TCS Daily

Indonesia's Year of Living Electorally

By Rowan Callick - May 24, 2004 12:00 AM

In Indonesia, the third biggest democracy in the world with 147 million voters, this is The Year of Living Electorally. No new laws, no policy direction, probably no complete government line-up, until 2005.

For after the first round of voting, the parliamentary poll of April 5, comes the presidential election on July 5, and a likely run-off for president in October. This inactivity isn't a total disaster, for three reasons.

It demonstrates the relish with which Indonesia, conducting only its third genuine election in more than half a century as an independent nation, has grasped democracy following the demise of the New Order of President Soeharto in 1998. It now boasts media, NGOs, and parliaments in Jakarta and in 330 districts, that are among the liveliest in the world. On the eve of the parliamentary election, The Jakarta Post editorialised: "Religious hype, xenophobia, long-held prejudices and regionalism in political rhetoric seem to be on the wane."

Second, the country is being managed, as politicians slug it out, by a mostly competent technocratic caste largely educated overseas under Soeharto, who have already steered the country back towards macro-economic probity, enabling it to withdraw from the International Monetary Fund's tutelage.

Third, the President, Megawati Soekarnoputri, daughter of the country's founding father, has been so inactive that few would notice her taking leave to campaign for a year. She has stabilised political life after the melodramas of her predecessor, the eccentric but highly liberal Muslim scholar Abdurrahman Wahid, but the flipside of such stability is sleep.

Twenty four parties contested the 550 seats in the parliament -- where special representation for the army has been scrapped. None gained anything like control. The party that was established by Soeharto to provide a fa├žade of democracy, Golkar, appears set for 117 seats, Megawati's Indonesian Democratic Party of Struggle (PDIP) 104, the new Democratic Party led by former general Susilo Bambang Yudhoyono, 55, the United Development Party of Islamic vice president Hamzah Haz, 54, and Wahid's National Awakening Party (PKB), 50. The election went impressively smoothly, with the only deaths resulting from road accidents -- compared with the dozens of assassinations already suffered by the Philippines in the run-up to the presidential poll there.

The spread of votes means that much horse trading is in store for whoever wins the presidential election, if they are to get legislation passed -- though the new president's voting power will be augmented by choosing a vice president who can deliver another party's regular support. From the politicians' viewpoint, office about distributing patronage, which starts with the president. So the stakes are soaring right now. Parliament is left to debate the detail -- a responsibility for which MPs in the last house shamelessly demanded payment from the presidential palace, letting bills that lacked such "facilitation" languish.

This is the first time the president will be chosen directly. When he or she was chosen by the parliament, the power of the vote was dispersed among the 6,000 inhabited islands. Now Java, with 60 per cent of voters, will have the crucial say.

Three candidates dominate the field: Megawati, whose fortunes are fast fading following the near-halving of her party's vote in April, former military commander; Wiranto, who has been indicted in East Timor for war crimes there during the Indonesian army's withdrawal in 1999 after 24 years of bloody occupation, and who has been chosen by Golkar, the best organised party; and the surprise favourite, leading all the polls: Yudhoyono, known best by his initials, SBY. He was Megawati's top security minister. He is smooth, charming, reform-minded and West-friendly. Despite being a former general, he is not Mister Decisive. Nevertheless, a win for SBY would be a great day for modern and liberal values in Asia and in Islam.

Among the myriad challenges awaiting the new president -- besides simply keeping the country intact -- two stand out. First, to encourage the moderate majority of the world's biggest Muslim country to turn against the radicals in their midst and to reject the spurious claims of Middle Eastern and Pakistani Islamists that theirs is a particularly pure version of the faith. And here, headway is already being made, with the big moderate organisations Nahdlatul Ulama (with 40 million members) and Muhammadiyah (30 million) distributing flyers to mosques at Friday prayers explaining why the radicals are un-Islamic and organising discussion groups among students on campuses and via the internet.

The second big challenge is to tackle corruption, worst in the courts, which notoriously offer the best justice money can buy -- especially the commercial courts, where judges unashamedly distribute their own tariffs.

Consumption is keeping Indonesia liquid, with record car leases and home mortgages, and motorcycle sales up 30 per cent, year on year. New malls with floor space equivalent to 200 football fields will be completed by 2005 in Jakarta, providing free air-conditioning for people perspiring in crowded apartments, as well as people-watching fun, and cheapish fast foods. But it is only the upper classes who have real money to spend. In a country of 220 million, that still adds up to a lot of luxury goods. There are more Jaguar cars on the streets of Jakarta than in Paris. And a lot of Chinese Indonesian money is returning after being squirreled away offshore, mostly in Singapore, after the 1997-99 financial collapse.

Many have bought hack for 20-30 cents in the dollar their old businesses that had their debt written off by the government after it took over the failed banks to which they were mortgaged. Often, their conglomerates owned the banks as well as the operating businesses. Ross McLeod of the Australian National University estimates that the government has lost about $US 60 billion on its "investment" in the banking system - equivalent to more than 40 per cent of the entire economy when it crashed.

Now, the big stumbling block in the path of growth is the lack of investment needed to help create the 2 million new jobs sought annually by school leavers. Capacity utilisation is low in established plant, and the China factor is sucking much of Indonesia's manufacturing away. Banks -- now divorced from the conglomerates -- are making themselves over as real businesses, and do not want to lend to the old firms. The vice-president special assets management of HSBC in Indonesia, Fikri Bachmid, says it's naturally impossible to convince the regional head office in Hong Kong that it's time to increase the corporate loan book, until the hangover of bad debts from the financial collapse of the late 1990s is cut down to size. "But when I threaten the bad debtors with taking them to court, they laugh, because they say they own the courts."

Meanwhile, regardless of the governance barriers restricting Western interest, capital has been quietly flowing in from elsewhere in Asia -- Singapore in telcos, Malaysia in banks, Thailand in coal, and China, especially, in oil and gas.

As a democracy, Indonesia today stands somewhat as it does geographically -- between India and the Philippines. Not ideal, but after a mere six years, it's progress.

The author is Asian Pacific Editor for the Australian Financial Review.


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