INDONESIA: CONFRONTING THE POLITICAL AND ECONOMIC CRISIS

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NAPSNet Special Report

Recommended Citation

Theodore Friend, "INDONESIA: CONFRONTING THE POLITICAL AND ECONOMIC CRISIS", NAPSNet Special Reports, February 23, 2000, https://nautilus.org/napsnet/napsnet-special-reports/indonesia-confronting-the-political-and-economic-crisis/

February 23, 2000

The following article was distributed by the Foreign Policy 
Research Institute (FPRI).  Theodore Friend, a Senior Fellow at 
FPRI, is currently writing a book on the history of Indonesia, 
under contract with Harvard University Press.  This is the text 
of his testimony to the House Committee on International 
Relations, Subcommittee on Asia and the Pacific, February 16, 
2000.  Friend discussed the current situation in Indonesia, and 
US interests in the region.

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Foreign Policy Research Institute A Catalyst for Ideas

February 16, 2000

INDONESIA: CONFRONTING THE POLITICAL AND ECONOMIC CRISIS

By Theodore Friend

I feel privileged to be asked to contribute to this committee's 
ongoing exploration of the situation in Indonesia.  This 
committee, having last week pursued matters as they are improving 
in tragically afflicted East Timor is wise, allow me to say, to 
confront now the issues of democracy, development, security, and 
human rights that Indonesia, with its 212 million people, 
represents.

As the committee is aware, but Americans generally may not 
realize, if you superimpose the Indonesian archipelago across the 
USA, it would reach from New York City to Seattle.  It has 80% of 
our size of population in 20% of our land area.  It has three 
times as many people as the Balkans, and more people than the 
Arab Middle East.  But it has not usually generated as much 
trouble as the Balkans, and only produces a fraction of the oil 
of the Middle East.  So we as a people have been slow to see 
Indonesia's global importance: now the third largest democracy in 
the world, and the only Muslim democracy besides Turkey.  Because 
Indonesia envelops the sea lanes between the Indian Ocean and the 
Pacific, and is the largest geopolitical factor in Southeast 
Asia/Southwest Pacific, the destiny of its democracy is vitally 
important to the region, to American values, and to our 
interests.

WHAT HOLDS INDONESIA TOGETHER? 

What holds Indonesia together?  It took the Dutch three hundred 
years to hammer it into one colony.  Along with the UN, we 
supported the latter stages of the national revolution, to 
independence in 1949.  What has held Indonesia together since?  
An ideal of a national democracy, many peoples becoming one.  A 
national language, spread by national education.  An army.  And 
the presidency.  Across half a century there were only two 
presidencies.  Sukarno for twenty years, and Suharto for more 
than thirty.

Sukarno held things together by force of personality, by 
balancing nationalism, religion, and communism; by distracting 
confrontations with Malaysia, the Dutch, the UN, the US.  By 
ignoring development and theorizing perpetual revolution.  All 
that collapsed in an attempted coup and the ensuing murder of 
hundreds of thousands of communists in 1965.

Suharto held things together with the Army, first of all.  With 
development secondly -- not only economic, but social.  
Indonesia's story since the late sixties is one of great gains in 
life expectancy, in literacy, in per capita income (from under 
$100 to beyond $1,000 before the Asian financial crisis slashed 
it), and in all social indicators.  Many lesser developed 
countries achieved such gains, but Indonesia's were still 
impressive.  The achievement was threatened, however, and the 
regime undermined itself by overconcentration of power at the 
top, and amoral greediness in the first family and its cronies.  
Add to that repression of thought, speech, and assembly; tightly 
rigged elections, loosely rigged business dealings, and false-
front foundations; the use of senior army officers as territorial 
business magnates and as state enterprise executives; and use of 
ordinary troops as political police.  All this, we know, broke 
down in riot in Jakarta, 13-15 May 98, with 1200 dead.  Suharto 
yielded to enormous pressure from a combination of students, NGO 
and middle class activists, and moderate Muslim leaders.  
International financial forces, represented by the IMF, held back 
money because hard-won agreements had not been observed.  Private 
capital took flight.  In the end Suharto's own parliament and 
cabinet deserted him.  His army quietly warned him they could not 
save him.  And so he retired with dignity, and more 
legal/financial protection than he deserved.

