INDONESIA: PROSPECTS INTO THE MID-1980S

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00573R001101520003-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 22, 2016
• Document Release Date: November 15, 2010
• Sequence Number: 3
• Publication Date: October 1, 1982
• Content Type: NIE

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Director of S c_ t
Central
Intelligence F
Indonesia: Prospects
Into the Mid-1980s
Special National Intelligence Estimate
SNIE 55-82
I October 1982
Copy 231
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S N I E 55-82
INDONESIA: PROSPECTS
INTO THE MID-1980s
Information available as of 14 September 1982 was
used in the preparation of this Estimate.
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THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL
INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS.
The following intelligence organizations participated in the preparation of the
Estimate:
The Central Intelligence Agency, the Defense Intelligence Agency, the National Security
Agency, and the intelligence organization of the Department of State.
Also Participating:
The Assistant Chief of Staff for Intelligence, Department of the Army
The Director of Naval Intelligence, Department of the Navy
The Assistant Chief of Staff, Intelligence, Department of the Air Force
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CONTENTS
Page
KEY JUDGMENTS .................................................................................................... 1
DISCUSSION .............................................................................................................. 5
The National Leader .............................................................................................. 5
The Power Structure .............................................................................................. 5
The Military ............................................................................................................ 6
The Technocrats' Economic Track Record .......................................................... 7
The Financial Crunch ........................................................................................ 7
The Government's Response .............................................................................. 7
Underlying Pressures .............................................................................................. 9
Challenges to the Regime ....................................................................................... 9
Plots Within the Army? ......................................................................................... 10
Foreign Relations: Continuing Moderation .......................................................... 10
ASEAN States ...................................................................................................... 11
China ................................................................................................................... 12
The Soviet Union ................................................................................................ 12
Japan and Western Europe ................................................................................ 12
The Third World ................................................................................................ 12
Indonesia and the United States ............................................................................ 13
Economic Policy ................................................................................................. 13
US-Chinese Relations .......................................................................................... 14
Middle East ...............................................................................:.......................... 14
Law of the Sea .................................................................................................... 14
Convergent Interests ........................................................................................... 14
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KEY JUDGMENTS
The visit to Washington of Indonesia's President Soeharto on 12
and 13 October comes at a time when US-Indonesian relations are on
the upswing:
- Several contentious issues involving naval ship transits, aid, and
human rights, which have strained relations in recent years,
have since been resolved or reduced in significance.
- Jakarta regards the current US administration as more forth-
coming on aid and more sympathetic on human rights than its
predecessor.
Parallel interests on issues important to both countries should help
to strengthen relations between them in the next few years. These
include a mutual interest in regional security, Indonesia's economic
development, and the enhancement of ASEAN.
Indonesians look to the United States for military and economic aid
and as the principal guarantor of the region's security. Although firmly
anti-Communist, they will continue to pay homage to nonalignment
and will resist the appearance of being drawn into the American orbit.
Frictions nonetheless can be expected particularly over economic
issues and the evolving US-Chinese relationship:
- Soft world markets for both oil and nonoil exports have
reversed Indonesia's export fortunes and spurred aggressive
export promotion measures by Jakarta just when high unem-
ployment is strengthening protectionist sentiment in the indus-
trial countries.
Worsening financial strains will intensify Jakarta's displeasure
over the likely divergence between Indonesia and the United
States on North-South issues and the constraints on US ability
either to provide aid or improved access to American markets
for Indonesian exports.
Jakarta would be especially distressed by US arms sales to
Beijing. Indonesia remains convinced that China poses a long-
term threat to the region.
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US policy on the Middle East and Law of the Sea are other, though
less contentious, areas where US and Indonesian views do not coincide:
- Indonesia will remain critical of US support for Israel and can
be expected to support moderate Islamic positions, generally
following Saudi Arabia's lead.
- The Indonesian Government is anxious for international valida-
tion of the archipelagic concept and can be expected to press
for some form of formal US recognition of Indonesia's sover-
eignty over its archipelagic waters.
Southeast Asia will remain the principal focus of Indonesian
foreign policy, with priority given to ASEAN initiatives. Given Soe-
harto's firm commitment to ASEAN unity, Jakarta is not likely to break
ranks with its ASEAN partners on Kampuchea despite some misgivings
about what Jakarta perceives as ASEAN's confrontational policy toward
Vietnam.
We see no change in Indonesian political leadership in the offing.
President Soeharto, already in power for 16 years, will be reelected in
March 1983 and will continue his presidency at least until 1988, health
permitting. Soeharto retains the firm support of the military, which
effectively preserves internal security throughout the country.
The opposition is weak and divided:
- Political parties are little more than creatures of the regime,
maintained to preserve the semblance of democracy.
- Groups that might be expected to exploit discontent, such as
students, Muslim extremists, and the remnants of the banned
Communist Party, are all politically passive at present.
- Minor insurgencies persist in outlying areas but offer no threat
to the stability of the regime.
