15 Jul 2011

Suharto's ‘New Order’

Suharto's ‘New Order’

Although not elected president until 1967, Suharto instituted a ‘New Order’ from 1966, with political power concentrated in the hands of a group of army and security-force officers. Sukarno's policies were reversed, and Suharto set about stabilizing a chaotic economy with the aid of a group of US economists nicknamed ‘The Berkeley Mafia’. Lavish incentives were introduced to encourage new foreign investment, assets nationalized by Sukarno were restored to their former colonial owners, and generous compensation paid for losses suffered by foreign companies as a result of Sukarno's policies. Support for China and the Soviet Union was abandoned and Indonesia turned to the West, while maintaining a non-aligned policy.
During the 1970s Indonesia's oil revenue enabled the government to invest in numerous development programmes.By the 1980s the country was self-sufficient in rice, thousands of new schools and health centres had been opened, and communications with the outer islands had been improved. However, the new oil wealth also gave rise to corruption on an unprecedented scale.

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