Indonesia moving in the right direction, at `glacial' speed

Indonesia moving in the right direction, at `glacial' speed

Managing relations between Indonesia and the United
States has never been easy, and these last few years it has been
even more challenging. The terrorist attack against the United
States on Sept. 11, 2001, changed a lot of things, and one of
those is the relationship between Indonesia and the United
States. Obviously, on many issues, Jakarta and Washington do not
see eye to eye. The two countries drifted even apart after
President George W. Bush sent his coalition forces to invade Iraq
in March.

But as Ambassador Ralph L. Boyce has repeatedly said, "As
friends, we can disagree on a lot of things."

Both countries indeed have a stake in maintaining and
nurturing their friendly relations, even as they disagree on
various global issues. Both countries know that they have a lot
to gain by working together, and that it would just be
unthinkable to think differently.

Boyce, who took up his Jakarta post only a few months
after the September 11, 2001 terrorist attacks, has virtually had
his work cut out for him. The war on terrorism, and the
subsequent war in Iraq, is only one element in the overall
relations between the two countries that he has been working on.
There are other aspects of the relations that have kept him busy,
from helping to promote the process of democratization in
Indonesia, Indonesia's economic recovery program, to promoting
business and economic ties.

The Ambassador recently talked at length with The Jakarta
Post's Endy M. Bayuni about he sees the state of relations
between the United States and Indonesia. Excerpts of the
interview follow:

Question: How do you see Indonesia developing in the
medium and long term?

Boyce: Indonesia is undergoing one of the most dramatic
transformations anywhere, may be ever, from an authoritarian
centralized state to a democratic and decentralized state, with
relatively little violence and a generally shared commitment to
that direction of change. There was very little debate about
remaining democratic or wanting to remake a lot of Indonesia's
institutions. There is generally a shared view about where
Indonesia wants to get in the medium and long term. Obviously,
bringing about that kind of change on a day-to-day basis in the
short term, in a new political environment, is very difficult.

You have turmoil, a lack of agreement on the day-to-day
tactical issues, but there is a general agreement on the
direction, the course, which I think is a good thing.

What underpins your optimism?

Politically, the August session of the People's
Consultative Assembly (MPR) is a historic milestone that has gone
underreported and certainly under-recognized outside Indonesia,
may be even inside Indonesia. That was a monumental date over not
just one or two fundamental issues, but a whole handful of issues
that defined the very nature of Indonesia and the state, the
definition of the MPR role, strengthening of the presidential
institution, the creation of a new elected body, the continued
distancing of the military from politics, the reaffirmation of
Indonesia as a secular state. All of these things, any of them
individually would have been remarkable. Taken as a cluster of
issues for a national debate and carried out on televisions in
front of the entire nation, is very quite remarkable. That's on
the political side.

Over the last three year-time frame, decentralization has
probably today presented more problems than solutions. But in the
very magnitude of the endeavor, it would be surprising if it did
not. You have gone, with the stroke of a pen, from a centralized
to a decentralized system, not at provincial but at the district
level. Obviously there are going to be a lot of loose ends that
have to be picked up, such as the relationship between the
districts, revenue sharing and interstate commerce and
regulations, and this sort of thing, but I hope this process will
continue.

Hopefully, it would be better recognized that this is the
most ambitious exercise of its kind in the history of the world.
Again, this is one of the quiet success stories of Indonesia.

How does this development bode for the U.S.-Indonesia
relations?

It's tremendously exciting for an American to be
witnessing even part of these dramatic changes, because the two
countries have so much in common in terms of their geographic
spread, ethnic and religious disparity, the population
composition, and we being the oldest democracy and Indonesia one
of the newest democracies.

It's sometimes tempting to be prescriptive, but again,
something will inevitably happen in our own country to remind us
that we still don't have it right when it comes to perfecting
democracy. So, rather than try to imply that we have all the
answers, we may have some experience over 226 years of trying to
do this, that we can make available to Indonesia.

The United States has always been a major trading partner
and an important source of foreign direct investment and
financial assistance to Indonesia. How do you see this developing
in the coming years? What problems do you see?

I hope at the very minimum, we remain the top sources and
destinations of all those three. I hope over time, foreign aid
will become increasingly unnecessary. It is an irony that we were
actually phasing out our assistance program at the end of the
Soeharto period because of the excellent macroeconomic growth
indicators, but in post-1998 period, we have completely
redesigned our program and basically started a whole new type of
program, from the ground up. We have focused largely on the whole
society, supporting democracy and economic reforms and health
related issues.

