Operating on a Giant

These are the hot and sticky days in Djakarta. From countless roadside stands, spicy odors of cooking food mingle with the smell of the clove-scented cigarettes so favored in Indonesia. Skeletons of unfinished skyscrapers still stand as bleak monuments to the grandiose dreams of the Sukarno era; three-wheeled betjak rickshas duel with decrepit cars on the capital's crowded streets, just as they have for years. But despite the outward resemblances to the bad old days, change is coming to Indonesia. In sharp contrast to the early '60s, that change is for the better.

Given the near-total economic chaos left behind by Sukarno, improvement is bound to be slow. Still, in the 2 1/2 years since President Suharto's government began its stabilization program, real progress has been made. At the moment, says a senior Western diplomat with long experience in Indonesia, "the internal situation is remarkably calm, and to anyone who has known Indonesia over the years, this is simply fantastic." With at least temporary political stability in hand, Suharto's small group of Western-trained economists has managed to balance Indonesia's budget for the first time in history, has firmed up prices, and checked the runaway inflation that plagued the country.

Crude Instruments. There were risks involved in what the economists did, notably in lifting Sukarno's foreign-exchange restrictions to stimulate exports. "It was like a doctor operating on a patient," says Mohammad Sadli, head of the Foreign Investment Board. "The patient was too weak, and our instruments were crude, but we couldn't postpone the operation." In 1966, the inflation rate was 650%; now it is being held below 25% a year. The basic price of rice has been stabilized at less than half the top price of last year.

Suharto and his economists early this spring launched a five-year development plan aimed at more effectively exploiting the nation's huge natural wealth. The plan emphasizes food production, irrigation, rehabilitation of the infrastructure and land-sea-air communications. If all goes well, Indonesia will be self-sufficient in rice production by 1974. The government also hopes to persuade 3,000,000 women to adopt birth-control methods. Exports, worth $643 million last year, are important in the country's growth plans. By 1974, Indonesia hopes to raise its export of primary commodities such as oil, rubber and spices to around $800 million.

Many Economies. For all the successes of Suharto's technocrats, Indonesia's persisting problems are staggering. Unless the benefits of stabilization filter down to the masses soon, political problems may surface again. The new five-year plan is dependent in part on foreign aid, which totals $500 million this year, $208 million of that from the U.S. A drop in assistance could cripple the plan. So could a bad harvest. The bureaucracy remains often corrupt, inefficient and underemployed, and civil service reform is a long way off. The nation's Chinese minority (about 3,000,000 out of a total population of more than 112 million) is a problem. They control an estimated 75% of Indonesian commerce, which provokes resentment. Moreover many of the Communists and their sympathizers who backed Sukarno were ethnic Chinese. All this makes it more difficult for the present government to utilize fully the Chinese citizens' considerable economic talents.

Perhaps most serious of all is the fact that communications between Djakarta and the outer islands of the huge archipelago barely exist. "At the moment," says Sadli, "Indonesia is not an integrated economic entity. There are many economies, living side by side, using the same currency." Only when Suharto's technocrats find a way to gear these economies together will Indonesia be well on the way to realizing its giant potential.

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