Sizing-up Indonesia's New Leadership

The following Executive Summary reports on a public affairs conference co-hosted by the Asia Society Washington Center and the United States-Indonesia Society (USINDO). This Executive Summary may be reproduced or quoted with attribution to Asia Society/USINDO.

Washington, DC, October 18, 2001

Conference Speakers (in presentation order):

The Honorable Joseph R. Biden, Jr. (D-DE), U.S. Senate and Chairman of the Senate Committee on Foreign Relations
Professor Dwight Y. King, Professor of Political Science, Northern Illinois University
Bambang Harymurti, Editor-in-Chief, Tempo Magazine
Sri Mulyani Indrawati, Political Economist, University of Indonesia
Anies Baswedan, PhD candidate, Northern Illinois University

A half-day conference to review the politics and economics of Indonesia's new government of President Megawati, long planned by the Asia Society and USINDO, was dominated by a discussion of the effects on bilateral relations of the terrorist attacks in the United States on September 11, 2001.
Frank Jannuzi, Legislative Assistant to Senator Joseph R. Biden, Jr., read a statement by the Senator conveying the disappointment in the U.S. Congress over Indonesia's response to the attacks. During President Megawati's visit to Washington in the week following the attacks the Congress hosted a "wide-ranging" dialogue with her, and Jannuzi reported the Senator's "high hopes" for Indonesia's understanding and cooperation in fighting terrorism worldwide, based on Megawati's statements. But, he said, "because we took steps to defend ourselves," (referring to the bombing of Afghanistan), Indonesia's support has faltered. (At the time of this conference, President Megawati had made a statement to a gathering of Muslim leaders in Jakarta that no country had the right to attack another and that blood must not be paid for with blood; noisy anti-U.S. protesters were gathering daily in front of the U.S. Embassy.)

"It is important for America's friends in Indonesia to understand the magnitude" of the September 11 attacks and the response that is required to combat terrorism. "Words are not sufficient; action is demanded," Jannuzi said. "It will require multilateral action."

Responding to a question, Jannuzi acknowledged that Indonesia had promptly agreed to permit overflights of U.S. aircraft and was cooperating in investigating the finances of terrorist organizations.

Speaking later, Bambang Harymurti cited the internal politics that account for the various positions taken by Indonesians. He said "the Afghan problem has been a gift" to the people who are trying to undermine Megawati. "She has to watch her back," said Bambang. She is still consolidating her position as president. She must fight to control terrorism, a position widely supported by the people, but keep her distance from the U.S. bombing of Afghanistan, for which there is little support.

Meanwhile, other elites have various reasons for "playing the Islamic card." Akbar Tanjung, Speaker of Parliament and Golkar leader, caters to Islamic factions because he knows the military is angry with him for using government money (Rp. 40 million of a Rp. 400 million slush fund of the state logistics agency Bulog) to finance the Golkar campaign of the last elections. Susilo Bambang Yudhoyono, Coordinating Minister for Politics, caters to Islamic rhetoric because he has presidential ambitions. Hamzah Haz, the Vice President, is the leader of the largest Islamic political party.

In reality, Bambang said, Indonesia has also been the victim of terrorist attacks. He cited the bombing of the Jakarta stock exchange, church bombings on Christmas Eve 2000 and the stabbing of the present Defense Minister Matori Abdul Djalil.

In Indonesia, a crackdown on extremists means a ruthless military suppression involving human rights abuses. This is the image that comes to mind when Indonesians think of retaliation.

He said he had a question for Frank Jannuzi: "Do you want our support in combating terrorism? How about Kopassus?" (the notorious Army Special Force, associated with the most egregious human rights abuses) Or do you want accountability for human rights abuses? "We need a clear message."

Q: You have pointed out the role of domestic politics in Megawati's position. What about the press? There is no balanced coverage. Is the press also playing the Muslim card?

A: The press is very free and very diverse. But some publications are afraid of Islamic retaliation, some agree with criticisms of the United States, and some reflect the "Pancasila indoctrination" of harmony. They simply don't want to engage in debate. A recent example is a letter sent by (Deputy Secretary of Defense) Paul Wolfowitz to every major Indonesian publication. Only Tempo and the Jakarta Post published it.

