Why Megawati's party has lost people's support

Ronnie H. Rusli, Senior Lecturer, Postgraduate Program, University of Indonesia, Jakarta

Although the results of the April 5 legislative election are not yet fully in, an irreversible trend is already emerging showing that President Megawati Soekarnoputri's Indonesian Democratic Party of Struggle (PDI-P), has lost a good portion of the support it gained in the 1999 elections.

Since PDI-P emerged as a party in 1997, Megawati Soekarnoputri has always held on to the party leadership. The President and the party are one, and projected as such. Therefore, the party's performance has a strong correlation with her performance. The decline in support for PDI-P is a reflection of the party's popularity and waning confidence in her leadership. Though the extent of this decline will be determined by the final outcome of the elections.

The widely publicized failure of Megawati's leadership is well documented. In sum, it is attributed to her failure to push the reform agenda, a commitment that brought about the party's success in the 1999 elections.

Since President Megawati took over from Abdurahman "Gus Dur" Wahid in July 2001, both PDI-P and the President have failed to live up to the people's expectations. She has failed to deliver on her promises.

The corruption, collusion and nepotism (KKN) issue, which was the main factor behind the fall of Soeharto's administration, was reignited by Megawati's administration. The Megawati government was widely perceived to have tolerated and even actively participated in KKN. Many observers have commented that in the slightly over two years of Megawati's national leadership, she lifted the practice of KKN to new heights.

The Megawati administration fared no better in managing domestic affairs. Some of her major failures include her reluctant response to terrorist threats, which perceivably led to the tragedy of the Bali bombings of 2002 and Marriott Hotel bombing last year. She failed to push law enforcement authorities to act decisively against terrorist suspects and tolerated the substantially reduced charges against the leader of Jamaah Islamiyah -- a suspected international terrorist.

Her erratic policies on Aceh, Poso and west Irian have caused mistrust and confusion. She failed to resolve these conflicts.

The decentralization program introduced in 2001 is not working well due to her weak administration. Regions are empowered with stronger autonomy and wider access to resources. However, they have generally failed to deliver the developmental results expected under a well-managed decentralization program. Increased corruption, and mismanagement at a local level was evident and eroded the people's confidence in decentralized governance.

In sum, she led a government that "did nothing" and tolerated and expanded the practice of KKN.

The administration claims to have restored macroeconomic stability by a steady growth of four percent over the past two years, and been responsible for declining interest rates, a stable rupiah and increased foreign reserves.

But these have not contributed to sustainable growth with job creation and increased investment. Growth has been dependent largely on domestic consumption. The US$800 per capita today is still far from the almost $1,000 per capita achieved pre-crisis.

On the other hand, the more productive state assets in the banking and service sectors have been disposed of, but there is no corresponding decline in the overall level of debt. The total national debt, at around US$130 billion, comprising external debt of $65 billion and an equivalent amount in domestic debts would sabotage any gains from economic growth.

The investment climate continues to deteriorate, as reflected by the continuing decline in foreign direct investment over the past two years. Large investments in energy and mining sectors have been put on hold due to confusion from conflicting regulations at the center and at regional levels. The administration fails to deal with these issues decisively to generate investment and new job opportunities.

The administration highlighted the rising Jakarta Stock Exchange (JSX) Index as evidence of an improved confidence in economic performance. The nominal rises in stock prices are symptomatic of speculation by "major players", and as reported and investigated, the bourse was used by many as a "money laundering" vehicle for illicit fund transfers.

New listings on the Jakarta bourse are limited compared to other regional exchanges. The price movement of a few selected stocks with large capitalization could have a substantial influence on the JSX performance. It is known that the government has been using its domestic pension funds to lift up market performance.

The declining interest rate is not a true indication of the soundness of the financial sector. Liquidity in the banking sector has not generated lending to the real sector. Banks continue to be reluctant to lend without a high-risk premium. The increase in loans is due largely to the consumer sector, which can be risky considering the tentative nature of economic recovery.

The soundness of the banking sector remains fragile and many banks are likely to encounter problems in the years ahead for loans extended to favored conglomerates of the administration. Banks continue to depend heavily on income from government bonds to sustain their profitability.

The international community plays a significant role in propping up the Megawati administration and her leadership style. Favorable reports were published of her success in restoring political and macroeconomic stability. These reports largely ignored the reality of a weak administration that was growing increasingly corrupt. Also, they gave rise to a false sense of confidence that she was the only one who could lead the nation after the 2004 election.

That the International Monetary Fund (IMF) rewarded the government for regular compliance with the Letters of Intent (LOI) was misleading. On several occasions, the government failed to comply with the LOI and the reform timetable was conveniently readjusted, and timely disbursement maintained the reinforcement of a surreal sense of macroeconomic stability.

The policy of accommodation by the international community toward Megawati and her administration emboldened her to continue to "do nothing", and tolerated all the bad governance that has been practiced under her by her immediate circle.

Megawati's immediate circle is a "party" that no one was willing to call an end to, despite the bout of "drunkenness" -- induced by over confidence on the part of Megawati and her administration -- that they could do no wrong with the international community fully behind them.

The resources available to -- and reportedly spent by -- PDI-P on the 2004 elections so far could not possibly have been accumulated by a party that only had its modest beginnings in 1997.

The 2004 elections and the likelihood that PDI-P will become the number two faction of the House of Representatives demonstrate that in a democratic election, the people vote with their consciences in search of an effective and sound government which can practice proper governance.

A senior PDI-P executive, State Minister of National Development Planning Kwik Kian Gie -- who is well-respected for his stance on good governance -- commented on the performance of PDI-P recently: "The people are very clever now. They have used their voting right to say PDI-P has performed poorly. The people were not stupid when they voted".