INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001800010012-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 19, 2016
• Document Release Date: January 18, 2006
• Sequence Number: 12
• Publication Date: March 31, 1967
• Content Type: PAPER

A prove F se 2006/02/07: CIA-RDP7f O0826A001>00010012-3
MEMO D69 IRLCO-iD
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33
INDONESIA
1. The Suharto regime, in which the army holds
the preponderant power position, appears capable of
maintaining internal stability for the foreseeable
future, i.e., for the next year or so. It will re-
tain its anti-Communist complexion and will persist
in its efforts to destroy the remnants of the In-
donesian Communist. Party. Its efforts to improve
the economy are likely to progress although perhaps
not at the pace or with the effectiveness that either
the regime or the general public has hoped. Indo-
nesia will continue to espouse a foreign policy of
nonalignment and to strive for increased Indonesian
regional influence.
Political Demise of Sukarno
2. By a decree of 12 March 1967, the Indonesian
Congress in effect endorsed the final turnover of
power by President Sukarno to General Suharto, pro-
hibited Sukarno from engaging in political activity
until after the next general elections, and appointed
Suharto acting president. Suharto was installed in
his new post the same day.
3. There is no indication that Sukarno will be
able to make a political comeback. Apparently he
will be permitted to remain in Indonesia, probably
in West Java where the political atmosphere is pro-
regime and the army commander is strongly anti-Sukarno.
The regime is not likely to let him visit, and cer-
tainly not live, in East or Central Java where he had
his greatest popularity. Sukarno probably will not
be brought to trial for his past activities as de-
manded by students and other activists. Although the
12 March decree requires a judicial "settlement" of
Sukarno's past activities, it leaves its implementa-
tion to Suharto, who has publicly opposed a trial
as politically unwise and prejudicial to national
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unity. Most of the perquisites of office have been
withdrawn from Sukarno, and presumably he is under
close surveillance.
4. In addition to his position as acting presi-
dent, General Suharto apparently plans, for the im-
mediate future, to retain his post as commander of
the army. He is also chairman of the cabinet
presidium and "first minister" for defense and
security; in this latter capacity he directly con-
trols the four armed services and the ministry for
demobilization and veterans affairs. He has emerged
over the past year and a half as a strong and re-
sourceful, although cautious, leader. He is presently
strongly entrenched as the country's foremost leader
and faces no significant opposition among either mil-
itary or civilian elements.
5. Suharto has made no effort to disguise the
fact that the army is the major political force in
Indonesia today and that his own political support
stems chiefly from the army. Since October 1965,
however, he has consistently worked to develop a
united team of the four armed forces (army, navy, air,
and police), and to avoid an exacerbation of inter-
service rivalries. Although he has not been totally
successful, he has, over the months, denied to Sukarno
the effective exploitation of pro-Sukarno units,
chiefly in the Marine Corps and the police, and has
repeatedly extracted effective pledges of loyalty
from all service commanders.
Army's Role
6. The army will continue to hold the preponder-
ant power position in Indonesia for the foreseeable
future and will staff significant posts at all levels
and in all sectors of government. The army holds 6
of 24 cabinet portfolios, and representatives of the
other armed services hold another 6. Army officers
are sprinkled liberally throughout the cabinet de-
partmental staffs and through the government-con-
trolled agricultural and industrial complex. Army
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officers are governors of 15 of Indonesia's 25 prov-
inces, and the 17 army territorial commanders exert
considerable authority throughout provincial admin-
istrative systems regardless of whether the local
governor is military or civilian. Suharto has re-
lied not only on military officers in the regular
chain of command and in the cabinet, but has also
called for assistance from an informal group of high-
ranking generals.
Civilian Role
7. General Suharto is sensitive to the charge
of creeping militarism and appears to be making an ef-
fort to maintain a military-civilian partnership--
albeit with the military the senior partner--which
is considerably more than a facade. The most influ-
ential cabinet minister next to Suharto himself is
Foreign Minister Adam Malik. He appears to have
good working relations with Suharto and seems likely
to remain in a key position. Half of the cabinet mem-
bers are civilians, and the parliament and congress,
both predominantly civilian., have enjoyed great:hr.-
authority and freedom of expression since mid-1966
than at any time in the last six years. Suharto him-
self leans strongly upon civilian advisers on most
economic matters.
8. Civilian leaders and organization, however,
are eager to reassert themselves after years of Su-
karno's "guided democracy," and are fretful under
what they regard as a new version of "guided democracy"
even though the "new order" is anti-Communist and
more relaxed in its controls toward non-Communists
than the previous regime. Civilians particularly re-
sent the growing pervasiveness of military influence,
but they have little capability to translate their feel-
ings into significant political action. The two major
parties in Indonesia are the Moslem Nahdatul Ulama (NU)
and the Indonesian National Party (PNI). The former
is generally regarded as "new order" although it has
a long background of corruption and opportunism. The
PNI remained pro-Sukarno throughout the postcoup period
and only reluctantly dissociated itself from him when
his political demise appeared inevitable. Of the six
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small parties the most active is the Catholic Party.
The other five are two Moslem parties, a proarmy
party, a so-called "national Communist" party, and
the Christian (Protestant) Party.
9. A development of the postcoup period was
the organization of "action fronts" which sometimes
call themselves collectively the "Generation of '66."