It took seventeen months to get in a democratically elected 
successor.  How is Abdurrahman Wahid, known as "Gus Dur," going 
to hold the country together?  Some pessimists and strategic risk 
analysts predict imminent bloody disintegration.  I don't agree, 
and I certainly believe we should support cohering forces.  Why?  
Gus Dur is Indonesia's first president whose values with regard 
to gender rights, ethnic fairness, and religious inclusivity most 
Americans would agree with.  He is the first president of 
Indonesia who understands and believes in modern democracy, rule 
of law and business transparency.  For these reasons he means a 
tremendous amount to Indonesia.  His success with his own people 
should mean a tremendous amount to us.  At the same time we must 
understand tendencies toward social hysteria among a people 
suffering high unemployment, severely lowered income, and limited 
opportunities.  The miseries of the Indonesian people are 
sandwiched between two thick slabs of bread -- one the bread of 
hope, the other the bread of patience.

WHAT DIVIDES INDONESIA NOW? 

In this deprived situation, Gus Dur faces severe divisions and 
distractions of at least three kinds: separatisms, ethno-
religious tensions, and distorted institutions.

1. Separatisms based on religion or culture, and perceived 
exploitation or cruelty, were latent even before the explosion in 
East Timor.  A careful analysis of regional productivity has 
shown that Java, with 55% of the Indonesian population, makes a 
45% contribution to Indonesia's annual GDP.  In other words, its 
"regional productivity" is negative by 10%.  Other regions to 
various degrees feel that they are feeding Java, or enriching 
those who feed off of Java.  This is particularly true of 
mining/oil/gas provinces.  We have seen the traumatic hiving off 
of East Timor -- a very poor province -- for reasons of religion, 
culture and resistance to gross oppression.  What follows now is 
what many in Indonesia's armed forces feared: an imitation effect 
in richer provinces.  The scorched earth retreat of early 
September '99 by the Indonesian army and their Timorese militia 
was apparently intended to stun other separatisms into passivity.  
That is one of a long string of gross miscalculations by some 
Indonesian military.  The effect in other regions is evident: 
"Why should we remain in a republic that's going to kick us 
around?  Let's shove off."

The most active of these intensified separatisms is in Aceh, the 
northwesternmost of all Indonesian provinces, spiritually closer 
to Mecca than Jakarta.  The pathos in the situation is that the 
Arun natural gas fields are nearly played out as Gus Dur offers 
to give Aceh province 75% of the revenues from them.  The 
historical separatism there is strong.   Mollifying language by 
the president, fluid deadlines, restoration of status as a 
special region, and promise of an (ill-defined) referendum have 
bought some time, but have not clearly leveraged over new 
loyalties.  The harsh counterinsurgency campaign of the early 
1990s cannot be repeated.  And Gus Dur's personal charisma, well 
received in much of Java, is not so in Aceh.

Irian Jaya, now renamed Papua in a spirit of acknowledging 
regional distinctness, is mineral rich, feels ethno-culturally 
discriminated against, and is probably the site of the second 
most significant separatism.  It does, however, appear 
susceptible to division in three provinces; and new revenue 
sharing formulae might satisfy enough political and economic 
appetites to retain this huge area in the Republic.

If one takes all other sharp or soft separatisms into account -- 
Riau, East Kalimantan, Southern Sulawesi, and Maluku, and adds 
them to Aceh and Papua as percents of Indonesia's pre-crisis GNP, 
one gets 17.2%, or about one sixth of the national total.

