The 1990s: Cooling Relationships

During the 1990s, in the years leading up to the economic crisis, two major international developments reinforced growing discontent at home.

One was the collapse of the communist empire. As a result, the threat of international communism disappeared. The implications for the New Order approach to government were not immediately evident but the long-term consequence was that the strategic role that Soeharto had played as an anti-communist leader in Southeast Asia soon became much less important. (Masters: 2003)

A second change that soon became apparent was that the global development agenda which reflected donor priorities continued to change, tending to widen to include an increasing array of non-economic issues such as human rights, democracy, greater involvement of civil society in the development debate, gender, and so on. The record of the New Order Government was considerably less impressive in some of these areas than in the economic field. The changes in the global development agenda thus tended to encourage increasing criticism of the Indonesian government.

External developments affected the conduct of economic policy in Indonesia in other ways as well. Increased emphasis on liberalization, and on market-oriented approaches associated with increased international private sector financial flows in the early 1990s, had opened the door to a number of large doubtful deals in the power sector and to sharp increases in risky borrowings overseas. Within Indonesia there was some questioning of the wisdom of these approaches. However, the prevailing international thinking in favor of market-oriented policies was strong. In the event, Indonesia was swept along.