Indonesia is on the cusp, according to diplomats in Jakarta. They speculate about whether President Suharto will be able to survive the political and social protests unleashed last week after International Monetary Fund reforms were implemented as a condition of extending loans to his regime.
It has been said that the closer you go to the edge, the nearer you get to the truth. So far, Mr Suharto has successfully contained rebellion without resorting to Tiananmen-type methods. From this perspective, the Indonesian army has been relatively restrained, despite shootings and reports of torture, which have attracted increased international condemnation. There are reliable reports of a willingness by army leaders to have a dialogue with leaderships of student and opposition movements. The student protest has been sustained over several months and has now attracted widespread popular support and political credibility.
Mr Suharto's stern warnings that he will put down protest and not allow political reform for at least five years look increasingly like the threats of a dying regime unable to contain its opponents. Last week petrol prices went up 71 per cent in line with the IMF conditions for its $43 billion rescue package. As subsidies on basic commodities were removed, kerosene increased by 40 per cent, diesel fuel by 35 per cent, bus fares by up to 40 per cent and commuter fares in Jakarta doubled in price. Electricity prices are also set to go up sharply. The cumulative effect on living standards for poorer Indonesians, already afflicted by huge increases in unemployment, can only be imagined.
The student movement has passive support from these social forces and this makes its protests all the more representative of Indonesian society as a whole. The students' main demands have been for political reforms to liberate Indonesians from corruption and crony capitalism. The question facing Indonesian society is whether a national political leadership can emerge to challenge Mr Suharto by capitalising on the students' movement, harnessing the middle-class and popular discontent.
Several political movements of opposition have been outflanked or repressed in recent years. Until the students' movement established a new credibility with its sustained protests, there was insufficient political space for an alternative opposition leadership to emerge. Much will depend on how factions within the regime and armed forces relate to those organising political and social protests over coming months. This, in turn, will depend on whether Mr Suharto and his closest advisers decide to use maximum force against their opponents or to start dialogue with them while seeking to contain the social protests.
Indonesia is, therefore, a political tinder box on a grand scale. It is the fourth most populous country in the world and in many respects a case study in how the West has handled Asia's economic crisis. On the evidence of the IMF policies, pursued so far, there is a great deal to be learned about marrying structural economic reforms with the political changes required to put them into effect. The Group of Eight industrialised countries meeting in Birmingham this week should ponder the lesson of Indonesia long and hard. They will share a large part of the responsibility if the Suharto regime falls over the edge into political chaos.