Newsmakers 1998

Mahathir and Anwar The premier and his chosen deputy battle

A.B. Vajpayee and Nawaz Sharif blast their way into the nuclear club

Zhu Rongji China's reformer grapples with the Crisis

The Internet Governments don't have to love it, but can no longer ignore it

IN AN EARLIER TIME, he might have expected to be addressed as raden, a title reserved for Javanese nobility. That is what Suharto's household staff called him. Two weeks ago, as he testified in Jakarta to a government panel investigating his wealth, he probably thought at least bapak (father) was warranted, given his position as ex-president. Instead, his questioners used saudara (brother), the term used to address an equal. How a man who had risen to the level of demigod fell so far, so fast is perhaps the most compelling personal story of 1998.

The year did not begin smoothly for either Indonesia or its embattled president. At the behest of the International Monetary Fund, 16 banks were shut in the last quarter of 1997. That touched off a confidence crisis in the entire domestic banking system and accelerated a decline in the rupiah's value. By Jan. 1, the currency had depreciated 40% against the dollar in three months. The jitters were compounded by news of Suharto's health problems at the end of a string of international trips in November. The day the announcement came that he would skip ASEAN's 30th anniversary celebration in Kuala Lumpur, the rupiah dove 10%.

As the currency continued to slide in the first weeks of 1998, Suharto recovered in the warm embrace of family and friends. In March, he was elected to his sixth presidential term. He quickly named a cabinet that included his eldest daughter, Siti Hardiyanti Rukmana ("Tutut"), and his top crony, Mohamad "Bob" Hasan. More than $5 billion in immediate assistance from the IMF, the World Bank and the Asian Development Bank had been put on hold before the announcements. Suharto chose allies over aid.

In hindsight, maybe the self-preservation instinct was correct. Suharto had crafted an elaborate political system for Indonesia based on an ancient model. He was king, the pakubuwono - nail of the universe. He controlled the army, parliament, government, even elections. Remove the nail, and everything falls apart. That was the fear he sought to implant in his subjects. Early in the year, Suharto must have sensed the nail losing its grip, loosened by forces of circumstance for which he felt no responsibility.

The deadly riots that broke out in May might have confirmed Suharto's fear, but they also exposed the weakness of his strategy to retain power. The economy was imploding - debt-laden domestic companies falling like dominos, banks cracking under the weight of bad loans, layoffs by the thousands, canceled investments, capital flight. Meanwhile, Suharto raised the ramparts and mustered his nobility. His frequent attempts to marry a modern society with feudal politics would make a final, desperate appearance.

The effort failed. Suharto's supporters deserted him, and he bowed to the reality of defeat on May 21. What was in his mind the day he addressed the nation and resigned? Perhaps he recalled the glory days: his rise to power in 1966, the heady 8% annual growth of his first 15 years in office, the successful war on poverty that slashed the proportion of poor Indonesians from 64% in 1965 to 11% two decades later. During that time, Suharto's "New Order" Indonesia was the Western world's poster child for development. It was virulently anti-communist. That meant one part of the world, led by the United States, was willing to look the other way with respect to how Suharto put down his opponents, like Islamists or democrats.

But at some point, Suharto's world changed. It was not a matter of violence - he had been a ruthless leader from the start. Tutut, now 49 years old, turned 31 in 1980. His eldest son, Bambang Trihatmodjo, now 44, was 26. Hutomo Mandala Putra ("Tommy"), the youngest, was 17. As the three came of age and were granted the business favors befitting a king's children, a darker phase of the New Order began.

Increasingly, Suharto seemed unable to set priorities or separate the interests of his cronies and his nation. National growth remained strong. But the nature of the expansion shifted. Manufacturing grew in importance as foreign investment was funneled to cronies. Banks lent on the basis of connections over economic fundamentals. The income gap between haves and have-nots widened. Suharto's power grew from all this, but the legitimacy he commanded in the early years began to hollow out. Widening discontent awaited only a spark to burst into flame.

If the first half of 1998 in Indonesia was dominated by Suharto's fall, the second was haunted by it. His hapless successor, B.J. Habibie, faced a violence-prone political culture and a ruined economic landscape. A food crisis threatened 70 million Indonesians, who discovered how years of industrial expansion and a strong currency had robbed the nation of its ability to feed itself while raising its dependence on imported foodstuffs. Few banks are even close to solvency. And private debt estimated at some $80 billion is strangling business.

The main catalyst of the devastation may have gone, but the national drama continues. In 1999, with elections, cynical maneuvering by power groups, growing divisions between the elite and the masses, and a continuing economic crisis, violence could easily escalate. The abiding image of Suharto is always from the back: shoulders hunched, head bowed in a gesture of resignation. This was the year Suharto left a burning house. Who will douse the flames and build a new one?

- By Tim Healy and Jose Manuel Tesoro / Jakarta