Indonesia's transition in the last ten years since the country was hit by the Asia's financial crisis has been such a remarkable success that some people see the emergence of a "democratic Indonesian tiger".
The combination of political democracy and rapid economic growth appears to be within Indonesia's grasp.
Indonesia is enjoying its sixth straight year of economic expansion with growth in 2007 expected to reach 6.3 per cent, slightly above the average of its peers in Southeast Asia. A 7 per cent growth rate is no longer unimaginable. This new level of growth would significantly strengthen President Susilo Bambang Yudhoyono's re-election chances in 2009.
Since the fall of Soeharto, the country has prioritized democratization, macro-economic stability and growth rather than improved governance, better services, and micro-economic reform.
The successful shift to democracy has confounded skeptics who in 1997 feared this sprawling, diverse country of 235 million would disintegrate without strongmen like Sukarno and Soeharto holding it together. The latest annual Freedom House global survey even identifies Indonesia as the only fully free and democratic nation in Southeast Asia. Indonesia has achieved something unique in the region and the developing Muslim world: stability and growth on democratic foundations.
However, strong macro-economic fundamentals mask other stubborn problems that still have to be dealt with. The most important ones are poverty, a crumbling infrastructure and a dysfunctional legal system. Yudhoyono promised that his election to office, and democracy itself, would reduce poverty and create jobs. The numbers are daunting. Over 100 million Indonesians survive on less than US$2 a day. According to some estimates 40 per cent of the workforce is either unemployed or underemployed.
Many investors, who didn't dare to visit the country three years ago, are giving Indonesia a second look. However, only a few of them set up labor intensive factories that would create the necessary jobs Indonesia so badly needs. Many also give investments in badly needed infrastructure a miss. The single most important reason for this: Indonesia's unreformed legal system is a mess. The legal system doesn't do what it is supposed to do: create predictability.
Why would an Indonesian or a foreign investor put money in a country if some bizarre court-ruling can go against you? The lack of legal certainty is the single biggest obstacle in beating poverty, (re-)building Indonesia's infrastructure and reducing unemployment.
To many observers it is mystifying why there is not more oversight of those who work in legal professions, like judges, solicitors and members of quasi legal institutions like the anti trust agency. The quality of many verdicts in civil cases in Indonesia is horrendous. The KPPU has established a well-established track record for nonsensical rulings of which the one against Temasek is only the latest example.
Another travesty of justice recently took place at the High Court of Jakarta. The High Court broke the Indonesian speed record by agreeing to hear, examine and rule on a case, all in three weeks. Curiously, the chairman of the Panel of Judges hearing the case retired the day after upholding a verdict by the South Jakarta District Court in favor of a former distributor of the Indonesian subsidiary of Mars.Inc.
The court awarded the former distributor 130 years of potential profits, even though the business was in steep decline. In fact, Mars' business in Indonesia was forced to close its factory in Medan due to insufficient sales of the products being manufactured there.
This case is only the latest in a long line of former distributers trying to get even through a defective legal system. Mars is appealing to the Supreme Court, which has a better record in addressing these matters.
Budiono Kusumohamidjojo, who is a senior lecturer in Philosophy of Law, thinks to know why the legal system is in such dire straits: "Legal certainty has been such an alien concept during the course of Indonesia's six decades of political independence that it has become an empty slogan for most Indonesians." According to him there is a need to uproot the corrupt culture from which plenty privileged people are accustomed to taking the forbidden fruit.
President Yudhoyono does not want to interfere with the judiciary's independence. But case after case has shown corruption in the system. Paradoxically, by not intervening the President is allowing the dysfunctional system to prevail.
It is a tragic state of affairs when so called black lawyers can openly boast that they can guarantee a judicial outcome, and taunt their opponents with the inevitability that they will lose, not because of legal arguments, but because of a defective legal system.
According to the well-respected lawyer Todung Mulya Lubis: "It is a tragic state of affairs when two courts in two different parts of the country reach virtually word-for-word judgments, each totally absurd as a matter of jurisprudence, and where the only link between the two courts is the plaintiffs' lawyer. The odds of those identical judgments being genuinely arrived at are similar to the odds of a room full of young children with typewriters accidentally creating the works of Shakespeare."
To become a truly "democratic Indonesian tiger" Jakarta has to tackle its dysfunctional legal system. Fully fledged democracies have independent courts that issue verdicts one can rely on. Not absurd verdicts that only serve some vested interest and seem drafted by Monty Python Flying Circus.
The writer is Vice Chairman, Asia of APCO Worldwide, a global firm specializing in political risk analysis. He was based in Indonesia in 2000-2006.
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