Prospects for 2006

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.