ABSTRACT
One of the main characteristics of Indonesia’s political economy under President Suharto’s long rule (1966-98) was the intimate connections between politics and business. As the Indonesian economy underwent an unprecedented development from the 1970s up to 1997, with growth averaging almost 7 percent and real GDP per capita more than trebling, the president’s and other senior officials’ patrimonial distribution of favors served to maintain the regime’s dominance at least as much as crude force or attempts at symbolic legitimation of power (see Liddle 1985). Although the direction of economic policy altered on several occasions during Suharto’s more than three decades in power, the state all along maintained its role as the central actor, and the “rise of capital,” to use Richard Robison’s (1986) term, remained highly dependent on personalized relations with leading members of the government and the bureaucracy and senior military officials. As a consequence, the Suharto era saw the rise of three major groups of politically connected companies, who between them came to control most of the formal economy. These were the Sino-Indonesian conglomerates, state-owned enterprises (SOEs) and indigenous Indonesian, or pribumi (literally meaning “sons of the soil”), firms.
