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