In earlier remarks Professor Dwight King, speaking on the terrorist issue, also stated that the U.S. strikes have "outraged mainstream opinion, not just the radicals," and present Megawati with a "huge dilemma." Indonesia too, he said, has experienced terrorist attacks connected with extremists and vigilante groups. He cited 5,000 killed in Maluku and hundreds in conflicts in Sulawesi. The radicals are weak, he said, but the "crisis of lawlessness allows them to flaunt law with impunity."

The principal speaker on the economy, Sri Mulyani Indrawati, charged that President Megawati's good start in naming a strong economic team to the cabinet was a "necessary but not sufficient" step in improving the economy. Since then the problems have not changed. She asserted that "capital outflow continues." She agreed with the overwhelming consensus of commentators on Indonesia that the government must sell the assets of failed companies but charged that parliament is the obstacle. "Indonesia is in many hands," she said. Politicians represent themselves, not political parties. In the parliament there are officially 11 factions of parties and special groups, but in reality "over 400" individual voices.

She called on the government to mount a campaign of education to communicate its policies to the public and explain what it is doing and why. "The Indonesian public thinks that Indonesian debt is foreign debt, but in truth the biggest debt is domestic debt" that the government assumed from failed banks and businesses.

The government must also communicate to the people why it must reduce subsidies on gas and electricity. No policies are adequately explained, she asserted.

A disconnect also exists between understanding the benefits and responsibilities of democracy and understanding the obligations to the International Monetary Fund.

"Indonesians liked the IMF when it helped in toppling a president," she said. "Now, they are just beginning to realize" that they must really do the IMF programs if they want the IMF loans.

She cautioned, however, that the IMF prescriptions were monopolizing the efforts of the government's economic team and preventing it from developing broader policies that are critical to economic development. Two priorities are legal reform, especially anti-corruption and bankruptcy laws, and a labor policy. Investors need a stable labor force and the country needs to create employment for a growing population. But there is no consistent labor policy. The process of decentralization has compounded the confusion over which level of government is responsible for resolving labor disputes.

Indonesia realizes that it cannot afford to be a closed system country, she said. Economic growth is possible only with international trade and an open system with all that implies, including reducing energy subsidies so that prices are competitive with other countries. She asserted that two percent of GDP goes to pay for subsidies in oil prices that mainly benefit the middle class.

"The middle class was spoiled by Soeharto," she said. They had free schools; they did not have to worry about the economy ('Leave it to the technocrats and my children, Soeharto said'). They paid no taxes and oil and electricity prices were subsidized. Now they must pay the price of an open, market economy, and they are saying 'This is not the democracy I like.'

"It's up to the Indonesian people. Do we really want to improve the economy for the people, or just benefit the elites? It will take a generation, but I'm not discouraged. There is a demand for change, and some progress is there. We should not give up too soon."

With respect to Aceh, Dwight King said that Megawati had gone to Aceh but the GAM (Acehnese Independence Movement) was excluded from the talks and she had nothing to offer. Her party, PDIP, wanted her to highlight the military atrocities but she was unwilling. Now the violence "knows no boundaries." Twenty thousand troops have been sent to Aceh. The Navy imposed a blockade, but after one month found no smugglers moving arms or people into the province. The GAM abuses do not excuse the violence committed by the military and the police. There is a split on how to resolve the issue. The palace seems to want dialogue, but the military appears autonomous.

Speaking more broadly on the military, Dwight King said that the military has prolonged internal conflicts to assure its role, in part because of military businesses that put millions in the pockets of individual generals. Megawati is not a militarist but is unlikely to press reform. Officers accused of past abuses will not be tried. The military has announced the turnover of territorial affairs to local authorities but the response has been skepticism that they will really carry this out. Meanwhile there is some evidence that the public is not opposed to the military role in internal security. According to a survey conducted at Gadjah Mada University at the request of the military, 76 percent of the respondents were in favor of a military provincial command and a smaller percentage, but still a majority, approved military commands at lower local levels.

