Suharto Fills Cabinet With Loyalists, Increasing Concern About Reforms

JAKARTA, Indonesia —  President Suharto named a new Cabinet on Saturday top-heavy with trusted, old-guard loyalists that is sure to unnerve foreign investors hoping for economic reform.

The message Suharto seemed to be sending was that he does not intend to be dictated to--by the International Monetary Fund or Indonesian critics--in determining how to deal with the threat of looming financial disaster.

“This is worse than business as usual,” one Indonesian economist said.

Most notable among his appointments were those of his eldest daughter, Siti Hardiyanti Rukmana, 49, as minister for social welfare, and his golfing buddy, Mohammed “Bob” Hasan, 67, a timber tycoon who symbolizes Indonesia’s shady business climate, as minister for industry and trade.

Coming on the heels of his old friend B.J. Habibie’s ascension to the vice presidency, the appointment of the 36-member Cabinet completes Suharto’s purge of technocrats and advisors who might question his actions.

His inner circle does not include any key figures who have been strong proponents of economic reforms demanded by the IMF.

The important position of finance minister will be filled by Fuad Bawazier, 49, who received his doctorate in economics from the University of Maryland in 1988.

Although respected by some financiers, Bawazier is said to favor the much-criticized currency board that would peg the local currency at a fixed amount, and he is considered by many Indonesians to be virtually in the employ of Suharto’s powerful children.

For overall crisis management, Suharto appointed Ginandjar Kartasasmita, 57, a retired Air Force general and martial arts expert, as coordinator for the economy.

Kartasasmita, who is a devout Muslim and a chemical engineer by training, is regarded as a Suharto yes man who does not favor a major overhaul of Indonesia’s economic or political systems. He retains his previous portfolio as minister of planning.

“We welcome international bodies such as the IMF and World Bank to help Indonesia,” Kartasasmita said last week. “But if that means they can impose their will or humiliate us, we would be better off without their help.”

Another controversial choice is that of Abdul Latief as minister of tourism and culture. Although the post is relatively minor, Latief was at the center of a recent scandal involving the diversion of social security funds to provide perks for Cabinet members.

The charges against Latief were not proved, but many Indonesians see him as part of what needs fixing in a system awash with nepotism, corruption and cronyism.

For security--a key concern in light of student demonstrations, food riots and widespread discontent with the 76-year-old president--Suharto turned to two trusted aides: Feisal Tanjung, a former head of the military, will be coordinator for politics and security, and Gen. Wiranto, commander of the 465,000-member military and police force, will add the responsibility of defense minister.

Economists looking for some good news in the appointments pointed out that, unlike the outgoing Cabinet, this is a group Suharto trusts and feels comfortable with.

That could help Indonesia get back on track with the IMF after several months of brinkmanship and dithering that have delayed the need for crucial reforms.

“I think too much has been made about the composition of a Cabinet,” said Jeffery Winters, an expert on Indonesia at Northwestern University. “People said a Cabinet of technocrats and international people would send a signal. But it’s hogwash that a new Cabinet would result in new directions. Suharto’s always had technocrats and international people around him, and he’s ignored them.”

In naming his daughter to the Cabinet, Suharto, some analysts speculated, might have been anointing a successor, though Rukmana has denied that the Suhartos have any interest in establishing a dynasty.

Known as Tutut, she is the most politically active of the six Suharto children and has long been a trusted advisor to her father.

Like all the children, Rukmana has extensive business interests.

She controls about 60 companies and is involved in toll-road construction, plantations, shipping and broadcasting. She is said to have been the first to suggest to Suharto a board linking the local currency, the rupiah, to the U.S. dollar.

Many Indonesian business leaders fear that the inclusion of timber tycoon Hasan will undermine the credibility of the entire Cabinet in the eyes of the international community.

A former driver befriended by then-Col. Suharto 40 years ago, Hasan has stakes in 300 companies and, with a fortune estimated at $3 billion, is the world’s 107th-wealthiest person, according to Forbes magazine.

He runs the plywood cartel that the IMF demanded be dismantled, and he has a lot to lose if Indonesia adopts stringent economic reforms to satisfy the prerequisites of the IMF’s 50-point, $43-billion bailout package.

Although his plywood cartel might be in danger, he remains the boss of the profitable timber industry.

“I am sure the task to be carried by this new Cabinet is not easy,” a weary-looking Suharto said in announcing the changes.

No one has disagreed. The rupiah has lost 70% of its value this year--the most of any currency in Southeast Asia--and virtually every major Indonesian company is technically bankrupt. Investor confidence in Indonesia has evaporated, and prices and unemployment are soaring.

Prime Minister Ryutaro Hashimoto of Japan met Suharto today and was expected to relay a message that Tokyo will do all it can within an international framework to help Indonesia. An IMF team was due here over the weekend amid reports that both the IMF and Indonesia are seeking ways to show flexibility in negotiations.