Prospects for 2006

Jusuf Wanandi Jakarta

I was not a supporter of Susilo Bamang Yudhoyono (SBY) during the presidential election campaign, because I thought that he would not be a decisive leader. However, now I have to admit, that while not a perfect and decisive leader, he has shown more willingness to bite the bullet on many crucial issues, albeit after a lot of pressure, advise and deliberation.

Before making a prognosis for the year 2006, I first want to evaluate SBY's first year as President. Despite severe challenges, such as the tsunami, the high prices of world oil, and now the possibility of an avian flu pandemic that could threaten his presidency, he has achieved some real solid achievements, mainly in the political field.

He has achieved peace for Aceh, after almost 30 years of strife and rebellion. Despite some misgivings from some factions in the House of Representatives, he has persevered and peace has now been achieved for the most part. The tsunami has assisted him in changing public opinion in Aceh on the empathy from and support from other Indonesians for the plight of the province. He has fully supported what his vice president, Jusuf Kalla, has initiated on Aceh.

He has also laid down the necessary prerequisites for solving the Papua problem, by establishing the Papuan People's Council, which is responsible on behalf of the Papuans to lay down the basic policies in that province. He also postponed the local elections in the controversial West Irian Province established by President Megawati Soekarnoputri.

Obviously, more needs to be done in Papua, especially to institute better governance and to undertake more investment for the human resource development of the locals in the form of education and health. The revenues accruing to this province should be sufficient to do that adequately. In addition, the best among the bureaucracy should be sent there to work with the locals to develop the province.

Despite its explosive political sensitivity, President SBY has made the decision to increase fuel prices by more than double, albeit a little bit late, to reach 80 percent of the international market prices. This was a brave act, but was necessary, since the subsidies could amount to 40 percent of the state budget.

He also has changed the Army chief of staff and National Police (Polri) chief without a hitch. They are willing to play a more positive role on such political issues as Aceh and Papua. He is also very popular among the internationally community, especially in the West, because he can relate to them very well, and is always open to them.

However, President SBY also has his deficiencies and lacunae.

First, is by being overly cautious.

Second, is the lack of experienced advisors that he can really trust.

Third, is his weak "rainbow" Cabinet, because he needs the support from other political parties. Since Kalla has taken over the leadership of the biggest party, Golkar, such support has become less urgent.

His weakest point is obviously the economy, because he has not been able to solve the problems of unemployment and underemployment, which are critical to his performance legitimacy, but also are a prerequisites for Indonesia's stability and peace. About 40 million Indonesians have remained underemployed for the last eight years and it has stretched the patience of the people.

To overcome this, SBY has to get more foreign direct investment (FDI), which is not coming because of the deficiencies he has shown above, plus the unresolved problems of corruption. The people, local administrations and civil society groups have exposed many corruption cases, but many have not been handled satisfactorily for lack of political will.

The problem of public security is a major issue because of repeated acts of terrorism. President SBY is now willing to take some real actions against terror, supported fully for the first time, by mainstream Muslims, who now see the danger that Islamic teachings can be misused to support terrorist acts. The threat of terrorism cannot be overcome simply by military means.

On top of these issues there is the problem of taxation, and the new finance minister may be able to better tackle it. Labor relations should be improved, and the costs of compensation and minimum wages are just too high for Indonesia to be able to compete against her neighbors such as Vietnam and India.

The prospects for 2006 depend on the answers to some of the residual issues that SBY has not been able to give during the first year of his presidency. The Cabinet reshuffle has been too limited, although the appointment of Boediono and Sri Mulyani as coordinating economic minister and finance minister, respectively, is an excellent choice and is a real plus for his Cabinet. The problem is with manpower and labor, which are now handled by somebody very inexperienced. Manpower is an important portfolio. The existing labor regulations will not help in attracting new investments.

President Susilo's action against corruption have to be more consistent to make a real impact. Several steps have been taken but the government lacks a consistent and effective anti- corruption policy. His new stronger policies against terrorism are welcomed, and the support from moderate Muslims is crucial. He yet has to improve the intelligence services, and should not simply rely on the military to counter terrorism.

There are crucial issues to get FDI to come back to Indonesia. Changing Cabinet ministers can help but improvements in policies and the business environment are most important. The high inflation following the dramatic rise in fuel prices last October has increased the vulnerability of the little people. If the economy is not improving soon, there could be a major political impact. The people have been patient for many years, but will not be so indefinitely, and as happened in 1965 and 1998, anything can then change the people's behavior, leading to upheavals that can lead to a serious political crisis.

On foreign policy, the year 2006 could further consolidate SBY's contribution and achievements in Indonesia's foreign policy. A lot has been said about expectations for ASEAN to take the driver's seat in the process toward East Asian community building. This will only happen if ASEAN gets her act together, and for that to happen Indonesia's leadership is crucial.

President SBY is the one that can do this, because he is intellectually well equipped, and he has a real interest in foreign policy. This will also help him to bring back foreign investment to Indonesia.

In conclusion, it can be said that politically, the year 2006 can be stable and peaceful if some real improvement can happen on the economic front, especially in regard to employment. The economic challenge facing the SBY government remains severe, and there is a litany of problems to make a failure possible.

The good news is that the duet of the president and vice president is still much intact. They complement each other so well and they do need each other to succeed, despite the rumors to the contrary. Furthermore, the majority in the House is now supporting the government.

The writer is a Co-founder and Vice Chairman of the Board of Trustees as well as a Senior Fellow at the Centre for Strategic and International Studies (CSIS), Jakarta.