According to O'Donnell and Schmitter, the democratization period of a transition process is defined as democratic reorganization of the most important state institutions together with the introduction of political pluralism. It is the time of “wheeling and dealing” to create the rules for the democratic order. This time frame ends, according to the mainstream transition literature, with the democratic election of a new government and parliament. According to transition theory, “institution-building” takes place during the democratization period (Merkel 1999, pp. 136–38). The introduction of political pluralism leads to the establishment of a party system, and the first post authoritarian elections are prepared. In order to achieve a democratic order, important laws and or the constitution have to be replaced or modified.

The time frame for this second transition period in Indonesia started with the resignation of the authoritarian President Suharto on 21 May 1998 and ended with the election of Abdurrahman Wahid as the new president on 22 October 1999. After the resignation of Suharto, Vice- President Habibie became, in accordance with the constitution, the new president of Indonesia. For more than twenty years, he had worked very closely with Suharto and was elected vice-president by the MPR in March 1998. Having no public support and not much authority within the ruling elite as well as among the opposition forces, he was and is regarded as a transitional president whose main task was to manage a smooth transition from the authoritarian to a more democratic order.

In an unwritten pact, the ruling and moderate opposition elites agreed that the democratization process should follow constitutional provisions and take place without a dramatic and immediate change. The transition to democracy was to be arranged peacefully with Habibie as a caretaker for the preparation of the institutional changes. The retention of the old regulations, especially the unchanged Constitution of 1945, in the beginning of Habibie' presidency, left power centralized in the highest state office, enabling him to launch an ambitious reform agenda within weeks. With his policies, including the relaxation of restrictions on the press and on political organizations, the reform process gained momentum. Political prisoners — among them former legislator Sri Bintang Pamungkas — were granted amnesty and released by the post-Suharto government (Schuck 2003, p. 77).