JAKARTA - Suharto is one of the names most closely associated with the occurrence of the monetary crisis or financial crisis in Indonesia. At that time, the Asian region was hit by the same crisis, 1997-1998. Rupiah inflation and spikes in food prices created chaos. We are going through this difficult period. Causes, effects, and other stories.
The swelling factor of foreign debt is one of the causes for the Indonesian economy to be under heavy pressure. The crisis began in mid-July 1997 as a result of the weakening of the rupiah to a fairly high number.
Entering 1998, the rupiah experienced a slight strengthening, before falling even further to Rp16,800 per US dollar. The monetary crisis is an economic crisis that hit almost all parts of East Asia.
This crisis has had a negative impact. The monetary crisis hit Indonesia since early July 1997, lasted almost two years and has turned into an economic crisis. Economic activity was paralyzed, unemployment emerged as many companies went bankrupt.
Trouble at the startAs described in the MEMORI article entitled The Rise and Fall of Suharto in the Recession, the transition from the Old Order to the New Order in 1966 left many stories behind. The transfer of power does not necessarily make Indonesia's conditions run well. The New Order also left a number of crises.
Quoted by Syaifruddin Jurdi in the book The Political Strengths of Indonesia (2016), the crisis took the form of an economic crisis with high inflation, depleted foreign exchange reserves, a government budget deficit, and ideological conflicts grouped into three tendencies: nationalist, Islamic, communist. .
“The legacy of the previous regime was a crisis with a double face, namely a crisis in the economic and political fields. In terms of the economy, there was a slump and stagnation. In 1966 the inflation rate reached 650 percent. The crisis in the economic field is exacerbated by the crisis in the political field, there is instability due to conflicts between political groups in society," wrote Syaifruddin.
The Suharto government then adopted an outward-oriented economic development policy and created a new political system, namely a political system that could support economic development. Suharto's movement began by gathering a number of economics graduates from FE-UI and USC Berkeley.
In an instant, this “Berkeley Mafia” has demonstrated its gripping inflation brakes. Then, the pace of the Indonesian economy rose to 8 percent a year for a quarter of a century.
“Indonesia is considered as the only successful 'oil' country in the 3rd world. Other oil-producing countries in poor parts of the world have not succeeded in developing their economies like Indonesia," wrote the article Karisma and Crisis in Tempo magazine.
"Then, Indonesia was flooded with the charisma of 'The Smiling General'. The moral of this past fairy tale is that charisma is not an innate trait, but simply the end result of a series of achievements, and that a crisis manager does not need to have charisma," continued the article by Nono Anwar Makarim that.
The 1998 recession marked the fall of the New Order
Dear. As the saying goes, the wheel turns. Likewise, the economic success that the New Order had achieved, which then began to fall into the brink of the worst recession since 1997-1998. Kompas daily, December 21, 1998 revealed that the economic recession that occurred in 1998 had begun a year earlier.
At that time, Indonesia's economic growth was minus six months in 1997 and the minus continued until the first nine months of 1998. It was so bad that the government had to ask for assistance from the International Monetary Fund (IMF) in October 1997.
Although it is known later that the assistance is not enough to help Indonesia. However, the cause of the crisis is thought to have started with the bath exchange rate crisis in Thailand on July 2, 1997. Later, until 1998, it quickly became the trigger for the economic crisis in Southeast Asia. As a result, the exchange rate of the rupiah to the United States (US) dollar, which was still at Rp.4,850 in 1997.
That figure grew to around IDR 17,000/US dollar on January 22, 1998. So, the impact of the recession was huge. The foundations of the economy in Indonesia have collapsed, dozens of banks have collapsed, thousands of companies have collapsed, millions of workers have lost their sources of income, so that Indonesia has become limp, and even almost went bankrupt.
This condition forced the public, especially students, to take to the streets to protest massively. They demanded the removal of President Suharto because he was responsible for the 1998 recession that made the Indonesian people suffer. Finally, President Suharto stepped down on May 21, 1998 and BJ Habibie was appointed as the new president.
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