Rich regions reject Jakarta hand

Rich regions reject Jakarta hand

By Anne Booth

LONDON: In the latter part of 1998 and early 1999 there were
many manifestations of regional unrest. Some were violent and
tragic, such as the events in Ambon and West Kalimantan. Some,
such as student demonstrations in Caltex facilities in Riau,
obviously intended to make a political point to both the national
and the international media. The B.J. Habibie government's
apparent promise, made at the end of January, of self-
determination for the troubled province of East Timor,
immediately provoked predictions of a domino effect in other
parts of the archipelago, from Aceh to Irian Jaya.

By the end of April, press reports suggested there was a
strong military backlash against any promise of ultimate
independence for Timor, based in large part on the conviction
that, once the Pandora's Box had been opened, several other
provinces would want to escape as well. Increasingly, newspaper
pundits in various parts of the world began to talk about
'another Yugoslavia' in Southeast Asia. To many, the world's
fourth most populous country appeared to be unraveling in much
the same way as the former USSR in the early 1990s.

To a number of observers of the Indonesian scene (myself
included) it had seemed obvious for some years that the highly
centralized system of government which Soeharto and his key
advisers had put in place in the 1970s was, by the 1990s, both
politically unacceptable and, from an economic viewpoint,
inefficient and inequitable.

In the early 1970s, the establishment of firm central
government control over revenues from natural resources (mainly
of course oil) had seemed essential if the government was to
provide infrastructure and improve the quality of life for
populations in all parts of the country. After all, much of the
oil was in fact located in two rather small and isolated
provinces, both of which seemed to lack any strong sense of
regional identity. Given the development needs in other parts of
the country, it would have been very difficult to make a case in
the 1970s for handing over a significant part of the oil revenues
to either Riau or East Kalimantan.

When huge gas reserves were located in Aceh, a province which
did have a long tradition of rebellion against outside control,
some observers predicted that there could be trouble, although I
cannot recall anyone in the 1970s forecasting the tragic events
of the latter part of the 1980s and early 1990s in that province.

But as rapid economic growth and industrialization transformed
both the urban and the rural landscape in Indonesia, and
especially in Java, over the 1980s and early 1990s, the whole
nature of the 'regional problem' in Indonesia changed. In the
1970s the central government could claim to be playing the role
of a benevolent Robin Hood, robbing the rich few to pay for
improved living standards for the poor millions, especially but
not exclusively in Java. But by the mid-1990s, it was clear that
the incidence of poverty in Java was in fact lower than in a
number of provinces outside Java, including some such as Irian
Jaya with abundant mineral wealth.

Even in those provinces such as East Kalimantan and Aceh where
poverty was lower than the national average, there was growing
resentment at the differences in living standards between the
local populations and those of neighboring Malaysia. Per capita
Gross Domestic Product in East Kalimantan in 1993 was about the
same as in the neighboring Malaysian state of Sarawak, and higher
than in Sabah, but poverty incidence was much higher in East
Kalimantan. Given the porous nature of the land borders and the
widespread movement of labor from Indonesian Kalimantan into East
Malaysia by the early 1990s, it was inevitable that local
populations would make comparisons between their own living
standards and those in adjacent regions of the neighboring
country.

In addition, by the early 1990s, the combination of rapid
economic growth and over two decades of administrative
centralization had produced a situation where government
ministries in Jakarta were handling huge budgets for both routine
administration and development projects in all parts of the far-
flung archipelago. Given the absence of effective audit
procedures, and the demonstration effect of growing nepotism in
the first family, there was inevitably a sharp increase in the
magnitude of official corruption throughout the central
government apparatus.

Even those government ministries and agencies which had been
considered 'clean' in the 1970s became increasingly blatant in
the way they creamed off funds for the personal use of senior
staff, including lavish housing and cars, foreign travel and
foreign education for their children. Regional and local
government officials often followed suit.

That there is now, with greater freedom in both the print and
the electronic media, an explosion of public outrage against such
manifestations of bureaucratic abuse is hardly surprising. The
Habibie government was not slow to sense the public mood. On
April 23, the legislature, the same body which slavishly approved
the centralist policies of President Serrate, passed a new law on
inter-governmental fiscal relations which allows for a
considerable amount of revenue-sharing between center and
province, especially for revenues from oil, gas, other mining,
forestry and fisheries. The issues are complex and it is, as yet,
far from clear how the law will operate in practice (see John
McBeth in Far Eastern Economic Review, May 13, 1999). It is also
possible that the new legislature will press for even more
sweeping changes.

There seems to be little doubt that what James Mackie once
termed the 'powerful centralizing and integrating forces' of the
New Order era have been halted and indeed thrown into reverse.
But how far will the reverse process proceed, and will it
inevitably lead to the breakup of Indonesia?

On this question, I can only give a personal view, based on my
own observations over nearly three decades of study. It does seem
to me that, after more than 50 years of independence from Dutch
colonialism, most inhabitants of this vast archipelago do wish to
be part of some entity called Indonesia. Understandable demands
for greater autonomy from a corrupt and predatory central
government apparatus should not be confused with a desire for
outright independence. Indeed it was the repeated failure of both
Soeharto and the armed forces to comprehend this distinction
which led to so many human rights abuses in places like Aceh and
Irian Jaya.

While the East Timor problem may only be resolved ultimately
by independence, it ought still to be possible for other regions
to remain within the Indonesian state, but with different
conditions of membership from those which were laid down in the
Soeharto era. New conditions of membership in effect mean
constitutional change.

Accommodating growing demands for such change while at the
same time trying to restore confidence in both the economic and
the administrative system will severely test the skills of
whatever government assumes control in Indonesia in the post-
Soeharto era.

But one thing is clear: Soeharto's New Order has gone, and with
it the highly centralized political and economic system which he
fashioned. There will be a very powerful group of losers from the
changes now in progress in the central bureaucracy (both civilian
and military), and especially in its upper echelons.

The logic of the decentralization measures introduced in April
will be that provincial and local governments will assume more
direct responsibility for sectors such as health, education,
family planning, women's affairs and environmental protection.
Much economic and social planning will have to be done in the
regions rather than at the center. Many officials will thus have
to move to the regions or find alternative employment.

To the extent that they will be forced to leave central
departments, they will also be cut off from the extensive
patronage networks which developed at the center; indeed these
networks will themselves wither as they are deprived of
resources. Senior bureaucrats were among the most privileged
people in Soeharto's New Order and they can hardly be happy about
the inevitable attenuation of their power which a genuine process
of decentralization will entail. What, if anything, they can do
about the situation remains to be seen.

Professor Anne Booth teaches at the School of Oriental and
African Studies, University of London. She has written numerous
books and articles on the Indonesian economy. This article is
reprinted with the courtesy of the Australia-based Inside
Indonesia in which the article first appeared and with permission
of the writer.