The relationship between international aid and political change is contested, theoretically and in practice, because of its explicit linking of the international and domestic spheres of politics. International aid by its very nature is foreign, and political change is generally recognized as domestic. This theoretical divide is no more vigorously protected than in Southeast Asia, whose leaders are renowned for their repeated calls for and commitment to non-intervention. And yet, international donors regularly credit their own programmes for political change, and nationalist leaders vigorously call for protection against continuing foreign intervention in domestic affairs. Recent political change in Indonesia illustrates precisely how the boundaries between foreign and domestic, between external and internal, are blurred by its aid relationship with the donor community.

This contribution to the volume explores the relationship between international aid and political change through an analysis of the East Timorese crisis of 1999. Soeharto's abrupt resignation on Thursday, 21 May 1998 created the opportunity to contest Indonesia's sovereignty over East Timor. Since its invasion of East Timor in 1975, Indonesia had claimed sovereignty over East Timor, and its military essentially ruled East Timor with impunity. Therefore contesting Indonesia's sovereignty over East Timor had the potential not only for bringing about significant political change in Indonesia, but also for implementing critical civil-military reforms to rein in Indonesia's extremely powerful military.

In the aftermath of Soeharto's resignation, international donors stepped up efforts to promote political change in Indonesia. But the international community was not monolithic in the political changes it sought. Instead, different players in the international community approached Indonesia in significantly different ways. A careful examination of the East Timor experience reveals how international donors approached Indonesia with regard to East Timor. More specifically, each donor adopted a different donor strategy. The disparate components of American donor strategy, which included a prominent role for non-governmental organizations (NGOs), finally converged in the mid-1990s into an approach that encouraged civil-military reform critical for Indonesian democratization. But the history of an American embrace of the Indonesian military neutralized the reform effort. Japan, in comparison, emerged as a potentially critical donor in using its tremendous financial leverage over Indonesia to change the military's behaviour, yet the rigidity of its donor strategy and high level of discomfort with “political” issues limited its impact on reform.