapter is not a study of the causes and consequences of the economic crisis for Indonesia. Instead the central concern of this chapter is to examine the extent to which during Indonesia's halcyon years the specific characteristic of state-capital relations conformed to or deviated from the developmental state ideal.
Indonesia enjoyed an abundance of raw materials which mitigated against the adoption of an export-oriented development strategy at an earlier stage in the country's development experience. Winters (1996) and Hill (1995) both maintain that the flood of oil wealth into Indonesia during the 1970s created an almost parastatal organisation with its own source of funds available for political purposes, Pertamina corporation and Team X (Tim Keppres 10),