Indonesia will continue to rely on the United States as a
source of investment and a trading partner. There are some who
prophecize that the Asian market will become increasingly more
Asian in nature as China becomes a larger and larger force in the
region. The emergence and rise of China is a natural thing, and
we are all going to have to accommodate, but I don't think it
necessarily means that Indonesia's traditional partners like the
U.S. and Western countries need to be necessarily out of the
picture.

Just how important is Indonesia to the United States' foreign
policy and foreign economic relations?

We can take a number of different indicators, and all of them
show Indonesia being very important. From a political point of
view, it's important for Indonesia to succeed as an emerging
democracy. From the political stability point of view, it is
important to us that Indonesia remains a unitary state, and that
the problems from Aceh to Papua are resolved in the context of a
unified Indonesia.

From the point of view of the war on terror, Indonesia is a
good partner and we hope that it will continue to be so in the
region.

From the point of view of Indonesia's political importance
within ASEAN, it's vitally important that Indonesia reassert
itself as the anchor and the leader of ASEAN. That's a natural
role that it used to have, and I am confident that it will have
again It is important, now that ASEAN has expanded, for Indonesia
to come back and reassert its traditional position. From economic
point of view, for the very trade, aid and investment relations
you have mentioned, in all of those Indonesia is one of our top
destinations and or sources.

What are you telling American investors about Indonesia?

I've talked to the existing American investors community that
has been here and has had a long experience. We have been
involved in Indonesia in over 100 years, and in many sectors. A
good investment advice to anyone is to be present on the ground
rather than try to do things by fascimile, e-mail or through an
agent. But most importantly is that we tell them that the
Indonesian government has a good policy of economic reforms and
we should keep an eye on it, because the fact that it is
implementing its policy, the more conducive the foreign economic
trade and investment activities, the better.

In particular, of late, we have focused on the need for
implementation of the announced program of legal and judicial
reform.

Are you encouraging American investors to come to Indonesia?

No.

We are encouraging investors to come to Indonesia once the
climate reemerges in a more positive way. We are encouraged by
the announced packages of economic reforms that we believe the
government really intends to implement. The speed with which they
pursue that package is going to govern the degree with which
investors are going to be engaged. Right now, it is not clear
that a significant input of new capital from any source is
necessarily going to be predictable and or protected under the
existing legal structure. It is that lack of predictability
inherent in the capital movement that is going to make investors
go elsewhere, if there is any doubt about how safe a capital
investment is going to be.

Do you think the Indonesian government is addressing this
problem?

The announced policy is right on. So there is clearly
recognition of what needs to be done. But as is always the case,
with difficult economic choices that are accompanied by very
difficult political price tags to pay, it is easy for an outsider
to say the process should move more quickly and be more
Draconian. But when you're making some difficult choices that
have real costs associated to them in a democracy, heading into
an election year, with a new empowered parliament, a media that
is playing a watchdog role, and a whole new growth of NGOs and
civil society that was not there before, it's not quite as easy
to make dramatic policy shifts as it used to be.

Are you confident that these changes will happen?

They have to happen. I think it's inevitable, otherwise there
is not going to be any new investment in Indonesia from any
sources.

How soon will they happen?

The government has seen the year 2002 as being the year when
they get the budget and the fiscal indicators under control. 2003
has been announced as the Year of Investment, so the subtext to
that is the year of the microeconomic reform that are going to
encourage investment. We're a quarter of the way into the New
Year, and I think it may be overly optimistic to expect that a
whole lot is going to happen this year. There is an election next
year. Realistically speaking, it's a very difficult call for the
government. But in putting off difficult economic decisions
because of the political costs associated with them, you are
literally putting off the prospect of a return to robust
investment growth in Indonesia. So there's the cost and the
benefit.

What about three to five years down the road?

Every indication I see is that the direction and the course
are unchanging, and the speed may be sometimes seeming almost
glacial, but nevertheless always in forward gear. There has not
been a lot of reverse movement. If you could go back in time and
take a moment and just dwell on where Indonesia was three-to-five
years ago, you will see how much we have taken for granted today.
Yet, how much has happened and how much movement there actually
has been, what appears glacial on the day-to-day basis, turns out
to be significant. I wouldn't be surprised if three-to-five years
from now, people are sitting and complaining about how slow
everything is moving, and how difficult it is to expect change,
and yet, we are probably going to be in a wholly different
environment because there will have been many imperceptible
change that goes on.