There is some danger that Soeharto's growing remoteness may
cause a misstep in handling the tough political and economic realities
his government increasingly faces. Thus far, he has shown a willingness
to-accept advice from his civilian technocrats, even when it threatened
his political popularity or the vested interests of his military associates.
The regime nonetheless faces growing socioeconomic problems
caused by burgeoning population pressures and growing urbanization
on the main island, Java, which will not be resolved by transmigration
to other islands. These come at a time when economic recession is
weakening the government's ability to create jobs for the 2 million
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entrants to the labor force each year. The increasing number of youths
migrating to Java's cities and unable to find jobs could in time provide a
volatile mix that could be manipulated by antiregime forces.
As in the past, periodic outbursts of violence against local Chinese
are likely to be the most visible symptom of discontent and frustration.
These could spill over into actions against foreigners or even against the
government if not quickly suppressed by security forces. A sustained
antigovernment movement is less likely.
Indonesian Islam is not the political or even the social force it is in
the Middle East, although reformist Islam is gaining popularity. The
government is acutely sensitive to potential threats from the Muslims,
but we do not see an Islamic fundamentalist movement emerging to
threaten the regime in the next few years.
The military is the key to continuity in Indonesia's authoritarian
political structure and development-oriented policies. Should Soeharto
die in office or become incapacitated, the odds are that the inner
military circle around him would select an acceptable successor-most
likely another Javanese general-who would continue to emphasize
development and stability at home and the moderate, Western-oriented
foreign policy Jakarta has pursued for the past 16 years.
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DISCUSSION
President Soeharto has done more good than harm to the
country.
Headline from Indonesia Times, April 1982, quoting
Admiral Sudomo, Soeharto confidant
1. Indonesia's President Soeharto, a former general,
came to power in the mid-1960s as a heroic figure
after crushing a threatened Communist overthrow of
the government. He is a stolid, reticent individual who
reflects his Javanese peasant heritage. Although he did
not initially seek the presidency, through his subse-
quent efforts that position was conferred on him in
1968, two years after he had actually begun exercising
power. Over the past decade and a half Soeharto has
politically evolved into a credible and powerful father-
figure, skillfully eliminating potential rivals. His gen-
erally benevolent authoritarianism has brought un-
precedented stability and unity to Indonesia, in sharp
contrast to the mercurial and ultimately disastrous
regime of his charismatic predecessor Sukarno.
2. Soeharto, 61, currently stands unchallenged for a
fourth five-year term when the People's Consultative
Assembly, a largely appointed body, meets in March
1983 to elect a president and a vice president. We
fully expect him to lead Indonesia until 1988 unless he
dies during that time or becomes incapacitated. He
has minor health problems but none are life threaten-
ing or serious enough to diminish his capacity to rule
confidently.
3. Soeharto's style has also evolved from the more
easygoing and consultative form of his early years into
one more self-assured and remote. Today his inner
circle consists of old loyalists, including both active-
duty officers and military retirees. All important
decisions require Soeharto's personal blessing. His cab-
inet meetings have taken on a courtlike tone, with
appropriate deferential behavior on the part of his
ministers. We expect that President Soeharto's aloof-
ness, buttressed by another election victory next
March, will continue, if not intensify. His practice of
listening only to trusted advisers, however, risks the
danger of further insulating him from tough political
or economic realities in the years ahead.
The Power Structure
4. Power emanates from Soeharto down through
the senior military and technocrats who run the state
bureaucracy. No outside groups (such as political
parties, Chinese business interests, or religious leaders)
have significant leverage with the senior bureaucracy,
while the judicial and legislative branches of govern-
ment serve mainly as expeditors of executive decisions.
This centralization of power is reinforced culturally by
a Javanese tradition of respect for hierarchical rela-
tionships and officialdom. Although centralized sche-
The government tolerates corruption as long as it is limited
and does not harm anyone or national development. In
eliminating corruption we cannot work like the US adminis-
tration. If we did as the Americans do, there would be no
officials left. As it happens, I have a nice watch and a nice ring
that are very expensive; if they had come from wages, it
would not have been sufficient.
General Yoga Sugomo, chief of BAKIN (State Intelligence
Agency), February 1982
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matically, the state bureaucracy is not efficient; indeed,
it is notorious for its redtape, indecisiveness, and
corruption.
5. Within the central bureaucracy, moreover, there
are competing personalities and networks that vie for
the President's ear. Soeharto listens to his military
commanders, his technocrats, and his inner circle. When
economic development or political stability is at stake,
he tends to accept advice from his civilian technocrats-
even when it threatens his political popularity or the
vested interests of his military associates. The most
recent example of this was his approval of the 60-
percent increase in domestic fuel prices in January 1982,
four months before parliamentary elections.
6. On the other hand, no individual or group
appears to sway Soeharto consistently. We believe the
most successful confidant is Lieutenant General Sud-
harmono, the State Secretary who has been Soeharto's
"gatekeeper" throughout his administration.
