Brief visit after a
two-year absence
I first visited Indonesia before the fall of
President Suharto in 1998. In that aging autocracy, any criticism of the authorities
was by innuendo or, at best, whispered. The country also had all the attributes
of a regime where, to paraphrase Lord Acton, “absolute power had corrupted
absolutely”: arbitrary decisions, absence of legal recourse, brutal repression
and, above all rampant corruption at the highest levels. But, to foreign powers
and multinational corporations, the country lived on its reputation as a haven
of stability and prosperity for the business class, and a guarantor of peace
for the whole Southeast Asian region.
To everyone’s surprise Suharto’s departure, though preceded
by riots, was bloodless. Almost overnight, the country transformed from a
repressive dictatorship into an unbridled democracy. Unfortunately, democracy
does not look as clean-cut or predictable as dictature does: in fact, at times,
it more closely resembles chaos.
There is no doubt that, in the eight years since Suharto’s
resignation, the country has seemed much more unruly and its policies more
tentative than under the best (early) years of Suharto’s leadership. With the
additional realization after 9/11 that the struggling new governments were
ruling over 200 million-odd Muslims, international perceptions of Indonesia have,
if anything, become more cautious.
I was recently remarking to the local representative of a
major international institution that, whenever I was about to visit Indonesia,
my family and friends fell into near panic at the ‘risks’ I was taking. He
shrugged and simply commented: “The same happens to me: Indonesia is perennially
misunderstood”.
Yet, the seemingly chaotic progress of Indonesia’s new
democracy may be just as misleading as the apparent stability of the preceding
regime.
Admittedly, the task of managing Indonesia is gigantic. It is the
fourth most populous country in the world, and endowed with enormous natural
riches (oil, gas, coal, metals, agriculture). But it is also spread over more
than 17,000 islands: although most are uninhabited, the logistical and
communication challenges are huge. On top of that, the population is made up of
300 ethnic groups, often of different religions, and if a common language had
not been superimposed at independence, in 1945, the population could not
communicate in the 250 different languages that are still spoken locally.
To a visitor in 1998, the country’s instant inebriation with
the long-suppressed and suddenly-regained freedoms of speech and of the press
was awesome and exhilarating. One of the new democracy’s outstanding successes
is that these freedoms have survived, even constituting a matter of envy in Singapore, Indonesia’s otherwise exemplary
neighbor. To some extent, however, these freedoms are a mixed blessing, because
the country’s problems are aired much more extensively than in most other
developing countries, giving the impression that they are more prevalent. And
then, the seemingly unending public debates that ensue, though necessary to
build national consensuses on issues, create an impression of indecisiveness
and agonizingly slow progress.
But democracy in Indonesia has been resilient in
other ways, too. It has even progressed to the point where most observers now
give it excellent chances of surviving.
The President is now elected by universal suffrage, as are
the parliament, the provincial governors and some other, lesser
decision-makers. All these centers of authority can claim legitimacy and have
acquired significant political power, constituting a set of checks and balances
that may not be perfect or very efficient, but is fundamentally democratic. Thus,
the criticism of indecisiveness that has been levied at the current President –
Susilo Bambang Yudhoyono (SBY for short) – is at least partly unfair. He has to
deal with all these lower but indispensable powers and needs to build a
consensus on major issues before acting: this takes time.
On the brief visit I just made to Jakarta after a two-year absence, I heard the
usual earful of criticism of government on a variety of issues. But the one
consensus was the surprising progress made by SBY in the fight against
corruption. Most observers, pretty much across the political spectrum, agreed
that people had been brought to justice under SBY that they would never have
dreamt of seeing in an Indonesian court before. Even judges have been
investigated and there is now hope for some progress towards a true rule of law
and, some day, a really independent judicial power. Of course, the main
culprits of the corruption orgy in Suharto’s late years are still mostly free,
but significant progress has been made and, apparently, a true momentum has
been created in the nation, which had seemed hopeless only two years ago.
Another area where the government has shown courage is the
very large, two-step increase in fuel prices over the past year or so. Fuel
prices are very politically sensitive in Indonesia and were partly blamed
for the riots that led to President Suharto’s downfall. The reasons are
several. First, while few average Indonesians can afford a car, many own mopeds
and scooters – in part due to the paucity of public transportation. Second, the
country’s logistics are very complex, so that fuel price increases are quickly
reflected in the price of other staples such as food. Finally, home cooking is
still largely done with kerosene, so that fuel prices are a direct and daily
influence on family budgets. So, SBY’s courage in implementing necessary fuel
price increases (assorted of subsidies for a large segment of poor families) is
a sign of true leadership.
Indonesia’s
inflation soared instantly, of course, resulting in a sharp fall in the
President’s popularity ratings, but calm prevailed. At this writing, inflation
seems to have stabilized and is expected to decline in coming months. Most
observers expect this improvement to be reflected in a steady recovery in
Presidential approval polls – provided employment can also display some visible
improvement, which will depend largely in a recovery of investment.
Indeed, one of Indonesia’s failures to-date has been
its inability to foster a stronger pace of investment and to improve its badly
lacking infrastructure in the process.
Paradoxically, one reason has been the government fight
against corruption. Large projects (both foreign- and domestically-financed)
require a “sponsor” to negotiate with local governments and various ministries,
and to guide investors through the complex web of authorizations. The spate of
highly publicized corruption cases and the still uncertain state of the legal
system have discouraged many of these traditional intermediaries from taking on
new assignments, and their clients from venturing into newly-uncertain waters.
Another impediment to foreign direct investment, in
particular, is labor laws. Even though Indonesian wages are internationally
competitive (against those in Thailand or Vietnam, for example) and social
charges are not prohibitive and could even afford some increase (health
coverage is practically inexistent), severance packages in cases of layoffs are
apparently quite a bit higher than in other developing countries.
The encouraging fact is that the country’s economy and
finances are managed by highly competent, western-educated technocrats with no
strong links to any of the political parties. The country’s budget is in
surplus and it recently announced its intention to repay early one of its loans
from the International Monetary Fund. So the government apparently has the
wherewithal to jumpstart investment in infrastructure. With the likely easing
of the severance pay impediment and some further improvement in the credibility
of the legal system, a new virtuous circle could get underway in the next few
years.
This, obviously, will depend on the continued strength of
the global economy. For example, concurrent slowdowns in the United States and China, combined with weaker
commodity prices could well derail this rosy scenario, at least for a while.
But if the country holds forth, economically and politically, while stock
valuations correct somewhat from their recent, overextended levels, Indonesia
could become once again a very attractive target for stock market investment.
Indonesia
still is a country where people are traditionally paid to go vote (hence the
high participation rate) and where the presence at popular demonstrations and
marches has a going rate (one tee-shirt plus a few thousand rupiahs, at one
dollar = 9000 rupiahs). To many black-and-white minded foreign investors, this
is difficult to reconcile with a model of democracy. Yet, in Indonesia’s
historical and traditional context, this is much less contradictory than it
seems. Moreover, change always starts at the margin: from that perspective, it
has been taking place indeed.
Meanwhile, as world citizens, we should all wish success to
this democratic experiment by a large Muslim country that, throughout the
recent global religious turmoil, has managed to remain largely tolerant and
moderate.
François Sicart
June 4, 2006
New York, NY 10019