Early Crisis and Mohamed Rahmat
Premier Musa Hitam exerted every ounce of his energy to sustain the delicate balance which his predecessor, LKY, has established marvellously. The growing economy under slightly better conditions even for the lowest of the poor had been the late Premier’s greatest achievements in his career. Despite being the most unrecognized abroad, his accomplishments succeeded his figure, radiating throughout the people who had been benefited from him. Still, there had been obstacles to achieve such triumphs, and those obstacles had been growing.
Concerns about the long-lasting economic growth were proclaimed by national economist after the last Carter term. In 1981, there was a devaluation of the dollar from inflation that supported the nation’s healthcare system which the US President highly had looked forward to. The devaluation of the dollar had actually not affected the growth of Indonesia, but it inflicted a slight indent on the state’s stock price which nearly shrank by 5%. That was Indonesia’s Panic of 1981, the local entrepreneurs had not been so fond of the weakening dollar and a small percentage of them had even resorted to the most stable currency in the world, the Deutsche Mark, for day-to-day commerce.
Carter shaking hands with Chairman Paul Volker for devaluation, 1981
Indonesia’s dependence on the dollar had been reflected way during the end of the Australian Aggression. The Nasution Presidency had owed Kennedy Administration a huge favour. As a result, the reconstruction of the state was mainly funded by grants, debts and graceful donations sent by the American government. Stopped during the Nixon term, the American had not stopped helping Indonesia after since. In the transitional government, the national debt to the Americans alone had risen to 79% of the nation’s GDP.
The succeeding administration was better in terms of economics. LKY’s university background and well-positioned witty figure attracted Subandrio to appoint him. In just three years, public debt had fallen dramatically to 79%. The large proportion of the debt was ‘washed’ as voluntary investments which funded the entire industry. As native conglomerates joined forces with their foreign investors, a stable balance was achieved on those two factions which caused the economy to boom. Including LKY’s less regulatory attitudes on most of Indonesia’s commerce, the service sector also expanded rapidly in power.
However, the business relied deeply upon the protection of the predecessor. LKY’s voice was crucial as lower branches of government officials were anti-business. On several occasions, local districts may need direct instruction from the central cabinet to continue said industry. In February 1986 alone, LKY had dismissed 328 local councillors just because they propagated demonstrations that harmed the company’s revenue towards the government. This power, albeit unconstitutional to popular belief, was not prohibited at all as the constitution allowed the central government to intervene for the betterment of the state.
LKY during his dismissal of said staffs, 1986
Overall, LKYs strict character with outstanding results had been the bane of improvement for the past years. The nature of Indonesia’s society had always antagonized corporate figures such as big banks or businesses, but the Premier, by one’s own bootstraps, purged those followers with the current situation Indonesia had become. Young scholars were delighted by the prosperity, so did the middle-aged population which saw their best era for their generation.
The death of the Premier uncovered the patch which concealed Indonesia’s true and unimpeded feelings towards business. Especially in the State Republic of Nusantara, the apparent opposition against the government had been most vocal. Without the new Premier’s command, local bureaucrats independently took matters and reverted allegiance towards the State Republic. Should they had to said why they reasoned as a fair ‘democratic’ move which the previous government has been attempted against it. The federal authority, to put it simply, had no unity in action with the State Republic of Nusantara. The largest of the state republics, Nusantara was literally Indonesia-proper. Unfortunately, the high staffers were affiliated with Mahatir’s PPP, they were too entitled to listen to Musa Hitam.
As stock prices kept receding, Musa’s focus was fixing the economy before the populace became too agitated by the sudden economic reversal. His first initiative was bailing out companies on the verge of bankruptcy, to fund them and have enough money to continue employment. However, his action stirred an increasing voice of the anti-business populace that had now chanting more for further regulative policies. PPP’s Melayu Bersatu Faction was the first to jump the board, then PPI and PUI to support the movement. Musa’s most vocal opposition, shockingly, rose within his own party.
State President of Nusantara, Mohamed Rahmat, was chosen in 1983. Previously, Mohamed Rahmat was a loyal PPP statesman that got elected with en-masse voting from the Malayans. He, albeit initially was amiable to the Premier, pursued closer ties to Mahathir Mohamad. However, he conjured a political strategy which had divided Nusantara into distinct ethnicity. Javanese, Sundanese and Borneo tribes were isolated to his Melayu group. Therefore, many of his voters dwelled merely in Malaya and Sumatra. His win in 1973 was because the gubernatorial election split Javanese voters into three groups, PPI vice-chairman and daughter of Soekarno Megawati, PNI-R DPD politician Ali Sadikin and PRD Wahono.
