Hope high on Gus Dur's Cabinet

Hope high on Gus Dur's Cabinet

By Richard Mann

JAKARTA (JP): Because Indonesia's new president, Abdurrahman
Wahid, or Gus Dur, has not issued any comprehensive statement of
policy, many people outside Indonesia seem to think his
government has no policy. Nothing seems further than the truth.

According to him, the foundation of his policy is political
and economic laissez-faire or letting matters take their course.
In this way the hope is that damaging conflicts will be avoided.

In economics, government is to become very much the hidden
hand and, in politics, decisions are to flow from the
legislature, the president, the Cabinet and even from the people,
especially the provinces.

In this process, decisions pop up day by day as circumstances
dictate which, when viewed together as trends can be seen as
policies.

The awesome power of the presidency, especially if abused, is
being consciously and daily limited by Gus Dur. He has
characterized himself almost as a people's president, open,
challengeable, accessible, just like any other man and not at all
like his predecessor bar one, former president Soeharto. He began
his presidency with a series of overseas trips which left the new
government in the hands of his ministers; it was their job to run
the country not his, as head of state.

As head of state, he has undertaken a grueling travel
program for a nearly blind man with two heart attacks behind him.
His objective? -- to spread understanding about his democratic
policies and views, to rebuild confidence, to win sympathy,
support and private and state financial assistance, even from
Israel, to reassure the ethnic-Chinese wherever he found them, to
open vital markets like China to receive more Indonesian exports,
to restore lost respect to Indonesia by projecting its head of
state onto the world stage and, in so doing to build up his own
status as a world leader.

Still, after two years, Indonesia is going through
revolutionary political times and facing tough economic
conditions. The two, to a large extent, go hand in hand.

Politically, many provinces want autonomy or even
independence; economically it is in Jakarta's immediate interest
to downsize and decentralize the state that Soeharto built,
passing as many as possible of its functions to the provinces to
perform and pay for, or alternatively to nongovernmental
organizations, now expected to mushroom in numbers and in powers.

Quietly, an austerity program has been launched to reduce or
eliminate the national government's budget deficit and reduce the
need for foreign loans, a reduction Indonesia wants and needs
much more fervently than the International Monetary Fund (IMF),
which is advising the same. Obviously, whether for reasons of
sovereignty or for hard financial reasons, Indonesia cannot
afford to let its already substantial public debt rise without
limit.

Government subsidies, often embezzled by between 30 percent
and 50 percent will be reviewed and where possible eliminated
unless deemed essential for the public interest, especially the
poor; corruption, collusion and nepotism is to be weeded out
along with all its financial penalties both to government and
business; government will do nothing that the private sector can
do as well or better; ways are being sought to bring Soeharto's
expensive wars in the provinces to an end; the efficiency and
profitability of state companies is to be improved; state costs
will be pared to the bone across the board, especially by looking
again at crony contracts between government agencies and
companies linked to Soeharto's family and cronies.

Urgent steps are being taken to increase revenues by
continuing with the privatization program, by speeding up the
selling off of assets inherited from bankrupt banks and companies
and by increasing the numbers who pay tax and the amount paid.

To help spur economic recovery, foreign investment, either
direct or portfolio, has been welcomed, provided the investors
want to help Indonesia as much as they want to make profits,
Indonesia's ethnic Chinese have been encouraged to repatriate
funds thought to be parked abroad and the diplomatic corps has
been turned into a super trade agency to help boost flagging
exports, thankfully matched by equally flagging imports.

The economy generally begins to look a little healthier;
incomes and purchasing power are said to have returned to 80
percent of precrisis levels and utilization of industrial
capacity is now claimed to have reached an average of 60 percent.
Indonesians feel that life and prospects are improving. More
foreigners can be seen around Indonesia's capital, interested in
finding out what's going on and about business prospects.

Finally, the prospects for foreign business will be different
than precrisis. For the moment there cannot be much new
investment in factories, power stations and office towers,
especially around Jakarta, and not in partnership with a handful
of giant conglomerates. But even in the capital the go ahead has
been given for the long contemplated massive mass rapid transit
system -- if someone can be found to pay, hustle and bustle has
returned and there is even a resumption of limited construction
activity.