7. In the political arena, Soeharto successfully uses a
rather unwieldy conglomeration of "functional"
groups-civil bureaucrats, labor associations, women,
youth, farmers, etc.-under the acronym GOLKAR,
to serve as the government political party. Backed by
military support and lavishly financed by government
funds, GOLKAR will remain the predominant politi-
cal instrument at least as long as Soeharto is in office.
Determined to maintain the system, GOLKAR has
absorbed within its hierarchy many ambitious younger
Indonesians who share the regime's disenchantment
with Western-style political party systems.'
GOLKAR is a kind of victim because it has had to do the dirty
work of carrying out policy based on the military dominance
of the government, even though it has often disagreed on that
policy.... the future of democracy in Indonesia will depend
on how effectively the armed-forces-controlled government
can continue to silence its antithetical forces....
A leader of GOLKAR, the government party, July 1982
' All political parties espouse the official state ideology, "Panca-
sila," which encompasses the five principles of belief in God,
nationality, humanity, people's sovereignty, and social justice. Indo-
nesians use "Pancasila" to emphasize their country's independence
from foreign ideologies and their commitment to national unity.
The Military
8. The Indonesian military is the key to continuity
in the authoritarian political structure and is the
principal underpinning of Soeharto's regime. The
"New Order" regime has been characterized by the
penetration by active or retired military into key roles
in the higher central bureaucracy, rationalized by the
longstanding Indonesian military philosophy that the
Army has a "dual function," both to protect the state
and to contribute to its sociopolitical development.
9. At present the armed forces-especially the
Army-exercise nationwide control through three im-
portant channels:
-A vertical command structure paralleling civil
institutions down to village level.
- Area leadership councils, linking the regular
military structure with civilian and police au-
thorities at district levels.
- Military personnel appointed to civilian minis-
tries and state enterprises considered critical to
the national interest.
The armed forces have traditionally placed great
importance on maintaining links to the people at all
levels of society. They have recently become heavily
involved in a nationwide civic action program and in
efforts to expand village security by supporting local
paramilitary organizations.
10. The military currently occupies 50 percent of
all senior positions in the bureaucracy. The military
controls key ministries pertaining to internal security,
the State Secretariat, and the State Intelligence Agency
(BAKIN). It also controls key enterprises such as
Pertamina, the state oil company; Bulog, the agency
responsible for food imports and distribution; and
numerous state-owned corporations.
The soldiers' assignment to work in rural areas not only serves
to firm up the collaboration between the armed forces and the
people, but also to lay down the traits and foundations of
mutual help, which has become the identity of Indonesian
state and people.
Explanation of the Army's civic action program from
Defense Minister Jusuf, July 1980
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11. Within the government apparatus, the intelli-
gence establishment plays a major role both in domes-
tic and foreign policy formation and in operations
against any opposition to the regime. Two agencies
with deliberately overlapping responsibilities and per-
sonnel perform this function. BAKIN provides intelli-
gence related to external or internal security. KOP-
KAMTIB-an organizational superstructure that
permits rapid exercise of de facto martial powers in
cases involving threats to internal security-has over
the years enormously expanded the scope of its activi-
ties so that it now monitors virtually all the political
life of the country, with powers of arrest overriding
those of civil authorities. It is headed by Admiral
Sudomo, another close friend and adviser of Soeharto.
The Technocrats' Economic Track Record
12. Soeharto's "New Order" was founded on the
principle that political stability would be ensured
chiefly by a commitment to economic development.
Soeharto has allowed latitude in formulating economic
policy to a group of Western-trained civilian techno-
crats. With some constraints-reflecting an antiforeign
bias from the colonial past and a fear of economic
domination by the country's Chinese minority-the
technocrats adopted a generally market-oriented de-
velopment strategy whose initial thrust concentrated
on public investment in infrastructure and heavy
industry.
Our economic development has been stimulated and helped
by Western capitalism. It does not mean that we are going
capitalistic. Of course we must always guard ourselves against
any pull toward capitalism, which is against the spirit and
letter of our Constitution.
From Indonesia Times, August 1982, quoting General
Surono, Coordinating Minister for Social Welfare
13. The economy has made major strides from the
chaotic conditions of the late Sukarno years, achieving
growth rates averaging more than 7 percent annually
during the 1970s. Oil exports have underpinned the
economic development, supplying two-thirds of the
country's foreign exchange earnings and financing
about 60 percent of government outlays in recent
years.
14. The government has also invested heavily in
expansion of rice output, through rehabilitation and
expansion of irrigation systems, and the spread of
high-yield variety seeds, fertilizer, and pesticides. The
effort has converted Indonesia from the world's largest
rice importer in 1977-78 to near self-sufficiency in rice
in 1982.
15. The world oil glut that emerged in 1981 and the
prolonged recession reversed Indonesia's export for-
tunes and presage a period of financial strain for the
next few years. Both oil and major nonoil products
were hit by softening foreign demand, which is caus-
ing a sharp downturn in 1982 (see figure 1). Indonesia's
current account deteriorated from a $5 billion surplus
in 1980 to a small deficit in 1981, and we project two
consecutive deficits of $7 billion annually in 1982 and
1983 even if Jakarta slows import growth and invest-
ment in heavy industrial projects (see figure 2). Be-
yond 1983, recovery in export growth and continuing
import restraint would gradually reduce the deficits to
more manageable levels.
