Adil W Surowidjojo
Indonesia enjoyed a controversial visit by US President Bush in October. The visit was an attempt to rekindle military and political relations with Indonesia, which have cooled significantly during recent years. For the people of Indonesia the occasion was highly controversial due to the United States’ current occupation of Iraq, the attack of Afghanistan after the WTC tragedy, and relationship with Israel: the US is seen by many Muslims as conducting a conspiracy against the Islamic world. The circumstances make Bush’s visit to the world’s largest Muslim country extremely important, not only because it is obvious that the West and the Muslim World need to start meaningful communication, but also because it shows to the world that Indonesia’s political and religious leaders are open to discussing these issues with Western leaders.
Of significance here are the incentives behind the meetings. Bush’s visit allowed him to meet not only President Megawati, but also three leaders of Indonesia’s moderate Muslim groups: mostly from Muhammadiyah and Nadhlatul Ulama. With regards to the war on terror, President Bush needs Indonesia’s committed support because Indonesia’s location and status as the world’s most populated Muslim nation makes Indonesia a very strategically important ally for Bush’s campaign. In turn, Indonesia is interested in economic and military assistance from the US, as the strengthening of both can help stabilize the troubled nation. The obstacles to agreement are multitude: the US senate has agreed to bar any military help to Indonesia unless Indonesia accountably prosecutes the killers of two US teachers who allegedly were murdered by rebel Papuans. It is rumored that members of the TNI were involved in the killings, although investigations by the Indonesian police and military (observed by US authorities) found no involvement of the TNI. Indonesia’s Muslim and political leaders are urged by the Bush administration to acknowledge the existence of the terrorist group Jemaah Islamiyah in the country: the problem here is that the leaders claim the group to be a Western invention that is intended to discredit Islam. Furthermore, there is significant opposition, both from inside Indonesia and other Muslim nations, to Indonesia joining the War on Terror. President Megawati is predictably keeping a low profile on the subject, fearing backlash from the Muslim community so close to the 2004 elections. One may postulate that the meeting and the processes that are soon to follow are ways for both countries to gauge either party’s bargaining power. The Indonesian government will only support Bush if America will ensure that Indonesia will not suffer from going against the popular opinion of its mostly Muslim population and of other Muslim nations, and the US will only provide this assurance if Indonesia promises adequate commitment.
Small Steps to Good Governance
The selection for Indonesia’s Anti Corruption Commission (KPTPK) has passed its first round, producing 223 selected people from the initial 513. The next step in the process will have the candidates writing about what their mission plan is with regards to eradicating corruption, as well as any previous experience that would complement their duties in KPTPK. Those who survived the selection process include Transparency International Indonesia Chairman Erry Riyana Hardjapamekas, human rights and governance reform activist Bambang Widjojanto, and former Minister of Justice and Attorney General Marsilam Simanjuntak. By the end of the process (the Committee is slated to begin its activities by December 27th), the candidates will be culled to only 5 members. An interesting point brought up by cynics is that the majority of people wanting to join the KPTPK are retired bureaucrats and business people who are looking for a job in the shrinking job market, hardly the right incentive. The popular opinion is that the Commission will face significant obstacles, Indonesia being notorious for her culture of corruption (Indonesia is perceived as the 6th most corrupt nation in the world according to TI’s surveys). The trend set by other nations is that any effort to end corruption cannot succeed if there is no political will on behalf of the government, as pessimists may say that the formation of KPTPK might just be an attempt of a government to displace responsibility to another party. However, one should not forget that if people expect things to change, then the process of corruption eradication will have to start somewhere.
Similarly, the process of selecting political parties that will join the 2004 elections has made noticeable progress. The General Elections Commission (KPU) has declared the final three political parties to have passed the KPU screening (bringing the amount of parties to have passed screening to 40); they are eligible for field verifications. However, political analysts such as Arbi Sanit have misgivings about the process by which the general elections will take place. Arbi Sanit has stated that the law is structured in such a way that the public is forced to vote for political parties, instead of individual leaders as touted in 2004 elections slogans (to be fair, this is true only for the election of parliament members, and does not apply to presidential candidates). One must remember that the 2004 elections is a major departure from that of 1999; for one thing, Indonesia has learned from the mistakes of the latter. The KPU so far has shown that it is a critical instrument in ensuring the accountability and transparency of the overall elections process. Furthermore, the KPU has drafted guidelines on the recruitment of legislative candidates, and on the rules regarding electoral campaign mechanisms. The guidelines for legislative candidates tell us that such a candidate must, most importantly: have at least graduated high school or its equivalent, not involved with the decades-banned Indonesian Communist Party, not have been convicted to jail for more than 5 years, produce a clean bill of health, and belong to a political party. One could argue that such a list might increase the chances of producing an upstanding and respectable Indonesian citizen, but one could also wonder if that citizen would be qualified to do the job, since the quality of that person will really only be reflected by the party he belongs to. The main worry here is that it seems too easy to be recruited as a legislative candidate, with the public having limited access to finding out the true accountability of the candidate. Another point of interest with regards to the 2004 elections is that Golkar has decided to delay the selection of its presidential candidate to, according to the Golkar Convention deputy secretary Rully Chairul Azwar, avoid the chance of Akbar Tandjung not being selected should he be found guilty by the Supreme Court by February 2004: All seven presidential candidates, according to Rully, has agreed to the decision.