Bambang Harymurti added that the military think they have completed internal reform and are now calling on the political leadership to provide guidelines lest the conservative elements in the military take over. Meanwhile conflict between the military and the police has increased "300 percent." Now generals understand they have discipline problems. It is common these days to see student groups fight one another. These students later join the police or the military and continue that tradition. "It's like the intifada."

But how can one expect the military to bow to civilian control when only 30 percent of their budget is provided by the government? The best battalions, like big nongovernmental organizations, have "endowments." They are financially and operationally independent. The government can't expect good results from the military if it doesn't pay up.

As discussion turned to decentralization, Anies Baswedan stated that Indonesia, although extremely centralized under Soeharto, has had other periods of decentralization, such as the period 1945-48 during the fight for independence and again in the later years of Sukarno. The success or progress of decentralization can be judged by four indicators: authority, accountability, capacity and revenue. Authority has indeed been shifted from the center to the district levels, but there is a lack of accountability. Political parties are centralized, and there is no local accountability. A survey revealed that only ten percent of people at the local level believe that politicians care for their interests. Local direct elections are needed. Localities also lack qualified personnel to manage affairs. They have - for 25 years - just waited for orders from Jakarta. Making a budget is a new experience for them. As for revenue, there has been a big shift for revenue from natural resources, but other revenue sources are not yet available.

In general, the formulae for revenue sharing with the provinces benefit the rich more than the poor provinces, but they do tend to reduce separatist tendencies.

Decentralization is a good and important development for Indonesia, but it does not necessarily mean economic growth, if a comparison with other countries is made. But it is important for capacity-building, for greater transparency and provides an opportunity for developing a local agenda.

As discussion turned to constitutional reform, Dwight King asserted that the current Constitution is inadequate. Piecemeal changes in 1999 and 2000 have tended to strengthen the legislative branch against the presidency. A committee of the Assembly (MPR) has been working steadily on constitutional amendments, but there is growing pressure for a special constitutional commission. Megawati surprised everyone on last August 17 by reversing an earlier stand and supporting a proposal for a special commission. However the proposal is not as radical as it might seem. The commission would not report to parliament before 2004, so there would be no changes until after the next elections.

Theo Sambuaga (a member of the MPR who was attending the conference was asked to comment): I am a member of the MPR committee for constitutional reform. The MPR will meet in early November and amendments to the constitution will be on the agenda. Amendments will deal with big changes, including a change in the structure of the legislature to a bicameral system, direct elections of the president, vice president and lower officials, and a change in the structure and format of the Supreme Court.

In continuing discussions of law enforcement and legal reform, Bambang Harymurti asked: Does the U.S. want us to help catch Osama bin Laden? We can't even catch Tommy Soeharto, and people have a good idea where he is. We can't freeze the assets of the old conglomerates, despite their debts. The legal structure is a total loss. For 30 years no dispute was ever settled in court. The elites did not need a legal system. All disputes were settled by Soeharto.

Now, however, everyone needs a functioning legal system, since there is no single source of power. And everyone needs a tax system. Of a population of 210 million only about 2,000 people have tax [identification] numbers. The people don't pay for the government; they get representation without taxation, but as a result they get the government they pay for.

Summing up the morning, USINDO President Paul Cleveland said that the new Megawati government had appointed some good people to the cabinet, particularly to its economic team, but had yet to make much of a dent on the obstacles Indonesia faced. Hard decisions were needed to overcome the vested interests:
• Heads of major businesses with the help of Parliamentarians blocked IBRA sales of their assets needed to pay down the national debt;
• The TNI was in charge of its own reform and progress was spotty;
• The legal system was in the hands of judges and officials who blocked legal reform;
• Elite members of society were in charge of making tax and other laws and policies they saw as disadvantageous to their own interests.
On top of these challenges, President Megawati now had to walk a narrow path between maintenance of relations with Indonesia's supporters in the West and radicals, political opportunists, and elements of the press at home who were playing the Islamic card.

It is a time for the United States to be patient, understanding, and skillful in pursuing quieter diplomacy. We need to reign in our expectations. At the same time, both sides need to insist on a tough, realistic attack on the challenges. Talk alone will not lead to success.