The Government's Response
16. Jakarta can finance temporary deficits through
a combination of drawing down reserves, eliciting
foreign aid and investment, and acquiring foreign
loans. The 1979-80 export boom boosted official for-
eign exchange reserves from $2.7 billion in December
1978 to a peak of $7.4 billion in October 1981. By
March 1982, however, Jakarta had already drawn
reserves down by more than $1 billion in less than six
months (see figure 3). Comments to the press by chief
economic minister Widjojo in August indicated re-
serves have continued to fall at that pace. We believe
continuation of this rate of decline would quickly run
reserves down to levels Jakarta would find unaccept-
able and damage its international creditworthiness.
17. The government has already taken the first
steps to strengthen the external accounts. Beginning in
mid-1981, when export taxes on major commodities
were cut, Jakarta has adopted a number of export
promotion measures, including some that have met
with strong disapproval from foreign trading partners
and suppliers. In January 1982 the government an-
nounced measures designed to ease payment and
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Figure 1
Indonesia: Exports (f.o.b.)
Figure 2
Indonesia: Current Account
Figure 3
Indonesia: Official Foreign
Exchange Reservesa
80 82a 0 1975 76
a End of period.
0
credit terms, reduce export credit interest rates, and
simplify customs and port procedures. The govern-
ment has also permitted a gradual depreciation of the
rupiah but denies any plans for a major devaluation.
18. The government followed up these initial moves
with more controversial measures that could back-
fire-a counterpurchase policy and shipping restric-
tions. The counterpurchase scheme is a disguised
barter technique similar to those of European Com-
munist and Third World countries that pay for their
imports with goods rather than cash because they lack
hard currency. The policy could increase development
costs as foreign suppliers raise their prices to cover the
cost of disposing of Indonesian goods they otherwise
would not buy.
19. The shipping restrictions aim at boosting for-
eign exchange earnings at the expense of foreign
shipowners and the entrepot port of Singapore. The
1974 75 76 77 78 79 80 81 82a 83a new shipping rules restricting government cargoes to
a
Projected.
Indonesian ships could affect up to 50 percent of US
exports to Indonesia. The government is also trying to
encourage the use of Indonesian ports by prohibiting
shipowners from charging higher freight rates for
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cargoes shipped from Indonesian ports than for those
from Singapore. Foreign steamship companies have
complained about the measures, and the government
may be forced to be more flexible than the rules
suggest.
Underlying Pressures
20. The current financial strains come at a time
when nearly 2 million workers are entering the labor
force annually, putting intense pressure on the govern-
ment to finance job creation, especially on overcrowd-
ed Java. The government has long tried to alleviate the
population pressure on Java by relocating people to
the outer islands, an effort that began in Dutch
colonial times. The program has consistently fallen
short of the government's extremely ambitious goals
and has been more than offset by the natural increase
in Java's population augmented by an influx of mi-
grants from the outer islands. Java remains the most
densely populated rural area in the world, with a
population growing by 2 million annually. The in-
creasing number of youths migrating to Java's cities
and unable to find jobs could in time provide a volatile
mix that could be manipulated by antiregime groups.
21. As in the past, anti-Chinese riots are likely to be
the most visible symptom of discontent and frustra-
tion. The Indonesian tradition of letting social pres-
sures build up until the strains result in an explosion-
running amok-could well result in public outbursts at
any time. The violence could also easily spill over into
rioting against Japanese and other foreign interests
and, if the security forces do not move quickly to
suppress it, could escalate into antigovernment
violence.
22. How severely the financial strains impact on the
population in the next few years will depend largely
on the ability of the economy to provide some means
of livelihood for youths entering the labor force. Up to
now, Indonesians have shared the limited number of
jobs through widespread underemployment and relied
on extended family systems to support the jobless.
Crowds of resentful urban youths, however, will place
increasing demands on the government at a time when
shrinking financial resources are weakening its ability
to satisfy rising expectations. If the Soeharto govern-
ment does not slow its ambitious development pro-
gram, however, it will run the risk of a severe financial
crisis in the next two or three years that would force
austerity moves even stiffer than those already adopt-
ed and repressive measures to enforce them.
Challenges to the Regime
23. Despite the possibility of rising discontent, Soe-
harto has no viable opponent challenging his rule. The
two opposition parties are so weak and internally
divided that they show little potential for exercising
any significant leverage, let alone posing an effective
challenge to Soeharto in the foreseeable future. Nei-
ther party has had any representation at the cabinet
level since the mid-1970s. Neither party is allowed
political activity at the village level except during a
brief, well-controlled preelection period. Furthermore,
the most outspoken leaders of both parties have been
effectively excluded from the parliament by the gov-
ernment's manipulation of electoral lists in last spring's
campaign.
