Rudy Habibie is arguably Indonesia's most influential citizen, after President Suharto, of course. Although officially he only holds the humble position of Minister of Research and Technology in the cabinet, he is far more powerful than that. As Suharto's foster-son, Habibie's power seemingly knows no bounds.
Having Suharto's confidence and friendship is the key to Habibie's success, the gateway for the creation of an economic and political empire. At first, he was known simply as the high-tech czar of Indonesia, in charge of all its vital industries; since 1990 he has emerged as a political powerhouse, chairing ICMI, the Muslim Intellectuals' Union, as well as playing a vital role in GOLKAR, the ruling party. No wonder many of his supporters see Rudy Habibie as the next president of the Indonesian Republic.
The Suharto-Habibie liaison
The Suharto relationship with the Habibie family goes back to the early fifties when the young lieutenant colonel was sent to Sulawesi to crush a local rebellion. In his autobiography, Suharto speaks fondly about the Habibie family who lived near the garrison. Mrs. Tuti Marini Habibie, Rudy's mother was a native from Yogya and cooked delicious Javanese meals, the kind of food Suharto cannot live without. Bacharuddin Jusuf (Rudy) Habibie, born in Pare-Pare (South Sulawesi) on 25 June 1936, was a teenager at the time but those first contacts proved to be the start of a long relationship. Rudy Habibie graduated in engineering in Bandung and obtained his PhD in aero-engineering in Aachen, Germany. In 1974, Rudy Habibie, already in a senior position at the German aircraft company MBB, was summoned home by Suharto.
1974 was a hectic year for Indonesia. Huge demonstrations, the so-called Malari events, rocked the capital and threatened Suharto's rule. The regime was quite shaky and it took all the skills at Suharto's command to consolidate his rule. The Indonesian economy, primarily based on oil revenues, was in need of a new thrust. Habibie was the man chosen for the job. After a day discussing grand schemes to industrialise Indonesia, Suharto and Habibie agreed on a plan. From then on, Habibie had a free hand and unlimited funds were put at his disposal. The story goes that Suharto told the ambitious young engineer: "Habibie, you can do whatever you want short of fomenting a revolution". In Suharto's autobiography Habibie occupies a prominent place; Suharto explains at length why he shares Habibie's views and supports his methods.
Habibienomics For the first fifteen years of the New Order, economic policies were primarily designed by the technocrats, western trained economists nicknamed the 'Berkeley Mafia'. The thrust of this World Bank/IMF style economy is what is commonly called comparative advantage i.e. using a country's natural resources and cheap labour to the best advantage for its role in the world market. The Indonesian economy has been groomed along these lines: exploitation of natural resources and an export-oriented industry with semi-slavery conditions for the labour force. Habibie rejects this approach and argues that his economic policies will pave the way for industrialisation. He is scathing in his criticism of the fast-growing domestic manufacturing industry producing shoes and blue jeans for the world market. His views, nowadays called Habibienomics, can be described in a nutshell as, not the comparative advantage but the competitive advantage approach. Comparative advantage can provide rapid economic growth in the short term but will ultimately collapse as industries are relocated to other regions with even lower labour costs. The competitive advantage is based on technology which will give an added value to domestic production.
The high technology industries, Habibie argues, will not create growth in the short term, but will produce a beneficial spin-off right across industry in the longer term. Engineers and technicians sufficiently trained in their specialised areas will spread their skills and knowledge across the board. He firmly believes that the state should pioneer this process, given that private firms cannot provide the necessary re sources for research and development. Habibie often speaks highly of the success stories of Taiwan and South Korea, who used the state machinery to boost industrialisation.
The high-tech czar
So far President Suharto, although decidedly in favour of Habibienomics, has had to keep a balance between the two approaches. The World Bank/IMF approach promoted rapid economic growth in the second half of the eighties, helping to foster business tycoons, including Suharto's sons and daughters. The path taken by Habibie has predictably been thorny. He set up two important centres: BPIS and BPPT. BPIS, the Coordinating Agency for Strategic Industries, is the flagship of the entire strategic sector which includes ten state companies in all, among them: IPTN, the aircraft industry, Krakatau Steel, PT PAL, the shipbuilding industry and PT PINDAD, the weapon and ammunition factory. BPPT is the country's technological think-tank, providing jobs for hundreds of highly-trained engineers and technicians.