Province - Principal Industry - American corporate presence - 
Contribution to Indonesia GDP as % 
East Kalimantan - oil and gas - Mobil, Unocal - 5.0% 
Riau - oil and gas - Caltex, Conoco - 4.7% 
Aceh - gas - Mobil - 2.9% 
South Sulawesi - agricultural commodities - (none) - 2.3% 
Irian Jaya (Papua) - copper, gold, gas - Freeport, Arco - 1.6% 
Maluku - timber, agr. commodities, gold - Newcrest - 0.7% 
Total Contribution to Indonesia GDP as % 17.2%

[based on Far East Economic Review, 2 Dec 99, p. 20]

If all potential separations actually occurred, the present 
nation, to improvise on one Indonesian commentator's remark, 
would become a Bangladesh (Java) encircled by a couple of Congos, 
some Arab sheikdoms, and a West Indian republic.  But it won't 
all happen.  For most of the archipelago there is still more 
pride and synergy in being part of a great republic than 
concocting a small one.

2. Ethno-religious tensions

These are numerous enough.  They do not appear, however, to 
threaten the nation so much as to split and scar parts of the 
society.  The number of church burnings in Indonesia in the 
1990s, according to Agence France Presse, reached nearly 500.  
Many of these were Chinese Christian churches.  That phase 
appeared worst in 1996-98.  It appears to have subsided with the 
riots in Jakarta of May 13-15, 1998, in which Chinese shop-homes, 
electronics stores, banks and malls were attacked (a) out of 
hatred of have-nots for haves; (b) massive shoplifting 
opportunity; (c) possible instigation by military provocateurs.  
The ensuing flight of Chinese-Indonesian families and Chinese-
Indonesian capital seriously weakened the nation's capacity for 
recovery.  Gus Dur is genuine in welcoming Chinese-Indonesians 
back.  He was a resounding hit with them and with neighboring 
businessmen in an early visit to Singapore.  But conditions do 
not yet suggest an elastic and confident return of capital.

Another sort of tension is religious without an ethnic element.  
That is the recent horrific communitarian-warring in Ambon and 
other cities of Maluku, where the overall population divides 57% 
Muslim and 37% Protestant.  Such close numbers are rare in 
Indonesia, which is overall 90% Muslim; and socio-economic 
reversals of fortune there manifest themselves in religious 
tension.  The scenes and stories are terrible. Broadcast on 
television, they lead to cries of jihad, countered by feelings of 
crusade elsewhere.  But most Indonesians, even if they don't love 
their neighbor, like most Americans don't want to kill their 
neighbor, either.

A third sort of tension is chiefly ethno-cultural, aggravated by 
non-Islamic reaction to Muslim practices.  It is best illustrated 
by the clashes between Dyaks of Kalimantan and Madurese 
transported there by government policy to relieve crowding and 
lack of opportunity on Madura.  The animosities of unlike and 
mutually aggravating cultures have a history of some years now, 
and may recur in future years.

3. Distorted institutions

Under this heading many phenomena could be listed: institutions 
of law perverted by the Suharto years; civil society stunted; 
free expression suffocated; and religion stifled by state 
ideology.  But among institutions I have chiefly in mind the 
armed forces.  Once they were triumphant as anti-colonial 
militias, united into a people's liberation army; once successful 
as a disciplined national army putting down a lengthy Islamist 
revolt (1949-62).  Having then "won the hearts and minds of the 
people," the Indonesian army is now deeply compromised by two 
practices which most Indonesian citizens detest or fear.  One is 
engagement in business for profit.  The other is involvement in 
local violence for power.  The first undoes the military; the 
second overdoes praetorianism.  The first produces clumsy 
entrepreneurs and flabby soldiers.  The second produces plotters 
instead of strategists, and killers instead of warriors.  But, as 
Ralph Waldo Emerson said, "The world is made of glass," meaning 
that culpable passivity or criminality are in the end 
transparent.  Military paralysis while Jakarta was in riot, and 
military overzealousness in East Timor, are now globally 
documented phenomena.  Neither of them is worthy of a 
professional army.

Indonesia badly needs to carry out steps of reform as articulated 
by some of its leading generals.  A sensible path is laid out in 
careful study by Indonesia's leading institute of social 
sciences.  Instead of earnest self- renewal, however, some of the 
army appear to be in an unproductive contest with the president 
for power and retention of prerogative.  Gus Dur says 90% of the 
army is behind him.  Dr. Alwi Shihab, his foreign minister, when 
he was in the USA, said 70%.  I don't dispute either figure, but 
use them both as a range.  Seventy to ninety percent of an army 
is not enough for a president to rely on.  He must have one 
hundred percent of an army with a clear and limited professional 
mission.