24. The PPP (Development Unity Party), an amal-
gam of former Muslim parties, is unable to draw on
the social force of Islam to unify opposition against the
government's secularist policies. The PDI (Indonesian
Democracy Party), an uneasy alliance of nationalists
and former Christian parties, suffers even more than
the PPP from internal divisions and government ma-
nipulation. The government wants to keep both parties
alive as the "loyal opposition," however, in order to
maintain a semblance of democracy.
25. Groups that might be expected to capitalize on
popular discontent, such as students, Muslim extrem-
ists, and the remnants of the banned Indonesian
Communist Party are all dormant politically. Their
lack of an attractive alternative ideology, beyond the
standard complaints that the regime's development
policies are inequitable, undermines their potential for
Members of Hamka (Muslim student regiment) are not now
interested in political activity, since any activity against the
government or against the military would mean suicide.
Student leader in Jogjakarta, Central Java, August 1982
Most students continue to be apathetic toward, weary of, and
generally fed up with political activities and are currently
concentrating on their studies ... the government is just too
strong.
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widespread public support. Although Islam in Indone-
sia is not the social force it is in the Middle East,
reformist Islam is gaining popularity. The government
remains acutely sensitive to potential threats from the
Muslims.
26. The government does take seriously its ongoing
struggles against minor insurgencies in the less popu-
lated outer islands, with rebellious pockets in Aceh,
Kalimantan, East Timor, and Irian Jaya. Despite
military operations against them, these nagging insur-
gencies will not go away, although none of them
represents a threat to the stability of the regime.
Furthermore, we do not believe that any of the small
rebel groups receive significant outside financing or
arms, although antigovernment groups in both East
Timor and Irian Jaya have received some international
sympathy.
Plots Within the Army?
27. The only group with the muscle to effectively
challenge Soeharto is the Army, and it has little reason
to do so. The top Army command, still run by the
"Generation of 45" that fought in the revolution with
Soeharto, has been extremely well rewarded by him
and the system. He recently has moved to maintain
this loyalty by inaugurating a new defense bill that
will separate the Ministry of Defense from the active
military command structure, thereby giving civilian
jobs with continuing policy influence to his loyalists,
virtually all of whom will be retired from active
military service by the mid-1980s.
The 1945 generation is beginning to hand over the reins to the
newer generation but the older leadership still has one
important task to fulfill; we must continue, complete, and
round out once and for all the process of reforming political
life.
President Soeharto, in speech before Parliament, 16 August
1982
28. The prospect of younger officers, now in their
forties and early fifties, attempting to seize the reins of
power is likewise fairly remote in the next few years.
These individuals, the so-called Magelang generation,'
2 Graduates of the Indonesian Armed Forces Academy established
in Magelang in 1957.
appear to share the aims of the older "Generation of
45" in that they are ardently anti-Communist, suspi-
cious of political Islam, and dedicated to stability. By
virtue of the new defense establishment arrangements
they now have improved prospects for promotion to
senior leadership positions and the benefits accompa-
nying them. This process has already begun.
29. In sum, we see little chance that Soeharto will
be forced from the scene. If, however, he should be
suddenly removed from the political arena by death or
incapacitation in the next two to three years, we
believe two alternative scenarios could emerge:
- First, and the most likely in our opinion, is that
the top Army officers clustered around Soeharto
would negotiate among themselves for an accept-
able successor committed to maintaining the
system that has served them so well. The new
ruler would be military, most likely a Javanese
(the Javanese are the politically and ethnically
dominant group in Indonesia), and probably
would come from the clique now in the corridors
of power.
- A less likely alternative would be factionalism
that could produce protracted dissension, with
the remote possibility that a military darkhorse
harboring either more reformist or nationalistic
ideology might make a successful bid for the
presidency. Unless he swiftly achieved a military
consensus on his legitimate right to rule, Indone-
sia would be likely to undergo a period of
instability.
30. To our knowledge, Soeharto has not indicated
his choice of a successor, thus adroitly keeping poten-
tial rivals for his position off balance and vying for his
favor. Nor has he spelled out a mechanism for the
orderly transfer of power in the future. Once he is
elected to his fourth term in 1983, the question of an
eventual successor or Soeharto's continuation in office
beyond 1988 will be the topic of increasing speculation
by those around him. Whoever follows Soeharto, the
institutions of basic military control and authoritarian
rule he has so well established are likely to be
continued.
Foreign Relations: Continuing Moderation
31. Indonesia, in the next few years, is not expected
to move away from the moderate foreign policy it has
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followed since the advent of the Soeharto regime in
1966. Unlike those of Sukarno, who relished confronta-
tion and a visible international role, Soeharto's inter-
ests reflect not only the more traditional insular
outlook of the Javanese but his near obsession with
economic development as well. The regime's belief
that development requires substantial infusions of
foreign aid and investment underlies its tilt to the
West. A strong anti-Communist bias reinforces this
pro-Western inclination. Indonesians nonetheless
maintain a strong philosophical commitment to non-
alignment as a basic tenet of their foreign policy and
are inclined to maintain some distance from all the
major powers-the United States included.
