Adil W Surowidjojo

 

 

Stability is now a buzzword in Indonesian business world. From now to the very near future, the government’s main worry will be whether or not the domestic and international public will take to its post-IMF White Paper document, in order to try and cultivate a new kind of trust in the government, which will go a long way to support stability in the nation.

 

As has been discussed by many observers, the package itself is sound, with its main focus on creating a favorable environment for investors, maintaining macroeconomic stability, and enhancing the financial sector. The main challenge for the government is for it to rekindle the confidence of foreign and domestic investors; the government needs to regain the peoples’ trust. This is unfortunately not easy to do, since a significant part of the public is of the opinion that the reformation effort has been a major failure. It is of the absolute importance, therefore, that the government’s efforts in the coming days be transparent and accountable, but above all, fruitful.

 

One worry is that the primary reason motivating the break from the IMF was political; in order to avoid friction with the parliament, which wanted to be more influential but was restrained by the IMF program, the Megawati government acceded to its pressures. The situation is worrying because keen observers will notice that Indonesia has broken off its ties with IMF when it is at a less favorable economic state than Thailand and Korea were when they ended their IMF programs. For example, Indonesia’s GDP growth in 2003 is a mere 4% in 2003 compared to Thailand’s 5% and Korea’s 9% back in 2000. Furthermore, Indonesia’s foreign debt as a percentage of GDP is 64% in 2003, compared to Korea’s 28% in 2000. Another criticism of the government effort is that the White Paper document can be cynically thought of as a ‘wish list’ for foreign investors; the objectives are so broad and unquantifiable that it will be difficult for the government to achieve them all (and for the public to believe that objectives have been achieved), particularly during the 2004 election year.

 

However, observers will also note that the mainly due to China’s economic strength, the whole Asian region has begun to enjoy the birth of an economic renaissance. Indonesia should not overlook this opportunity and attempt to stick to its White Paper objectives so that it can benefit from the boom. Another ray of hope is that the Indonesian government still possesses many state owned enterprises to privatize, including potentially very lucrative ones such as Perusahaan Gas Negara (state gas company), with gas being an almost forgotten power source in Indonesia with plenty of room for development, Aneka Tambang (mining operator), with Indonesia’s natural mineral reserves still largely uncovered, and so on. With proper planning and a strong emphasis on transparency, such projects could develop into goldmines for the Indonesian economy.

 

Indonesia and the Outside World

 

Very recently, Indonesian officials have been busy recently with visiting other countries in an attempt to woo investors back to the nation, though some of the high profile visits were not held in the Asian region. The October 7-8 meeting of ASEAN leaders in Bali provides a chance for Indonesia to strengthen its economic ties and improve trade relations with ASEAN countries.

 

An amicable relationship with ASEAN countries is very important for Indonesia, because these are countries that were hit hard during the Asian economic crisis, but have now re-emerged out of their recovery programs. It is in the interest of these countries that they come together and organize their efforts in order to encourage development through trade. Also significant is the presence of four dialogue partners during the Bali Concord II, these being Japan, China, India and Korea. The premise is that ASEAN will be developing deeper relations with the four countries, which ideally will be beneficial for all parties included, with ASEAN providing a large market and investment opportunities for the more established nations and the latter providing the funds and technology transfer to the former for development. The fact that such a major international gathering took place in Bali, where bombings disrupted lives in the region last year, generates a positive outlook for Indonesia that is desperately sought by officials. On that note, another significant result of the meetings is a focus on enhanced regional security measures, a program promoted by Indonesia and endorsed by Singapore and Thailand; no doubt a plan intended to change foreign opinion that Indonesia is rife with terror attacks.

 

Terrorism still haunts everyday life in Indonesia, if only in the form of heightened security. The success of the Indonesian police, aided by international police agencies, to catch the perpetrators of the Bali bombings in a relatively short time helped raise Indonesia’s image. The speed with which the legal system doled out sentences has further returned the faith of the international community (especially Australia) in Indonesia. Fortunately, the harsh sentences did not spark any significant protests in the country, strengthening an image of an Indonesia united against terrorism.