They provided the most dynamic support to the army's
anti-Communist and anti-Sukarno campaign and in some
instances urged more extreme action than Suharto
was willing to take. The most active of these groups
have been the two student fronts, KAMI and KAPPI, com-
posed respectively of university and high-school age
youth, and the scholars' front, KASI. Although the
students have returned to their classes, some of their
leaders'and those of KASI remain politically active
and about 30 of them have been appointed to parliament.
The action front leaders are likely to remain the
most dynamic element, within the civilian contingent
of the Indonesian Government.
10. An early crystallization of civilian forces
into effective coalitions is not likely. The probable
pattern will be one of shifting alliances, with the NU
and PNI occasionally working together against the mil-
itary and just as often pitted against each other
while the smaller parties change positions in oppor-
tunistic fashion. The action fronts probably will
be in a swing position between the parties and the
military depending upon the issue at hand. The in-
stability of the civilian forces, however, will be
within the context of a stable army-supported regime
and therefore will not endanger national equilibrium.
11. Suharto is encouraging legislative action
in preparation for elections, now slated to be held
no later than mid-1968? Speculation is already grow-
ing, however, that this schedule will not be met.
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Communism
12. The outlawed Communist Party (PKI) remains
fragmented and under continuing military pressure.
Its decline since October 1965 probably has not yet
reached its lowest point. The party is presumed. to
retain a significant following in East and Central
Java, but the PKI is not likely.to attempt a test of
its strength in those areas. Its policy apparently
is to be as inconspicuous as possible and to focus
on infiltration of other organizations.
The Economy
13. Suharto recognizes that the deteriorated
economy is now the nation's major problem. He is
aware that basic remedies require considerable time,
but he also realizes that obvious improvements--
even if superficial ones--are a political necessity
within the next year or two.
14. With the help of the International Monetary
Fund (IMF), Indonesia formulated an economic stabil-
ization plan which it began to implement in October
1966. Among the moves called for by the plan are a
balanced budget, rigid credit policies, a realistic
and simple exchange rate, increased tax collection,
revision of the banking system, and increased par-
ticipation in the economy of private capital, both
foreign and domestic. The most recent steps taken
are intended to increase export incentive, reduce
smuggling, and liberalize foreign exchange controls.
A foreign investment law has also been passed which
improves the climate for foreign interests. Inter-
national Monetary Fund advisers, while gratified at
some of the results of the stabilization program,
have cautioned that financial stability cannot be
achieved unless all economic measures are implemented
with greater effectiveness.
15. In view of its lack of foreign reserves,
Indonesia has been and remains unable to meet pay-
ments, other than cash obligations, on its interna-
tional debt of approximately $2.4 billion, and in
1966 requested some form of debt relief from its
creditors. In a series of meetings in 1966 and 1967,
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Western creditors agreed to reschedule payments on
debts already in arrears and on certain categories
of loans and export credits falling due through De-
cember 1967. Separate bilateral meetings with the
Soviet Union, Indonesia's largest creditor, also
resulted in a rescheduling of debt payments.
16. The IMF has stated that debt relief will
be insufficient to assist the Indonesian economy to
advance and has suggested Indonesia's need for as-
sistance during CY 1,967 at $200 million. Western
nations are currently considering the extent of
their assistance. No new credits appear likely to
be granted by the Soviet Union in CY 1967.
Foreign Policy
17. The reorientation of Indonesian foreign
policy from an anti-West, pro-Peking line to one of
nonalignment may be considered to have been com-
pleted in September 1966 when Indonesia re-entered
the United Nations. In practice, Indonesian foreign
relations today are oriented toward the non-Commu-
nist world although Indonesia preserves correct re-
lations with the Soviet Union and other bloc nations.
Relations with Communist China remain unfriendly.
The major current issue between the two countries
is Indonesia's treatment of Overseas Chinese. Pe-
king charges prejudicial and often illegal treat-
ment of the Chinese minority; Djakarta charges Pe-
king with interference in internal Indonesian af-
fairs. The Indonesian-Chinese relationship, how-
ever, is low-keyed and is not a major issue at this
time in either capital.
18. Indonesia continues to move toward the regu-
larization of relations with Malaysia. At Malaysia's
invitation, Indonesia will send observers to the
April elections in the Malaysian state of Sabah.
Major Sabah parties have already reaffirmed their
desire to remain in Malaysia, and their anticipated
electoral victory will fulfill Indonesia's final
condition --"reaffirmation"--for ending confronta-
tion. Indonesia reportedly plans to resume diplo-
matic relations with Malaysia within the next few
months.
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19. Indonesia recognized Singapore last June,
but an exchange of diplomatic representatives was
postponed so that Singapore and Malaysia could re-
sume relations with Indonesia at the same time.
Meanwhile Indonesia and Singapore have moved to
regularize their trade relations, but a return to
the preconfrontation level of trade is not expected.
20. Indonesia retains its interest in expanded
regional influence, but the Suharto regime is pur-
suing this policy within the context of friendly ,
relations rather than within the former one of mili-
tary expansionism. Foreign Minister Adam Malik is
exploring the prospects for a four-power cultural
and economic organization which would be composed
of Indonesia, Malaysia, the Philippines, and Thai-
land. Malik is opposed to a regional military pact
and has publicly corrected statements from within the
military establishment which have implied Indonesian
interest in a regional defense arrangement. Indo-
nesia has resumed active participation in regional
UN activities and holds a directorship in the Asian
Development Bank.
21. Indonesia has reduced its diplomatic repre-
sentation in Africa, however, and for the time being
has abandoned its pretensions to Afro-Asian leader-
ship.
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