Prognosis of Indonesia under Susilo's leadership

Prognosis of Indonesia under Susilo's leadership

Abdul Naeem, Lahore, Pakistan

Indonesia appears to have surmounted the most severe political
and security problems of its post-Soeharto era. If President-
elect Susilo Bambang Yudhoyono meets foreign investors'
expectations, the country will begin to attract much-needed
investment once again.

International investors will welcome the election of a former
military leader after the country's security environment
degenerated to simmering chaos in the post-Soeharto era. Foreign
direct investment (FDI) should begin to trickle back into
Indonesia. If the new president can demonstrate firm control of
the government early in his tenure, the inflow of foreign
investment could begin to rapidly accelerate.

Susilo captured nearly 61 percent of the vote in the Sept. 20
election, demonstrating a strong desire for regime change. But
Indonesian citizens are not the only ones happy to see President
Megawati Soekarnoputri step down. International investors eager
to exploit the country's natural resources and large labor market
hope Susilo will restore stability and improve security. The
country's neighbors -- worried about it becoming a safe haven for
regional militancy -- also welcome the change.

One of Southeast Asia's booming newly industrialized nations
in the 1990s, Indonesia hit hard times after the 1997 Asian
financial crisis. Its economy lagged while its fragile national
cohesion fell apart amid the absence of strong central
leadership, while Jakarta experimented with democratic reforms.

Indonesia's bloody response to East Timor's succession and the
international isolation that followed was the first shockwave to
hit the country. Then insurgencies in the resource-rich regions
of Aceh and Papua prompted foreign energy firms to look elsewhere
for future projects.

The emergence of the Jamaah Islamiyah (JI) militant Islamist
group, responsible for the October 2002 Bali night club bombing,
the September 2003 Jakarta Marriott bombing and the Sept. 9
Australian Embassy bombing caused international investors to fear
Indonesia could become a thriving center of militant Islamist
activity.

Indonesia experienced a US$597 million outflow of FDI in 2003.
The decline in foreign investment helped accelerate Indonesia's
falling oil production, and in March the OPEC country became a
net oil importer for the first time. Indonesia sorely needs more
investment in factories and industry to create jobs, as nearly 40
million people, or 40 percent of its labor force, are either
jobless or underemployed.

However, Indonesia might be poised to begin a slow, arduous
ascent. The country's insurgencies in Aceh and Papua remain
relatively contained and have failed to seriously threaten energy
infrastructure or other industries. JI attacks appear to be
annual events with declining impact. The Australian Embassy
attack, for example, was an operational failure -- the JI bombers
were unable to seriously damage the building or kill Australian
diplomats.

Although the Indonesian security environment will not soon
return to the stability it experienced during Soeharto's reign,
the country appears to have reached a tenable and predictable
level of violence.

Internal Indonesian security could also be poised for an
upturn. Susilo will likely be able to work far more efficiently
with the country's security and intelligence apparatus,
controlled predominantly by the military (TNI), than his
predecessor, who viewed the military as more of a competing
political power than an arm of her government.

Susilo will attempt to retain the appearance if not the
reality of full democracy in Indonesia, but his relationship with
the military and intelligence communities -- along with the
international interest in stability and aggressive
counterterrorism actions -- will push Indonesia on a path toward
more centralized control and an integrated security apparatus.

Civil liberties and human rights in Indonesia's fledgling
democracy will likely begin to slide in the near future, sparking
some loud, but likely ineffectual, international condemnations --
most observers will simply welcome the return to stability.

Susilo's election victory will increase the Indonesia's
attractiveness to investors, but he will need to demonstrate
control over the country's fractious political system before
anything close to a deluge of investment appears on the horizon.

That is easier said than done. The opposition coalition, led
by Golkar Chairman Akbar Tandjung, comprises the Golkar Party,
which controls 128 House seats, and three other parties -- the
Indonesian Democratic Party of Struggle, the United Development
Party and the Prosperous Peace Party -- giving it a total of 307
seats of the 550-seat House. This bloc presents a formidable
force against Susilo's Democrat Party, which leads a minority
coalition with only 103 seats.

Although Susilo's government can expect defections from the
opposition to his coalition as he forms his government, he is
facing daunting opposition that could disrupt planned
legislation. In the worst-case scenario, the opposition would
attempt to make Susilo's rule ineffectual and try to hound him
out office, like Wahid's government before Megawati's.

If Susilo's government survives the trial of opposition
politics -- which likely would occur sooner rather than later
because his opponents will want to strike before the president
consolidates power -- investment could begin an upswing
relatively soon.

Investors who were sitting on the fence before the elections
could be ready to make their move, while others will first want
assurances of the strength of Susilo's government. Once that is
proven, more money could begin to flow into the country,
especially for oil and natural gas field-development projects.

On the other hand, if Susilo's government is unable to fend
off its opponents in Jakarta, Indonesia will probably receive a
fraction of potential investment as firms continue to shy away
from the archipelago. Additionally, Indonesia's neighbors and the
United States will remain frustrated with Jakarta if the
government is paralyzed by infighting and fails to take adequate
measures to disrupt and destroy militant groups within its
borders.

The writer is an executive editor of Weekly Independent,
Pakistan. He can be reached at ikonoclast2002@hotmail.com