Two Faces Of Islam In Asia (I)

Whether the reason invoked is poor leadership, corruption or other, few observers now expect Indonesia to resume its past role as an anchor of regional stability, or to realize its huge economic potential any time soon. Rather, most view Indonesia’s economy as permanently on the brink, and some expect the country to eventually break down like the former Soviet Union.

Now, the public’s sudden awareness that Indonesia has the world’s largest Muslim population has put the country under a further cloud of suspicion. The mixed feelings of the country’s people toward the war in Afghanistan have not helped, and neither has the discomfort evidenced by the country’s leadership in a series of contradictory statements.

The press, of course, has been playing its usual aggravating role, by repeatedly painting Indonesia as a caldron of violence and anti-Americanism.

All I can say is that cameramen for fear-mongering media truly deserve a prize. But not one in reporting; rather, one in creative image taking would be more appropriate. On the very days when televisions were showing mass demonstrations and violence against foreigners in Jakarta, I drove very slowly by the English and American embassies, as well as the United Nations building. The city was, in fact, incredibly calm and normal (traffic jams and all!). From the small crowds gathered in front of these symbols of western domination, I elicited nothing but utter indifference. As I told my wife, who was anxiously awaiting my calls in front of her TV set in Singapore: "The only time I get scared is when I get back to the hotel and turn on CNN".

Demonstrations in Jakarta are a good lesson in not judging things on appearance alone. Traditionally, and to everyone’s knowledge, most demonstrators get paid to participate, because the number of politically motivated citizens is very small. Only the source of the payments is a matter of conjecture, as it varies with the demonstrations -- even if the demonstrators themselves do not always. Participants are brought in by bus since many come, if not from out of town, at least from distant outskirts, which they would not leave without proper transportation. The police usually escort these buses to the demonstration locale with some fanfare (sirens, etc.) and agree with the leaders on the time at which it will end. Then, the first two or three rows brandish flags and shout slogans, while the paid "extras" stand by lackadaisically in their Nike caps and Adidas sneakers. At the agreed time, everybody goes home. If the most excited in the first two or three rows get carried away, the police use water jets or even tear gas. If not, they quietly escort the buses out of town. But, of course, reporting demonstrations this way would not make "special correspondents" look very heroic on TV…

Since the fall of Suharto, Indonesia has been a study on whether a new democracy with varied cultural and tribal heritages, disparate levels of development and a spread out geography can -- or should -- incorporate western-style values and institutions. Now, there is the added question of whether Indonesia’s moderate form of Islam can survive in a world where religious polarization seems to be gaining.

My main observation, on this last visit, was how remote the local population feels from the events since September 11^th. This may seem shocking to Americans horrified by the World Trade Center tragedy and mobilized by our ensuing quest for retribution. But think back at how we have felt, as a crowd, toward past horrors in Biafra, Somalia, Cambodia and countless others: sorry, but remote. The same applies to Indonesia, but in reverse.

While we, in the West, felt that Biafra or Somalia were somehow irrelevant to our lives, Indonesians today feel that America matters a lot, but that it can take care of itself. What they are primarily concerned about is that the delicate balance of power between Indonesia, its neighbors and the region’s various rebellious movements not be upset. America, however justified in its actions, is seen as a mammoth that makes dangerous waves at every move and pays scant attention to smaller animals. Beyond these worries, for the vast majority of Indonesians, daily concerns such as food and work take precedence over world affairs.

From direct observation and conversations with managers of companies that have operations throughout the country, life in Indonesia is going on pretty normally. Of course, strife continues in various outer provinces but, generally, these have been going on since the fall of the Suharto regime and are more rooted in tribal rivalries and efforts to control local resources (and attendant tax revenues) than in any direct resentment of foreign powers.

For example, I did not notice more women wearing the Islamic scarf than on previous visits, and the vast majority was still going around bareheaded and dressed in modern, even "sexy" fashion. Most firms maintain a prayer room for use by their employees but, according to a secretary, it is harder to get a job if you go to an interview wearing an Islamic scarf than if you don’t – even at firms owned by Muslim proprietors.

I saw foreigners mixing with the local crowd in food courts and department stores without eliciting any special attention. I was also relieved to see that churches of non-Islamic denominations were left alone by demonstrators and, in fact, did not even seem to be guarded by the police. Similarly, international schools were closed a couple of days as a precaution, but returned to normal schedules soon thereafter.

I am not trying to deny that violence occurs in Indonesia. In fact, instances of it are reported regularly and there were attacks on the Australian school and a church in Java in early November, a month after my visit. But these were exceptions, and we should not mistake tribal feuds or the acts of small splinter groups with a national animosity against foreigners or a nationwide religious jihad. It should also be noted that Indonesians were among the first to point out the difference between most Asian Muslims and the "Arab troublemakers" who imported chaos to the region from the Middle East.

Altogether, while Indonesia is an overwhelmingly Muslim country, it continues to practice a surprisingly tolerant form of Islam.

Against this background, and regardless of statistics that only capture a relatively small and fluctuating part of total domestic transactions, the economy is doing rather well. For example, retailers catering to the low end of the market are reporting strong business, motorcycle sales recently exceeded their pre-crisis record, and many consumer companies are still experiencing sales growth in the 15%-20% range.

Indonesia is relatively less intertwined with global trade than most emerging economies. It is relatively self-sufficient in basic commodities and its labor remains very competitive with others in the region. Altogether, besides continued failure to decidedly cope with its bad loans and privatization problems or to put in place a credible legal infrastructure, the biggest problems facing Indonesia’s economy are financial and external – namely its currency and international capital investment flows.

Currency fluctuations and international capital flows are obviously related, and both are highly dependent on global investors’ perception of a country’s investment opportunities and attendant risks. Prior to September 11^th, despite the lack of tangible progress on Indonesia’s structural domestic problems, there had been a worthwhile rally in the Rupiah, from more than Rp11,000/$ to less than Rp9,000/$. Since then, however, these gains have been all but erased. On the encouraging side, rumblings about potential foreign investments in Indonesia accompanied some of the Rupiah’s rally and several companies already operating in the country – mostly Japanese and European manufacturers or natural resource groups -- have actually gone ahead with small, additional commitments in the last few weeks.

Indonesia’s financial markets, from stocks to currency, have become incredibly narrow and can be moved by very small amounts of money. Therefore, even a small change in perceptions toward the country could produce a worthwhile rally in both the stock market and the currency. With an already overwhelmingly negative consensus further aggravated by suspicion toward anything Muslim, the potential rewards of investing in Indonesia are beginning to outweigh the well-documented risks.

François Sicart
November 26, 2001

^© Tocqueville Asset Management L.P.