Muhammed Rahmat during a public gathering in Palembang, 1984
Advocacy towards pro-labour sentiment maintained Rahmat’s legitimacy from the divided voters and somewhat appeased non-voters to side with him. Especially in the non-college group, Rahmat’s popularity rose significantly when he pushed for an increased budget of general insurance for working accidents. His problem was most of the revenue were from satellite cities of all neighbouring federal district, he didn’t like that his state was given the non-profitable while big metropolitans were controlled by the federal government. He conveyed that frustration to his hinterland people whom jobs and opportunities were seized by that same federal districts. Soon, what was once his base’s exclusive by race had become widely accepted under one class: blue-collar workers.
His countermeasure for all his problems was quite simple, frankly. He pressed the federal government with demanding more budget percentage for pro-labour laws. A proto-medicare program was launched, subsidizing all patient treatments classified as common checkups. He passed ‘Employment Laws’ which protected freelancers from exploitative corporates. At first, Premier LKY was reluctant to oppose the majority of Indonesia’s population. Besides, the economy was still doing great. Yet, as the divide grew ubiquitous across Nusantara, Premier LKY tapped budget spending towards Rahmat.
The Premier also discovered questionable spending under the administration. He looked at the state budget to have an excessive amount of welfare spending. Should welfare become a state priority, the staggering level was not equivalent to its effect on the citizens. Thousands of Nusantara citizens migrated to Federal Districts or other state republics, the notion had become a concern that pushed for an investigation. His state was also the most tainted one, his staffs had been fired multiple times by the late Premier.
He debated Premier’s suspicion of corruption to be blatantly misleading and genuine misdirection of the Indonesian public. Premier’s growing disagreement also prompted villagers to side with the state president. Except for seasonal workers at the federal district, most of Nusantara’s nationals had endorsed Mahathir Mohamad as the next leader. Nevertheless, said voters were PPP ones. PPI, PUI and PNI-R all had a particularly fanatic base that preferred die than change allegiance. However, PPP’s voters were adequate for a transition on the Parliament.
The rise of Musa Hitam provoked Rahmat to act steps unthinkable during the LKY reign. Musa Hitam, in contrast, had less unrelenting commitment than LKY had. Rahmat had been the first to persuade Mahathir to form an overthrow of the current PPP leadership. While months went by, State President Rahmat perform manoeuvres that past administration would consider as treason of the government.
Since the revaluation in 1985, the minimum wage was Rp3,500 monthly, but the Nusantara officials had unilaterally raised the wage to Rp 5,000. This was from the local union’s plea which heard only by the state government. State President of Nusantara argued that the imposition had existed way before the election The declaration was published on 5th September. The Premier was desperate on resolving the issue because as payday would come, an unprecedented outcome would definitely have meant the economic downturn to be worse than before. In Rahmat’s eyes, this was his perfect gamble. Should the government fail and economic slug occurred, he has disenchanted people from his perceived ‘temporary’ joys of capitalism. Should the government succeed, his pro-welfare policy will continue to push aggressively for attracting workers.
State President of Nusantara Mohamed Rahmat and his pro-labour laws, 1986
Premier Musa Hitam was incapacitated on fighting against multiple fronts. His ministers sounded warnings an economic downturn was imminent with Rahmat’s deeds. Nonetheless, Musa Hitam his best to mitigate the impending loss by printing more money. But, he was too late.
As the 29th of September arrived, multiple businesses liquidated themselves from the unwelcoming minimum wage on Nusantara. Industrial complexes sent hundreds of thousands home as their worth had become too expensive to sustain. The crippled secondary sector inflicted damage to the service commodity, destroying trade values. Thus, the stock market worsened its fall. The proceeding events marked the nation’s slow fall to the infamous Crisis of 1986.
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Mohamed Rahmat OTL was the Information Minister of Malaysia. ITTL he is the State President of Nusantara, his power is alike to the Republic of Indonesia during the United States of Indonesia Era. If the federal government had a rival government, it would be the State Republic of Nusantara.You may think Rahmat's motives are a bit strange, but this is the perfect example of Indonesia's socialists. OTL Indonesia has always had socialist tendencies that never changed, businesses would still be regulated as opposed to Taiwan or maybe Malaysia. The current Omnibus Law still suffered backlash despite passed. ITTL, socialists had been discouraged with LKY's economic system. This Indonesia was more of Greater-Singapore ITTL, therefore opposition against the system was apparent. It was not that LKY despised socialism, no. His economic policies were relaxed that most conservative Indonesian thinkers would think of it as 'radically liberal'. This Rahmat character ITTL was the embodiment of decades from presidents that neglected the socialist side of economics.
In the upcoming chapters, we would see how Rahmat thought of non-economic issues, like social or cultural change in Indonesia. However, I also wanted to address the Crisis of 1986. A small hint for the crisis: it would be transregional.
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