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.