Indonesia's commitment to nonalignment has deep roots. It
remains a pillar of its foreign policy. While in practice there
remains no comparison between the close range of cooperation
with the United States across a wide spectrum of activities and
the limited range of contacts with the Soviet Union, obeisance
must be paid to the theology of nonalignment.
32. Indonesian foreign policy focuses primarily on
Southeast Asia, with outside powers viewed in terms of
their impact on the region. Indonesians see a continu-
ing danger of great-power confrontation in the region
but no immediate external threat to themselves or
their ASEAN neighbors. There is growing concern,
however, about potential threats from abroad further
in the future, especially in the mineral-rich waters and
outlying areas of the archipelago. Indonesia's sea-
boundary dispute with Vietnam and the Soviet
Union's enhanced naval presence in the region are
elements of this concern, which is aggravated by the
flow of Vietnamese refugees into Indonesia's northern
territory and by an upsurge of piracy. Indonesia has
undertaken a fairly ambitious program to enhance its
Vietnam is clearly viewed as the primary short-term threat to
Indonesia, with the most likely source of confrontation or
conflict being over disputed oil and gas claims in the South
China Sea.... Indonesia has plans to develop a force oriented
toward protecting or regaining offshore oil platforms from
terrorists or pirates, noting that the South China Sea is a likely
area for such activity.
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naval and air capabilities in the remote reaches of the
archipelago-part of a general five-year program to
upgrade the armed forces.3
ASEAN States
33. The Association of Southeast Asian Nations is
the centerpiece of Jakarta's foreign policy. Indonesians
still regard their nation as the natural leader of the
region but do not try to dominate their neighbors and
increasingly formulate political and economic policies
in an ASEAN context. Although there has been a
significant broadening of bilateral military coopera-
tion between Indonesia and its ASEAN partners-a
trend we expect to continue-Jakarta would strongly
resist ASEAN's expansion into a military pact.
34. Within ASEAN, Jakarta's ties are closest with
Malaysia-bonds strengthened by common language,
culture, and religion. Somewhat prickly relations with
Thailand and Singapore have been smoothed over in
recent years in the interests of ASEAN unity. Relations
with the Philippines remain the most distant-more a
reflection of Manila's relative inactivity in regional
affairs than of any outstanding bilateral problems-
although Jakarta views the US bases in the Philippines
as a welcome contribution to regional security.
35. We believe that the Indonesians, despite misgiv-
ings over aspects of ASEAN's Indochina policy, will
maintain public solidarity with their ASEAN brethren.
They will continue to argue within ASEAN councils,
however, for a less confrontational policy toward
Vietnam and to pursue their own unilateral efforts
with Hanoi to find a compromise solution.
' The armed forces have been procuring a variety of weapon
systems designed primarily to build more effective deterrence and
to improve the military's capability to detect and respond rapidly to
any territorial challenge. Emphasis has been placed on replacing or
refurbishing old, obsolescent equipment rather than drnstynlly
increasing force size.
We reject and we cannot accept the government of some
country that is set up by and with the help of armed forces
from outside.... It is hoped that Vietnam can show the
attitude that this country does not endanger the security of its
neighbors and does not have ambitions of territorial expansion.
President Soeharto, in budget speech to Parliament, Janu-
ary 1982
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China
36. The Indonesians' strong antipathy toward China
is a major factor in Jakarta's thinking. Unshakably
convinced that China poses the principal long-term
threat to regional stability, Indonesians regard a strong
and independent Vietnam as a potential buffer against
Chinese expansion. There is little likelihood of change
in Indonesian attitudes toward China while Soeharto is
President. The military continues to have strong mis-
givings about the security problems that might be
generated by a Chinese diplomatic presence in Indo-
nesia. The emotional residue from the bloody upheav-
al in Indonesia in 1965-66 and China's lingering ties
with the Communist parties in the region feed Indone-
sian skepticism about Chinese intentions. In Jakarta's
view, regional hegemony remains China's ultimate
goal.
The Soviet Union
37. Indonesia's intense preoccupation with China
tends to blur its perception of a Soviet threat. Indone-
sians agree that the Soviet Union and Vietnam are
capable of posing an immediate threat to the region,
but they argue that Moscow's preoccupations in Af-
ghanistan and Poland, along with economic problems
at home, have reduced Soviet interest in Southeast
Asia and will limit its commitment to Vietnam.
38. Bilateral relations with the Soviet Union are
distant but correct, with a facade of cordiality deliber-
ately maintained by Indonesia in the interest of
keeping the appearance of balanced foreign policy
and its nonaligned credentials. Military and economic
aid from the Soviet Union, significant in Sukarno's
time, are in abeyance. Direct bilateral trade is negligi-
ble. The Soviet Union nonetheless has one of the
largest diplomatic missions in Jakarta, an anomaly that
causes some concern for the Indonesians. Although
they believe that the Soviets are both less interested
and more constrained by cultural and racial barriers
than are the Chinese, Indonesian complacency has
been shaken by a recent spy case in Jakarta, which led
to the expulsion of several Soviet officials.