 

Perhaps the success of this stance coupled with Indonesia’s confidence in its White Paper document is reflected with global ratings agencies such as Moody’s Investors Service and Standard and Poor’s raising Indonesia’s ratings. Moody’s raised Indonesia’s sovereign rating (reflecting a stronger financial condition, e.g. ability to pay off foreign debts) from B3 to B2, while S&P raised Indonesia’s long-term foreign and local currency ratings from B- to B and from B to B+ respectively, with the short-term foreign currency rating also being raised from B- to B. The ratings increases will hopefully lead to a healthier disposition towards investing in Indonesia; a situation that must be nurtured through policies that better accommodate the investors’ needs, with business practice should maintain transparency and accountability to all parties.

 

The Military in Indonesian Society

 

Historically, the Indonesian military is a nation-shaping force. At times, this force had been accused of not heeding to principals of human rights, that it has a culture that is steeped in violence and brutality. For the past six years, the public has been questioning whether or not this force is something that should exist as is in a newly democratized Indonesia. As an effort to cleanse the image of the Indonesian military, it has decided to withdraw from the right of its members to vote in the 2004 general elections, although the 1945 constitution was amended just to allow them to vote.

 

TNI Commander Gen. Endriartono Sutarto, in his interview with the Jakarta Post, revealed that it is the military’s wish to remain a neutral and impartial entity in the upcoming elections, thereby acting as a sentinel for the event. The decision is strengthened by an accompanying decision of the military to not give any support to retired army officials who want to run for presidency. Perhaps the main rationale for this is that the military does not want its soldiers to be divided, i.e. over who they will be voting for; if different factions within the military support political parties that clash, the result could be ‘nation-shaping’ in a very negative way. This move may also be intended to calm members of the public who fear that Indonesia will one day become a militaristic state, a fear that is caused by the fact that although military personnel were not allowed to vote, they were given lucrative positions by those in power. Conventional wisdom agrees that if a military officer is given such a position based on merit, this is acceptable. However, the people have felt misled by the reformation era in that corruption, collusion and nepotism still run rampant that they cannot envisage any official, perhaps especially a military official, being put into office that did not in some way depend on KKN. The military most likely recognizes this feeling, and the decision to renege from its voting rights clearly shows an effort on its part to ensure the public that it is a stabilizing force in Indonesia, and not a power-hungry entity.

 

Difficulties in Regaining the People’s Trust

 

With public confidence on the success of the next democratic election low, it is important that the government rally the courage and trust of the Indonesian people to get involved in shaping their own nations. To this end, the government must improve its image and be more transparent and accountable in running the nation. The aforementioned White Paper documents is a step forward in this regard, it is a showcase of determination and confidence. However, the public first needs to be able to trust the government; this is a problem because the Indonesian society is so riddled with corruption, as revealed by the Indonesian chapter of Transparency International. According to TI’s surveys, Indonesia is the second most corrupt nation in the Association of South East Asian Nations (ASEAN), and the sixth most corrupt nation in the world.

 

Corruption is most disturbing when it occurs in the Indonesian justice system, and this is a significant deterrent to people trusting the government and its systems. Recent cases such as the attachment for securing the final judgment on a house belonging to the co-founder of Tempo magazine Goenawan Mohamad, as collateral under a libel suit, essentially show the public that the legal system cannot be trusted. It is imperative that the system cleans itself up, and it is important also that the public make loud demands through the appropriate and effective channels in order to push for the government to initiate reforms. Corruption thrives both in government institutions and in the private sector; it is so hard to eliminate because of the synergy that results from the two sectors interacting in a corrupt way. Corrupt government officials and personnel milk the private sector when the latter is required to deal with it, and businessmen bribe the former when they want in on a particularly lucrative venture. Although a special corruption court is being formed, observers feel it will not succeed in putting a stop to corruption unless the government is strong-willed and capable enough to support the new court and any other attempts to remedy the problem.

 

(aws)