Pak Harto and Oil Price

Until now Indonesians are still arguing never ending story whether Pak Harto is a hero or corruptive leader. During Pak Harto's terms we see a lot of development result such as infrastructure, industry, economic growth, more educated people, etc. Why can't all this things make him a hero? Some might say that the Indonesia's development benefitting his family's wealth development. Indonesia's economy is governed by his inner circle. However how is about the development presented by high economic growth? Can we appreciate this?

In terms of oil price, now we can explain why Indonesia developed so fast during Pak Harto's stint. Oil price did matters! Pak Harto can develop Indonesia because of good oil price. And later Pak Harto could only be toppled thanks to low oil price.

It was American bestseller author, Pulitzer-winning Thomas Friedman who suggests the relation of oil price and dictatorship or democracy in First Law of Petropolitics. The idea is during the oil price hike, the democracy will be hit and the authoritarian regimes blossom. When oil price is going low, the democracy rise. It occured in Indonesia and oil price definetely determined Pak Harto's faith. 

Let see http://www.wtrg.com/prices.htm.

During 1974 - 1985 oil price soared above USD 40 per barrel. It was because of oil embargo by Arabs following Yom Kippur war between the Arabs and Israel and Iran-Iraq war. And then it tumbled hovering USD 20 per barrel until the end of financial crisis 1999. And the the price increased again and peaked in 2007 and then went down again during financial crisis 2008 – 2009. But it remains above USD 40 per barrel.

From this data we can see why Indonesia develop so fast during the oil boom years 1974 – 1985. All national program had been succcesfully implemented. Indonesia was laudable for its rice self-sufficient. The population could be controlled by massive family planning program. Even we can designed a plane, CN 235 in 1983. Certainly Pak Harto is also a good administrator, so that the oil money was spent wisely.

And then the situation is turnabout. The oil price plunged and ever reached under USD 20 per barrel during financial crisis 1997-1998. And Pak Harto had to stepped down in 1998.

But Pak Harto had still some credits. Thanks to lower oil price , the government scambled to enhance non oil and gas industry and it worked. Indonesia manage to transform from agriculture-based country to industry-based one. In 1993 the agriculture sector contribute to GDP more than the industry sector, but in 1993 the industry sector had surpassed the agriculture sector. And according to UNIDO criteria, Indonesia included in industrial country since since the industry sector made up more than 20% of GDP.
However this achievement was not enough. The still-fledgling industrial country was not strong enough to tackle the financial crisis. At last the government yielded to high inflation and the government fell. And after Pak Harto fell, Indonesia's democracy rose.

The relation between oil price and the succes and failure of Pak Harto explains as follows. When the oil price high, the government had enough money to implement the development program, while the oil price as low as USD 20 per barrel, the luck went away.

Indonesia's oil has nearly run out. After becoming oil net importer country, Indonesia has withdrawn from OPEC since 2008. Instead of a bad things, it is absolutely good news. Now we have no choice to grow industry, innovation, education etc. for survival.