Besides being Minister of Research and Technology, he holds at least a dozen other prestigious positions, making him an Indonesian superman. Next to chairing all these agencies, he is the managing director of the strategic companies IPTN, PT PAL, PT PINDAD and chairs the Development Agency for Batam, the boom island close to Singapore. High cost economy
The Habibie way of running high-tech companies has been controversial from the start. The companies absorb huge amounts of state funds and are likely to continue to do so for the foreseeable future. The lack of transparency about the finances of the companies has been a nightmare for ministers and bureaucrats in charge of financing. IPTN, the aircraft company, in particular has caused huge problems.
IPTN, located in Bandung, West Java, employs at least 15,000 highly trained people and is projected to grow to 60,000 by the turn of the century. It started as an air-force repair facility but now produces small aircraft, helicopters under license, aircraft components and weapon systems. Initially, Habibie undertook production in cooperation with foreign aircraft companies like Bell in the US, CASA of Spain and MBB of Germany but in 1989 he decided to develop his own aircraft, the N-250. The 70-seater is an ambitious project with highly sophisticated technology such as glass-cockpit avionics and a special flight-control system, for which IPTN has relied on foreign suppliers.
After major technological and financial problems, the N-250 was officially launched during APEC, the Asia-Pacific Economic conference, in the presence of an array of world leaders. Although IPTN talks optimistically about selling 700 N-250s, there are no signs this will be achieved. Despite a host of financial disasters, Habibie remains confident and is looking ahead to another project, a 130-seat fly-by-wire, transonic speed twin-jet. At least US $1.6 billion state money has been sunk into IPTN, but the company has yet to become internationally competitive or genuinely profitable, argue economic analysts. In particular, the prestige-project N-250 has been at the centre of controversy. In 1993 Habibie became embroiled in a battle over state funding for the N-250. The new Minister of Finance Mar'ie Muhammad reportedly refused to channel more money into the project and IPTN was forced to dig into its own capital reserves. President Suharto came to the rescue, instructing the Forestry Minister to release US$ 185 million from the reforestation funds to keep the project afloat. Several environmental groups tried unsuccessfully to prevent this.
Habibie's special status
PT PAL, the shipbuilding firm, illustrates vividly Habibie's special status: The tax audit discovered that PT PAL had under-reported income for a three-year period., 1985 to 1987. In a letter dated 10 October 1990, then Finance Minister Sumarlin informed Habibie that PT PAL was liable for past tax payments plus fines, which together amounted to about US$ 80 million. On 25 March 1991, Habibie wrote back refuting the audit and saying that payment of past taxes 'would be a burden for PT PAL and damage its future prospects'. He sent a copy of the letter to Soeharto. Two days later, State Secretary Murdiono passed on a terse, very un-Javanese message from Soeharto to Sumarlin: 'If the Minister of Finance has a problem with waiving PT PAL's tax payments, then the President will do it. PT PAL is a state-owned company, not a private Habibie enterprise, and it doesn't need to be squeezed of tax.' The subject was dropped. [A Nation in Waiting, Adam Schwarz, Allen & Unwin, 1994, pg 72].
As is often the case, promoting high-tech goes hand in hand with the promotion of technology for military purposes. The majority of Habibie's strategic companies are part of Indonesia's growing military industrial complex. While in the early period, top-ranking generals benefited from Habibie's industrial empire, in the past decade, sharp differences have arisen. Officers used in running their own affairs and buying their own hardware have been side-stepped by Habibie. The bottom line is money; everybody knows that the purchase of weapons provides plenty of kickbacks which now fill the pockets of the Habibie clique. Moreover, the generals resent being forced to purchase helicopters, ships and aircraft from Habibie's companies when better vehicles are on offer on the world market. It was the purchase of 39 naval vessels from the former East German navy that brought into the open the conflict between Habibie and the generals and technocrats. As Habibie's power has increased, he has gained more enemies. Now that he has built a political power base, the number of enemies has multiplied.
ICMI, Habibie's political vehicle
In December 1990 Habibie set up ICMI, the Association of Muslim Intellectuals, and became its chair. Only a nominal Muslim, Habibie was initially hesitant about taking it on but pressure from several influential Muslim intellectuals, and particularly from Suharto persuaded Habibie. Given the stalemate in politics, ICMI quickly became a powerhouse, a rallying point for at least three trends in political Islam: the natural Habibie allies, technologists and bureaucrats working within the Habibie empire; Muslim intellectuals, often called Muslim modernists, who have been searching for decades for a political umbrella and see his cosy relationship with the president as providing unprecedented opportunities. The rest joined ICMI for a variety of reasons: dissatisfaction with the obscure role of political Islam in Indonesia or the economic strength of the Indonesian Chinese or the over-representation of Christians within the Indonesian hierarchy.
