Seth Mydans, Jakarta – As Indonesia enters one of its most difficult years, President Suharto announced Saturday a Cabinet marked by loyalty and family connections rather than economic expertise.
The Cabinet lineup suggested that Indonesia is prepared to hunker down in its confrontation with the International Monetary Fund over the fund's demands for a more open economy that would reduce the role of family, favoritism and cartels.
The new Cabinet includes the president's powerful daughter, Siti Hardiyanti Rukmana, as Minister of Social Affairs, and the man known as his "first friend," Mohammad Hasan, as Minister of Trade and Industry.
As part of the eclipse of technocrats in the Cabinet, the new Finance Minister is Fuad Bawazier, formerly the director of the Taxation Department, who is seen by analysts here as close to the president's family and supportive of its economic interests.
At a time of growing fears of social unrest over the country's economic hardships, the new Minister of Home Affairs is Hartono, a tough former military chief who also has close ties to the Suharto family.
"Going through the names, I think the people and the market will find it hard to trust some of them," said a leading political commentator, Loekman Sutrisno.
Speaking of the appointment of Hasan, a wealthy businessman who has profited hugely from his friendship with the president, another prominent commentator, Umar Juoro, said, "This is not going to encourage the IMF to reach a settlement with Indonesia. Hasan has big business interests. He also does not have the best reputation among investors."
Suharto also announced that B.J. Habibie, another confidant who is the new vice president, would be given a special portfolio to deal with international organizations, giving him a higher profile than any of his predecessors in the job.
In one sign of continuity, though, Ali Alatas was retained as foreign minister for a third five-year term.
The appointment of the Cabinet is the first test of Suharto's intentions as he enters new discussions with the IMF over the austerity measures it is demanding in return for continued disbursement of its $40 billion rescue package.
It coincides with the arrival here this weekend of a team of IMF officials, of Prime Minister Ryutaro Hashimoto of Japan and of the latest in a stream of American envoys, David Lipton, a senior Treasury Department official. All are expected to urge Suharto to proceed with the economic liberalization to which he agreed in January.
Suharto, 76, was inaugurated Wednesday for a seventh five-year term with a burst of assertions of nationalist solidarity in the face of what he and other Indonesian officials characterize as interference by the IMF and foreign governments.
The official stance was expressed by the military commander in chief, Gen. Wiranto, who said Thursday, "Reforms – political, legal and economic – should be constitutional, gradual and not done in a radical way."
A leading Indonesian economist, Rizal Ramli, has characterized the IMF as "an amputating doctor, not a healing doctor" whose medicine is sometimes so strong that it can kill the patient.
Suharto has made it clear that he hopes to continue to receive IMF money but that urgent additional steps must be taken to strengthen the value of the Indonesian currency, the rupiah, which has sunk to less than 30 percent of its value six months ago.
"We're not asking for much," the president told supporters on Thursday. "We just want to have a stable rupiah so that people's living standards do not fall further." In what one foreign banker described as an attempt to have his cake and eat it too, Suharto appears to hope to persuade the IMF to let him raise the value of the currency by artificially pegging it to the dollar through a currency board.
On Thursday in Washington, the Fund's director general, Michel Camdessus, said such a move would be disastrous for Indonesia now.
"Why?" he said. "Because this country with its very limited stock of reserves now, with an extremely vulnerable banking system, with a corporate debt which has not yet been stabilized or rescheduled, cannot afford to manage a currency board."
A week ago the IMF said it would delay until at least next month the release of a second disbursement of $3 billion because of Indonesia's slow action on removing price supports, reforming the banking sector and disbanding monopolies and cartels.
That announcement drew an orchestrated chorus of nationalist indignation from officials here, along with a suggestion by Suharto that the liberalized economy he had agreed to would run counter to the Indonesian ethic of family relationships and government controls.
Suharto has stubbornly resisted outside pressure, first by naming his friend Habibie as vice president, despite objections abroad that he represents that very ethic, and now by naming a Cabinet that is not dominated by economic technocrats.
Mark Brown, a vice president of the World Bank, said on Tuesday: "This is a test of wills between Suharto and domestic and international markets
Listing of members of the seventh Indonesian Cabinet (1998-2003)
President: Soeharto
Vice President: B.J. Habibie
Coordinating ministers:
Politics and Security: Feisal Tanjung
Public Wealth: Haryono Suyono
Economy & Development Supervision: Ginandjar Kartasasmita
Development Supervision: Hartarto
Ministers:
Home Affairs: R. Hartono
Foreign Affairs: Ali Alatas
Information: Alwi Dahlan
Defense and Security: Wiranto
Health: Farid A. Muluk
Manpower: Theo L. Sambuaga
Finance: Fuad A. Bawazier
Cooperation and Small Business: Subiakto Cakrawerdaya
Agriculture: Yustika Fahrudin B.
Education and Culture: Wiranto Arismunandar
Industry and Trade: H Mohammad Hasan
Transportation: Giri Suseno Hadi Harjono
Social Affairs: Siti Hardiyanti Indra Rukmana
Mining and Energy: Kuntoro P. Subroto
Tourism, Post, and Telecom: Abdul Latief
Forestry: Sumohadi
Transmigration: Abdullah Moch. Hendro
Regilion: Qurais Sihab
Justice: Muladi
Public Housing: Akbar Tandjung
Public Works: Rachmadi Bambang S.
Secretary State: Saadilah Mursjid
Environment: Juwono Sudarsono
Food Affairs/Head of BULOG: Haryanto Dhanutirto
Women Participation Affairs: Tuti Alawiyah
Research & Technology/Head of BPPT: Rahadi Ramlan
Youth and Sports: H. R. Agung Harsono
Investment/Head of BKPM: Sanyoto Sastrowardoyo
State-owned Enterprises: Tanri Abeng
Land Use/Head of BPN: Ari Marjono
General Attorney: Sujono Atmonegoro
Bank Indonesia Governor: Safril Sabirin