The 1997-98 Crisis and the Aftermath

The long period of the New Order Government ended dramatically during the 1997-98 crisis. The crisis itself was a special period of both external and internal turmoil. For the purposes of the discussion in this session it is enough to note that the crisis underscored the fact that changes in the external environment can have a dramatic impact on the domestic economy. (Thee: 2003b)

In the aftermath of the crisis, certain key changes in the international environment appear to have complicated the challenges of managing external affairs. Several deserve special attention.

First, the global development agenda has continued to grow and has become increasingly complex. Furthermore, the non-economic issues which have been added (e.g., human rights, democracy, corruption) encourage attention on areas where Indonesia is perceived to have been less successful.

In addition, the emergence of security and terrorism issues since the 9/11 terrorist attack in the US, combined with the quite marked increase in concerns about domestic security within Indonesia, has cast Indonesia in a less favorable light on the international stage than previously, especially in the US.

Further, the geographical focus of much of the global community has shifted since the 1997- 98 crisis. Today, Indonesia is neither successful enough (such as China, India, and Viet Nam) nor insecure enough (such as Iraq, Afghanistan, and North Korea) to attract special attention. Indonesia is now no longer an economic star that attracts much attention (as was the case in the mid 1990s) nor a basket case that warrants special international support (as was the case at the end of the 1960s). Today, Indonesia is widely seen as just one more developing country struggling, with indifferent success, to confront major internal challenges.

In response to these various trends, the focus of international agencies has shifted as well. The special support that Indonesia received in the decades before the crisis has been replaced by a more usual relationship. The international agencies, for their part, have found that dealing with a highly pluralistic Indonesian society is a complex and time-consuming process. The Indonesian body politic, too, appears to have collectively decided that it is time to consider a readjustment in the relationship with the key multilateral economic institutions. The recent decision to conclude the standby arrangement with the IMF and enter into a postprogram monitoring phase reflects the change in the mood in Indonesia.