Eye on Business
This week will see the Initial Public Offering (IPO) of state-owned Bank Rakyat Indonesia (BRI) where, due to strong demand, the government has been able to peg the price of each share at Rp 875 (1.4 times the book value), a high-end price where shares are concerned. Due to this arrangement, the 4.76 billion shares (40.5% of total shares) on offer will generate about Rp 4.17 trillion, around US$ 490 million. High demand for the shares is due to the reliability of the high value of each share, because BRI’s core business is lending to small to medium enterprises, reputed to be mostly farmers. Conventional wisdom states that such enterprises are more fastidious in repaying their debts than big corporations, ensuring a steady business that involves a large number of small to medium enterprises. However, it should be taken into account that due to the nature of the business of those small to medium enterprises, i.e. agriculture, one must remember that they are more vulnerable to shocks, such as climate changes, than big corporations. For example, those farmers will not be able to repay their debts if a plague ruins their harvest. The risk is compounded by the fact that agriculture is an area of business where an externality (a disaster) is more likely to affect the whole of the sector: for instance in the case of an abnormally long drought, all markets for agricultural goods will be affected, not just the rice market. If something like this were to occur, a bank like BRI whose main business is farmers will face a lot of unpaid debts.
Still on the subject of banks, the recent scandal concerning a Rp 1.7 trillion fraud befalling Bank Negara Indonesia (BNI) has shown that even in times of crisis and suffering for many people, there are incentives for certain individuals to make big cash the fast (and dubious) way. Despite attempts by BNI President Director Saifuddien Hasan to find remedies to the loss (most recently by meeting with Maria Pauline Lumowa, the main suspect of the fraud case who resides in Singapore, where Hasan arranged the securing of Maria’s assets for payment), it is to be expected that a scandal of this magnitude will damage investor confidence by increasing the risk of investing in Indonesia. Not to mention a government budget that will be severely hit by the fraud, as the government garners most, if not all of its revenue from state owned companies such as BNI.. The fraud case highlights a culture of corruption in Indonesia that is still rampant, as the arrangement would not have dragged on for so long (from July 2002 to July 2003) to banks in Kenya, Switzerland, and the Cook Islands (banks that are not correspondents of BNI) without proper measures to check the legitimacy of the business, if the arrangement was made under clean circumstances. This culture clearly affects adversely the competitiveness of Indonesian business, and it is therefore important for not just the government (for instance through the anti money-laundering law), but also private entities to retain the true competitive edge of Indonesian business life by staying away from corrupt practices and developing their businesses through real efficiency and innovation.
On the foreign interest in Indonesian business front, the 5th of November saw the seventh general meeting of the Jakarta Japan Club (JJC) with the Indonesian government has produced solutions for 42 out of 79 business issues – obstacles – faced by Japanese businessmen in Indonesia. Out of the rest of the issues, 30 are up for further discussion, while 7 were considered too difficult to overcome at this point in time, due to legal restrictions. 14 issues out of the 42 solved are classified as urgent issues that merited immediate attention. Aside from the general meeting, JJC meets with the government regularly to work out the particulars of easing the bureaucratic burden of creating a business and investing in Indonesia. The JJC has created sub-committees to separately and concurrently deal with the relevant government authorities, breaking down Japanese interests into: Customs and Duty, Taxation, Labor, Investment Promotion and Supporting Industries Development, and Electric Power. Coordinating Minister for Economic Affairs Dorodjatun Kuntjoro-Jakti has lauded the meetings as an “enlightened example in partnering with the Indonesian government in identifying possible problems, discussing alternative solutions, and deciding the most accommodating course to take”; the Minister has encouraged other ‘businessmen associations’ to follow the example of the JJC, to which Japanese organizations such as JICA and JETRO belong, perhaps in order to facilitate a more dynamic and civil business life in Indonesia. [aws]
