The Enthusiasm of the 1970s

With hindsight, it would appear that the incoming President Soeharto was fortuitous enough to come to government at a time when the international environment provided considerable support for his approach as President.

For one thing, Soeharto's priorities fitted in well with the international priorities of the day. The strong emphasis on internal stability and economic growth stood in marked contrast to the continuing turmoil in nearby Viet Nam where the United States was endeavouring to contain the perceived threat of communism. The rest of the international community welcomed the domestic economic priorities of the new Soeharto Government as well, emphasizing as they did such things as fiscal responsibility and a more liberal approach to foreign investment. In response to the change of direction, Western donor countries signaled their support by establishing the Inter-Governmental Group on Indonesia (IGGI), promising increased aid, and actively stepping up diplomatic engagement with the new government.

A second form of important support came from the multilateral institutions that quickly expanded their activities in Indonesia after the change of government. The World Bank and International Monetary Fund, especially, established strong teams of advisers in Jakarta and began to develop programs to promote economic recovery and growth. A significant measure of the increasing importance that the international community gave to Indonesia is the fact that the new President of the World Bank, Robert McNamara, visited Indonesia in June 1968 on his first overseas journey as President of the Bank. The World Bank Resident Mission established shortly after McNamara's visit soon became a key component of Indonesia's economic relationship with the international community and represented a very considerable commitment of resources by the World Bank. (Thompson and Manning: 1974).

External economic factors impacted favourably on Indonesia in a third significant way during the 1970s when both the 1973-74 oil boom (and five years later, the second oil boom) and the Green Revolution provided substantially increased resources and key new technology to help underpin growth.