Japan and Western Europe
39. Indonesia's relations with Japan are still subtly
strained by memories of the wartime occupation and
contemporary perceptions of Japan as an economic
predator. Japan nonetheless is a vital trading partner,
investor, and source of economic and technical assist-
ance. Japan takes more than half of Indonesia's crude
oil exports and all of its liquefied natural gas (LNG).
Indonesia accepts the need for improved Japanese
defense capabilities around the home islands but reacts
strongly against any suggestion of a Japanese military
role in Southeast Asia and is highly critical of what
Jakarta perceives to be American pressure to move
Japan in this direction.
40. Western Europe is growing more important to
Indonesia as a market, investor, and source of technol-
ogy and higher education. The Europeans have be-
come an important supplier of military equipment as
Jakarta seeks to diversify its sources of weaponry.
There have been strains over European quotas on
imports from Indonesia, an issue likely to become
increasingly contentious as Indonesia more aggressive-
ly seeks to develop its markets for nonpetroleum
products at a time when the world economy is
sluggish.
The Third World
41. Indonesia plays a quiet, pragmatic role in non-
aligned and Islamic forums, in OPEC, and in the
UN-staying firmly in the ranks of the moderates.
Although a firm advocate of a new international
economic order, technology transfer, and other stand-
ard Third World positions, Soeharto favors a coopera-
tive, nonconfrontational approach to the industrialized
world in seeking a better deal for the developing
nations. Indonesia has strongly resisted efforts by
radicals in the Nonaligned Movement, such as Cuba,
to capture the movement or use it as an anti-US
forum. As the world's largest Muslim country, howev-
er, Indonesia feels obliged to support moderate "Islam-
ic" positions on international issues, generally follow-
ing Saudi Arabia's lead. The Indonesians carefully
avoid the inter-Islamic quarrels that plague the Middle
East, but they are firmly in the Arab camp on Arab-
Israeli issues.
42. Indonesia is making an effort to exercise more
active diplomacy in many areas of the world. This
stems more from a desire to gain support on issues
important to Indonesia-East Timor being the para-
mount one-than from any interest in strengthening
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relations for their own sake. Jakarta is confident that its
annexation of East Timor in 1976 is a fait accompli but
finds the continuing international disapproval a nagging
irritant. Jakarta's active diplomatic efforts to remove
the issue from the UN agenda will undoubtedly remain
a high priority.
Indonesia and the United States
43. Indonesia's size, location, resources, and moderate
orientation all underscore its importance to US interests.
It is the world's fifth most populous nation (158 million
people) and sits astride strategic sea lanes between the
Pacific and Indian Oceans. It generally follows policies
favorable to US interests, supporting moderate positions
in the Nonaligned Movement, the Islamic Conference,
OPEC, and the UN. Its participation in ASEAN en-
hances regional stability. And it is important as a trading
partner (approximately $6 billion annually in two-way
trade), the site of large US investments, and the supplier
of 7 percent of US oil imports, more than 40 percent of
US natural rubber imports, and significant quantities of
coffee, tin, and spices.
44. Indonesians regard the United States with some
ambivalence. There is popular admiration for the
American democratic system but criticism of what
Indonesians perceive as an overly materialistic and
individualist society. The United States is viewed as a
major source of aid and investment and as the princi-
pal guarantor of the region's security. At the same
time, there is strong resistance to being drawn into the
American orbit, underlying resentment over Indone-
sia's dependence on foreign largess and protection, and
a visceral mistrust of all major powers. This mistrust
stems from Indonesia's colonial heritage and subse-
quent experience with foreign involvement in subver-
sive actions against its government. Indonesian leaders
are sensitive to real or imagined slights and to Ameri-
can actions that seem to ignore their interests.
45. US-Indonesian relations have improved in re-
cent years. Several issues that previously strained
relations have been resolved or have receded in
importance:
- One such issue was notification of US warship
transits. The Indonesians now appear to be satis-
fied with information they currently receive on
US and Soviet activities in the region, which
mention transits of US naval vessels.
- An increase in military aid and holding the line
on economic aid apparently have helped to
assuage Indonesian impressions of neglect and ill
will toward Soeharto's regime, impressions also
eased by the invitation for him to visit Washing-
ton. Frictions could reemerge in the future if
Jakarta again perceives the US Government as
unresponsive to its needs, especially as it turns
increasing attention to military force modern-
ization.
- East Timor and human rights are less heated if
still nagging issues. Indonesians continue to
grumble about criticism in the American press
and the US Congress but perceive a more under-
standing attitude in the current US administra-
tion, which has been encouraged by Jakarta's
release of most of the political prisoners held
since 1965.
46. Contentious issues remain, however, which un-
doubtedly will cause friction in the next few years.
The two principal areas of likely contention concern
international economic policy and US-Chinese rela-
tions.
There is even greater sensitivity than I remember some years
back to even the slightest US act or statement which might be
interpreted as indicating we do not appreciate Indonesia's
nonaligned status.
