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.