RI needs to formulate a long-term strategy

RI needs to formulate a long-term strategy

Although the government appears to have fought the current
crisis tooth and nail, it does not seem to have abated. Jusuf
Wanandi, chairman of the Supervisory Board of the Center for
Strategic and International Studies, talks of pitfalls lying
ahead.

JAKARTA (JP): Despite some relief from the World Bank and
donor governments in the form of financial assistance and aid
programs, Indonesia remains in a severe crisis.

This is because the country is undergoing not only an economic
crisis but a political crisis as well. The economic crisis is, in
itself, quite complicated -- requiring solutions to the huge debt
problems faced by private corporations and the restructuring of a
banking system that has practically collapsed.

The real economy is shrinking rapidly and there are no signs
of even the slightest move toward a reversal. Meanwhile, there is
the big challenge of developing social safety net programs that
are effective and sustainable.

The task is immense and the concern, as expressed in a
declaration by 15 prominent Indonesia economists, is that the
Habibie government is unable to overcome these difficulties
because it has yet to develop a coherent and consistent policy
and suffers from a lack of necessary leadership.

This situation is compounded by a political crisis caused by a
total loss in confidence in the government. Many say the current
administration lacks political legitimacy because they believe it
is an extension of the old Soeharto regime.

What makes matters worse is that many observers believe the
political behavior of the Habibie government is no different from
that of its predecessor.

The government's lack of credibility and public confidence, a
problem faced by the military as well, has led to a situation in
which anarchy may very well be just below the surface of our
national fabric. A little rumor could create major havoc with
severe implications for the economy.

What can be expected to happen in the near future? One
possibility is that the country will embark on real political
reform following a special session of the People's Consultative
Assembly (MPR) in November. Such reform could be strengthened
further by general elections scheduled for May 1999.

The other possibility is that the political and economic
situation could continue to deteriorate with the government being
unable to arrest the situation.

If such a situation arose, the government would not be able to
guarantee national stability and would have to transfer power to
another transitional government, possibly through the MPR. Both
possibilities are not far-fetched since the situation remains
highly uncertain.

Whatever happens, Indonesians need to begin to formulate a
long-term strategy for the country.

In the economic field, a new situation is likely to emerge.
Indonesian conglomerations, mostly run by Chinese-Indonesians,
will no longer be relevant since they are currently heavily
indebted and probably will not be able to overcome their
difficulties on their own.

Many will go bankrupt, be taken over by foreigners or be
nationalized.

It will take some time before Indonesians, both indigenous and
ethnic Chinese, can become big players again in the economy.
Indonesian businesses will mostly be involved in medium- and
small-scale activities. At the other end, there are efforts to
strengthen cooperatives. But this will not be successful unless
they are totally reformed.

Indonesians must accept the fact that in the medium term, the
economy will be dominated by foreign corporations and investors.

Attention should not be focused on the issue of ownership,
though. Instead, it would be more appropriate to devise policies
that would induce foreign investors to increase domestic income,
create jobs and enhance productivity and skills in the economy.
In this regard, human resources development will play a critical
role.

In the end, inclusive growth, in which all groups in society
benefit from development, is key to a successful development
strategy.

Today, political trends reflect a desire for a more democratic
and open society. There cannot be a return to the repressive
political system of the Soeharto regime.

Public pressure regarding this is so strong that the Habibie
government has no other option than to accept the trend. The
emergence of new political parties is a natural development, and
the political role of the Armed Forces will definitely be
limited.

Given the severe limitations imposed on people's political
freedoms for over four decades, it is only natural that there is
strong pressure to go in the direction of complete political
freedom. The challenge for our society is to ensure that this
desire for freedom will be translated into a real democracy that
is sustainable.

In this context, the granting of a special status to East
Timor would be a first step toward a political solution. If this
process leads to a referendum and independence, this would have
to be accepted.

Yet, precautions should be taken from now on toward other
parts of Indonesia where separatist tendencies are a problem,
such as Irian Jaya and Aceh.

Such tendencies are not as strong in these other parts as in
East Timor, but they cannot be dismissed either. A just and
humane policy toward these regions must include a generous amount
of autonomy.

If Indonesia becomes a more open and democratic nation, it
would have a positive impact on Southeast Asia given the
country's dominance in the region. This could mean that the
Association of Southeast Asian Nations (ASEAN), too, would be
transformed into a more open, creative and integrative regional
institution.