While Habibie relies primarily on the first and third groups, it is the Muslim intellectuals who have a clear agenda for ICMI. A small group of Muslim intellectuals first had the idea of setting up ICMI and Suharto embraced it as it suited his need to broaden his political base, using it as a buffer against the military. Suharto rewarded ICMI quite generously with several posts in the cabinet and a number seats in parliament representing the ruling party, GOLKAR. ICMI people catapulted into high positions, all of them from the first group, the Habibie loyalists. The second group, often called 'the real ICMI', by no means unified in their views, have built an influential think-tank called CIDES (Centre for Information and Development Studies) and a well-run newspaper, Republika. To put it bluntly, tired of fighting the system, they opted to join it, in other words, translating clientelism through Habibie into more political power, as has already happened. In the political game of who is using who, thirty years' rule has made Suharto a past-master. It has become clear that Suharto distrusts 'the real ICMI' and will never allow them to become too powerful.
Habibie the politician
The Suharto-Habibie duo performed quite a political tango when they stage-managed two major events in 1993: the MPR (Congress) session in March that re-elected Suharto and the GOLKAR congress in October. On both occasions Habibie acted as the manipulator (with Suharto behind the scenes), curtailing the influence of the military and the technocrats and promoting ICMI bureaucrats and Suharto loyalists. For the first time the GOLKAR chairmanship was occupied by a civilian, Harmoko, the Minister of Information and known as the "censorship boss".
On many occasions, Habibie has boasted that he learned his ABC as a politician from his guru Suharto. The GOLKAR congress was typical of Suharto's craftsmanship with Habibie executing the plot. The outgoing board under ret'd general Wahono was humiliated over its successor board - Habibie was ready with his own list of candidates. The new board was nepotism and political clientelism at its crudest. Tutut Suharto became vice-chair while Bambang Suharto emerged as treasurer. Habibie installed eleven of his cohorts on the board, proving that ICMI has become the stepping-stone to higher realms.
Greed and nepotism
As a civilian, Habibie is the only non-military person in 30 years of Suharto's rule ever to have gained so much power. A remarkable achievement but, as analysts say, Habibie could only have come this far thanks to his special relationship with Suharto. In the past Suharto used different allies, General Ali Murtopo, General Benny Murdani or General Sudharmono. But their relationship with Suharto was fundamentally different. Suharto profoundly distrusts anybody who gets too powerful. At the peak of their careers, these generals were stripped of their powers.
His tie with Habibie is a different ball-game. Suharto has a complete trust in him and apparently does not see him as a potential threat. Their personalities differ markedly. Suharto is a bland, uninspiring man while Habibie has a dazzling style, with a reputation of engaging in hours'-long monologues extolling his technology dreams. But the two have a lot in common, not least their greed and favouritism for close relatives.
Political analysts in Jakarta say that Rudy Habibie's nepotism is unending. The Habibie family has become quite a dynasty with at least 40 companies involving brothers, sisters, children and in-laws. Rudy Habibie's private residence in the elite Jakarta suburb of Kebayoran Baru is an example of the burgeoning wealth of the Habibie dynasty. Starting with just a villa, the Habibie residence has spread to include all the houses in the block, an entire complex of affluence. Similarly, Suharto's residence in Jalan Cendana clawed up the entire block.
The majority of Habibie companies are known as the TIMSCO Group, named after Timmy, the nickname of Suyatim Abdulrachman Habibie, the youngest of Habibie's brothers. The TIMSCO Group consist of at least a hundred companies, including affiliates, many of which were set up to carry out special tasks, while thirty to forty have longer-term tasks. Many are joint ventures with the Suharto crony Liem Sioe Liong or with members of the Suharto clan, notably sons Bambang, Tommy, daughter Tutut Suharto and foster-brother Sudwikatmono.
The holding company is PT TIMSCO Indonesia whose activities range from trading, consultancies, plantations, chemical industries, pig and poultry farming to construction, tele-comunications, aerial mapping and tourism. According to official figures for 1993, PT TIMSCO had a turnover of Rp 630 billion (US$ 300 million) and assets worth Rp 290 billion (US$150 million).