We will never be dictated to by the United States in our
foreign policy.
Foreign Minister Mochtar to university faculty, December
1981
Economic Policy
47. Indonesia is generally disappointed with Wash-
ington's international economic policies and would
like to see a more generous approach to Third World
problems. Soeharto is a firm advocate of the new
international economic order, although Indonesia con-
tinues to take a nonconfrontational approach to the
North-South dialogue.
48. The recession and concurrent oil glut are accen-
tuating frictions between the United States and Indo-
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nesia. Tin, coffee, and textile problems currently head
the list of Jakarta's complaints over commodity issues.
The continuing sale of tin stocks by the United States
and US ceilings on imports of Indonesian textiles are
sure to become more contentious.
49. Likewise US disagreement with Jakarta over its
new counterpurchase policy and shipping restrictions
will not easily be resolved. The Indonesians have
chosen what they consider the best of several unpalat-
able choices-that is, export promotion and fiscal
austerity. Indonesia's flexibility in implementing its
policies clearly will be keyed to improvements in its
external accounts.
US-Chinese Relations
50. The Indonesians will continue to watch the
evolving US-Chinese relationship with some apprehen-
sion and would be especially distressed by American
arms sales to China. Even China's economic develop-
ment-with help from the United States and Japan-
leaves Indonesians uneasy as it portends for them a
stronger and potentially more assertive nation.
It now appears that the United States prefers its relationship
with China over its relationship with ASEAN. US policy is
directed only against the Russians and, because of that, we do
not really trust the United States.
Foreign Minister Mochtar to university faculty, December
1981
relationship. The Indonesians are critical of US policy
for not dealing with the Palestinian problem and for
not putting more pressure on the Israelis for a compre-
hensive settlement.
52. Indonesia likewise is very disappointed by
Washington's decision not to sign the Law of the Sea
convention, which Jakarta values primarily as an
official international validation of the archipelagic
concept. ' The Indonesian Government is particularly
anxious for formal US recognition of Indonesia's sover-
eignty over its archipelagic waters, which include
more than 3 million square kilometers of previously
open seas. Jakarta can be expected to continue to press
at all levels for US agreement on this issue.
Convergent Interests
53. Fortunately, there are significant areas where
US and Indonesian interests converge-the security
and development of the region, the continuing devel-
opment of Indonesia and its resources, and the
strengthening of ASEAN. Indonesians welcome a
strong US military presence in the region, although
they remain uncertain as to the extent and depth of
the US commitment. For its part, Jakarta's moderate
and responsible role in ASEAN contributes to the
stability of the region. The regime's emphasis on
economic development and reversal of the provocative
foreign policies of the Sukarno era contribute to the
"regional resilience" Jakarta advocates as the best
hedge against unwanted foreign intrusion. Jakarta
often helps soften radical attacks on the United States
in international forums.
54. Both countries benefit from American invest-
ment in Indonesia. US oil companies, which account
for more than 80 percent of Indonesia's oil output,
have highly profitable operations in Indonesia. Oil
exports are Indonesia's most lucrative source of foreign
exchange earnings, and the oil industry provides sub-
51. The Middle East will be another area of con-
tinuing US-Indonesian divergence of view but one
with less impact than other problems on the bilateral
' The archipelagic concept holds that states made up of a group or
groups of closely related islands and interconnecting waters would
have sovereignty over a sea area enclosed by straight lines drawn
between the outermost points of the outermost islands. Ships and
aircraft of other states would enjoy the right of passage through and
over sea lanes designated by the archipelagic state.
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stantial benefits as well through the transfer of tech-
nology. US investment includes construction firms and
suppliers of construction and transportation equip-
ment, chemicals, and foodstuffs. These firms not only
have developed profitable markets in Indonesia, but
have made significant contributions to Indonesia's
development program.
55. Indonesia continues to cooperate in efforts to
resettle the Indochinese refugees. Although Jakarta
will not permit the permanent resettlement of Indo-
chinese refugees in Indonesia, it maintains a humane
first-asylum policy and provides one of the region's
two processing centers for preparing refugees for
resettlement in third countries. Jakarta is nonetheless
concerned that the US commitment to refugee reset-
tlemept will flag, and leave Indonesia with a residue of
unsettled cases.
Continuity Rather Than Change
56. Although Jakarta is likely to continue to assert
its views more vigorously than in the earlier years of
the Soeharto regime, Indonesian foreign policy is not
likely to change significantly in the next few years.
Even if Soeharto should pass from the scene, the
Indonesian military's strong anti-Communist orienta-
tion and commitment to development argue for a
continuance of the moderate, Western-oriented for-
eign policy Jakarta has pursued for the past 16 years.
Indonesian insularity is gradually being reduced by
the growing network of bonds with the outside
world-the most prominent being those within
ASEAN-and the growing propensity to think in a
regional context should curb any return to a Sukarno-
type policy of confrontation. There nevertheless will
continue to be areas where US and Indonesian views
do not coincide, and Jakarta may well become more
prickly to deal with as economic problems worsen.
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