On 21 May 1998, just two months into Habibie's vice presidency, Suharto announced his resignation. Habibie, as the
Constitution says, succeeded him as president. The following day, Habibie announced the
Development Reform Cabinet, which removed some of the most controversial ministers in Suharto's last cabinet while maintaining others, with no major figures from the opposition. Within days of his appointment, he asked his relatives to resign from government positions, promised an early election, repealed some legislation, and ordered the release of political prisoners.
East Timor referendum Habibie was opposed to
East Timorese independence but did offer East Timor special autonomy. Timorese independence forces led by the
National Council of Timorese Resistance had been calling for a referendum in the territory for some time. Its chief diplomat,
José Ramos-Horta, proposed a transitional period of autonomy leading up to a referendum. In late 1998,
John Howard, the Prime Minister of Australia, sent a letter to Habibie suggesting that Indonesia defuse the East Timorese issue by providing autonomy to be followed by the promise of a referendum in the long run, following the method used by France to settle
New Caledonian demands for independence. Wishing to avoid the impression that Indonesia ruled East Timor as a colony, Habibie surprised some by announcing that a
referendum, offering a choice between special autonomy and independence, would be held immediately in East Timor. Leaders of the Indonesian armed forces (
ABRI) were not consulted on this decision. On 30 August 1999, the referendum was held and the East Timorese people overwhelmingly chose independence. Subsequently, pro-Indonesian militias killed and displaced large numbers of people during the
1999 East Timorese crisis. On 10 September, General
Wiranto allegedly threatened to stage a military coup if Habibie allowed in peacekeeping forces, causing Habibie to back down. On 12 September, however, Habibie accepted a
UN-mandated peacekeeping force to halt violence. In response to this, Habibie then appointed
Andi Muhammad Ghalib as
Attorney General. Under Habibie, the Indonesian government also began investigating and prosecuting Suharto's youngest son, Hutomo Mandala Putra (commonly known as
Tommy Suharto). Ghalib charged Tommy in December 1998 in conjunction with the Goro scandal, where the government, under pressure from Tommy, allegedly gave him a desirable parcel and below-market loan for the construction of a Goro supermarket. However, Tommy was found innocent in the case after several key witnesses, including Habibie aide Rahardi Ramelan, changed their testimony and declared that the deal did not cause losses to the state.
Economy and the Chinese Indonesians Habibie's government stabilized the economy in the face of the Asian financial crisis and the chaos of the last few months of Suharto's presidency. Habibie's government began to make conciliatory gestures towards
Chinese-Indonesians who, because of their elite status, were targeted in the
riots of 1998. In September 1998, Habibie issued a 'Presidential Instruction' forbidding use of the terms
pribumi and
non-pribumi to differentiate indigenous and non-indigenous Indonesians. In May 1999, Habibie directed that an ID card was sufficient proof of Indonesian citizenship, revoking the previous requirement for a '
Letter of Evidence of Republic of Indonesia Citizenship' (SBKRI). Additionally, he lifted restrictions on the teaching of
Mandarin Chinese.
Political reform Under Habibie, Indonesia made significant changes to its political system that expanded competition and
freedom of speech. Shortly after taking office, in June 1998, Habibie's government lifted the Suharto-era restriction on political parties and ended censorship by dissolving the Information Ministry. He also quickly committed to holding democratic elections, albeit on an initially vague timetable. In December, he proposed political reform laws that were passed by the legislature and MPR. These laws set elections for December 1999, reduced the number of seats in parliament held by the military, and barred political activity by civil servants. However, political opponents criticized Habibie for allowing the military to retain some seats in parliament, and taking little action on other military and judicial reforms. Habibie's government also passed laws which granted significant autonomy to regional governments, namely at the
regency and city level. The laws resulted in indirect elections for mayors and regents, and allowed local legislatures to hold said executives accountable, though it was not implemented until after his presidency.
End of presidency Although he had been viewed as leading a transitional government, Habibie seemed determined to continue as president. He was initially unclear about whether he would seek a full term as president when he announced parliamentary elections in June 1998. Habibie began to lose support from Akbar Tandjung and a faction in Golkar, composed of both reformers and hardliners, that wanted to oust him. In March 1999, Golkar put forth five presidential nominees: Habibie, Tandjung, Wiranto,
Hamengkubuwono X, and
Ginandjar Kartasasmita. In May 1999, after extensive lobbying, Golkar announced that Habibie would be their presidential candidate, but a large faction in the party remained loyal to Tandjung and opposed to Habibie. His political credibility was tarnished by the exposure of the 1999
Bank Bali scandal, in which banking funds were funneled to members of Habibie's re-election team. At the 1999 MPR General Session in October, Habibie delivered an accountability speech. This was a tradition carried on from Suharto, in which he outlined the achievements of his tenure and showed how he had adhered to the Broad Lines of State Policy drafted by the MPR. Under the Constitution at the time, the MPR was responsible for developing the Broad Lines of State Policy. The president, in turn, was responsible for implementing them as the "mandatory" of the MPR. Afterward, MPR members then began voting to either accept or reject his speech. Habibie attempted to win the support of the military by offering the vice presidency to General Wiranto, but his offer was declined. After Tandjung's Golkar faction broke ranks and voted against him, Habibie's accountability speech was rejected by 355 votes to 322. Realizing that his position was untenable, Habibie withdrew his nomination as president. He was succeeded by
Abdurrahman Wahid. ==Post-presidency (1999–2019)==