LONG-TERM PROSPECTS 

A coherent and delimited mission for the armed forces is only one 
of the areas of reform in which we must hope Indonesians will 
work out their own future.  Reattracting capital and regenerating 
first rate business momentum in a fresh transparent environment 
could take five years.  Business, when faced with necessity, 
actually seems to modernize its practices faster than other 
institutions.  Reforming and professionalizing the army could be 
achieved in five to ten years.  Recovering lost ground in 
education and achieving new plateaus of learning and skill could 
be done in ten to fifteen years.  Rescuing the court system from 
corruption, and nourishing rule of law, could reach significant 
effectiveness in fifteen years, or at best ten.  If Indonesia 
with leadership, luck and patience can achieve substantial 
progress by sustained effort in these tasks, its fifth successive 
democratic election in 2019 could see it standing proud among the 
world's democracies.  With synergy among all enterprises 
mentioned, that goal could be achieved by its fourth, or even 
third, such election.

AMERICAN INTERESTS AND LINES OF POLICY 

Example is the best advice.  America, if it is true to itself as 
a federal republic, an open society under the rule of law, with 
competitive enterprise and transparent procedures, will continue 
to have a magnetic power of attraction in Indonesian national 
behavior.

I believe we should recognize that our major interests there are 
few and simple.  One is ideals; they can be summarized in the 
thought that both freedom and development advance fastest when 
they are allowed to be mutually reinforcing.  The other is 
concrete: it can be summarized in the fact that no hostile 
technology or power can soon make the strait of Malacca as 
danger-fraught as the strait of Taiwan.  The sea lanes through 
Indonesia stand for our geostrategic interest there, especially 
the flow of oil to allies in Japan and Korea.  With these factors 
in mind, we must quietly help Indonesia to realize a reformed 
political economy that will allow it both to fulfill its 
democratic dream and to resume its role as the center of gravity 
in a reorganized ASEAN.

In what ways may we help?

(1) Explicitly support the values that the reform government 
represents.  Nourish Gus Dur as the elected leader with moral 
support, without overpersonalizing the relationship.

(2) Endorse what I understand to be a proposed expansion of the 
AID budget for Indonesia, still at a modest level, but intended 
to bolster legal reform, local democracy and civil society 
projects.

(3) Support IMF and World Bank projects, for their invaluable 
multilateral aid toward Indonesia recovery, in confidence that 
criticisms since the onset of the Asian crisis have strengthened 
discipline in the administration of both.

(4) Reinstitute IMET and JCET programs for advanced education of 
Indonesian military in the United States.  Punishing a past 
administration does not help the present one.  Breaking such ties 
does nothing to advance the reform movement within the military.  
The current free press in Indonesia was launched by a retired 
general as Minister of Information, who learned Jeffersonian 
principles at Fort Benning.

(5) Encourage public and private foundations to form consortia as 
was done for Eastern Central Europe after the Berlin Wall fell.  
Now that the Suharto walls have fallen, American foundations 
should cooperate further for (a) support of community recovery 
programs; (b) initiatives in educational renewal at all levels; 
(c) scholarships for Indonesian students now in, or wishing to 
come to the U.S.; (d) special programs by media foundations in 
the disciplines and limitations of a free press; (e) special 
programs by bar associations and legal institutes to advance the 
capacities of young Indonesians in law, procedure, and 
regulation.

(6) Stand fast in the whole Southwest Pacific. Pull away no 
military assets.  Remain what Lee Kuan Yew asked us to be many 
years ago, "the sheriff of the Pacific."  Recognize that 
Islamists in Southern Malaysia are expressing sympathy with arms 
and money to separatists in Aceh.  Tactical moves and occasional 
statements by China suggest that it might like to be a 
neighborhood posse-leader.  Realize that the whole region may be 
more like our own "Wild West" than it was twenty years ago.  Be 
prepared for restrained action if necessary.

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