For the time being, it seems likely that investment now will
largely be in resources, cash crops, agriculture and agribusiness
and fisheries. It may take the form of anything from food drying
plants, to freezing or canning factories to ports and shipping
fleets. It will also be in medium to small businesses
manufacturing a wide range of products for home use and export,
many of which are expanding and soaking up Indonesia's
unemployed. At around US$10 billion foreign investment held up
well in 1999. Investment should also flow to the provinces where
within a year or two we can expect a mushrooming of
opportunities, including for infrastructure projects. It should
be in the provinces that the new office towers will rise. The
government says that opportunities for foreign investors are now
or will soon be greater than ever. Some, of course, will be in
newly free and internationally bankrolled former East Timor.

As always, a major problem for the economy and the government,
remains private sector debt and its impact on the banking system.
The new government says that it will try hard during the next
four years to restructure some of these companies and their debts
or sell them off, even at a loss. Revenue raised will go toward
recapitalizing the banking system, a process backed by the
government and currently underwritten by the issuance of
government bonds.

For the moment, these companies and related banks, the remains
of Indonesia's once high-flying modern industrial sector, form a
virtually dead mess at the center of the economy. But around
them, companies who do not have debts or financing needs are up
and coming and there are forecasts of 4 percent growth for
Indonesia in 2000.

There is no intention to interfere with or distort the free
market economy, except in instances where not doing so will
inflict severe hardship on Indonesians. This means that it cannot
always be expected to agree out of hand with the IMF and the
World Trade Organization. Seattle has shown that others agree!
And while Indonesia is pressing on with its commitment to free
trade within the Association of Southeast Asian Nations,
ministers say that certain aspects not favorable to Indonesia in
its current weakened state may have to be renegotiated.

A key condition for economic growth as far as foreigners are
concerned is that there should be peace and security. This almost
exclusively involves hammering out new deals with the provinces
and the military's continued move back to the barracks and, as a
result, will take time. The signs are positive, despite constant
alarms and frights.

Indonesia has switched in a few months from being an
authoritarian state to an open democracy. There are clashes
between the old and new forces; some people are standing still,
some are moving forward. A confusing picture emerges as different
groups and interests defend or prosecute their positions.

And the noise level is suddenly high, not at all like the
politically silent Soeharto days. Now all mouths can be open, the
legislature is free and empowered, the media is free and
empowered, the answers to many mysteries can be revealed, the
corrupt and the criminal brought to book. All these new freedoms
and empowerments add to the sense of instability some feel but
this is democracy at work and, hopefully, will not disappear in
the near future. Even the new Cabinet is not immune as some of
the new ministers are suspected of having skeletons in their
cupboards and, if proof is found, have been told to quit or face
trial.

Some people fear that old forces will try to return to power
or that reactionary new forces will appear. It is difficult to
imagine. Indonesians are unlikely to stand for it and leaders of
powerful foreign countries are equally unlikely to stand for any
return to unjustified violence. Just how far the military has
come along the reform road was demonstrated this week when it
said that it could even accept a federation so long as the change
is sanctioned by the Constitution. There was immediate
confirmation the legislators are working on it!

Gus Dur's most important and far-reaching imprint on his
government is that of tolerance and reconciliation. In his new
Indonesia the aim is that all citizens will enjoy the same
democratic rights, all religions will be welcome, abuses will be
punished, wrongdoings prosecuted. From the highest to the lowest,
the ideal is to make Indonesia predictable, transparent and
accountable -- starting from Oct. 20, the date of the
presidential election. Certain abuses prior to that, especially
those committed by the military, may have to qualify for large
doses of forgiveness to maintain loyalties and stability.

It is a grand ideal and an even bigger task. Only time will
tell to what extent this massive revolution can be achieved.
There are certainly many vicious looking rocks along the way on
any one of which the new theories and dreams could run aground.
Most people in and out of government think that it will be 2004
before we know for sure. But most also think that rebuilding will
begin in earnest in March 2000. Hopes are high!

The writer is the author of Economic Crisis in Indonesia: The
Full Story, Plots & Schemes That Brought Down Soeharto", and
Fight For Democracy in Indonesia.