Face to Face: Elections in Indonesia

On November 22, 1999, CERN hosted its first Carnegie Face-to-Face with a senior delegation from Indonesia. The delegation discussed the recent election of President Abdurrahman Wahid and Indonesia?s efforts to create a new political and economic framework to bring stability and prosperity to the country in the new millennium. Panelists included Jusuf Wanandi, Centre for Strategic and International Studies (CSIS), Jakarta, and Chairman of the Indonesian National Committee for the Pacific Economic Cooperation Council, Lt. General (Ret) A. Hasnan Habib, advisor to the Minister of State for Research and Technology, Mari Pangestu, Rice University, former Executive Director of the CSIS, Jakarta and Fidri Jufi, Publisher, Tempo and Mantra magazines.

Mr. Wanandi began the session by noting the extraordinary circumstance that Indonesia is in, with a second opportunity to pursue democracy and balanced development. However, he emphasized that the country has many deep and complicated problems to address. The most pressing difficulties include the current situation in Aceh, how to deal with the fall-out of the recent economic crisis and to pursue economic development, how to professionalize the army, and how to encourage civil society and foster full democracy. Mr. Wanandi asked the rest of the panel to address these difficulties and suggest possibilities for solutions.

Mr. Habib agreed with Mr. Wanandi that Aceh is an pressing issue, saying that the situation in Aceh is the most critical problem faced by Indonesia, and it may well decide the fate of the country as a whole. He reviewed the arguments for the independence of Aceh. Acehnese independence fighters believe that Aceh never belonged to Indonesia and that Indonesia does not have the authority to say that Aceh is within its borders. They demand a referendum, and they mean to have independence from Indonesia as East Timor was given. Mr. Habib stressed that East Timor and Aceh are totally different issues. Whereas East Timor was never really a part of Indonesia and Indonesia only intervened in its own civil war with the support of Australia, Aceh has been a part of Indonesia since the colony became independent from Portugal in 1949. Mr. Habib argued that to allow a referendum in Aceh or to facilitate the Aceh independence movement would be the end of the united Indonesia. The armed forces in Indonesia, since the proclamation of independence in 1945, have been fully committed to uphold the unity of the nation and to defend its territorial integrity at all costs. In addition, independence for Aceh will cause further instability and multiple independence movements elsewhere, and for this reason the military is committed to suppress Aceh?s independence movement.

The military in Indonesia, Mr. Habib continued, has always had a very dominant political role. It has not only been a force of defense, Mr. Habib stressed, but also a political force. The military has been made the scapegoat for many of the problems that have plagued Indonesia. Many actors in the civil society demand that the military give up its political role, and steps have been taken to remove the military?s deep involvement in politics. But other actors, the elite, members of the Indonesian academia and some civil society groups, want the military to remain involved in political leadership. So, Mr. Habib concluded, public opinion is split and the military is confused as to what it should do.

Dr. Pangestu spoke on the economic situation in Indonesia. Indonesia, she reports, was hit by a more acute banking sector crisis than other countries and is twelve months behind the rest of East-Asia countries in its recovery, which is likely to take at least eight years. Dr. Pangestu noted that most of the macroeconomic indicators have stabilized and begun to look up. The exchange rate has stabilized, interest rates are down, and there was actually deflation in late 1998 and early ?99. Now the important question is how to reform the economy in order to spur and sustain growth. Though the response to the crisis was by necessity short-term, what Indonesia needs now is long-term and deep economic restructuring. The first priority, Dr. Pangestu argued, is reducing the large fiscal debt, a large portion of which is owed to domestic creditors. Indonesia, like other East-Asian countries, used fiscal expansion to kick off the recovery. But now, it needs to restructure the debt and reduce fiscal responsibility by selling off government-owned enterprises and reducing subsidies. In the wake of the crisis, Indonesia took over failing banks and now over 80% of the banking sector in Indonesia is public. Re-privatization is a second priority. Also important is coordination between the government and the financial sector in the corporate recovery. And last, argues Dr. Pangestu, decentralization will not only help the struggling economy but will also ease the situation in Aceh.

The new cabinet, Dr. Pangestu noted, is untested and inexperienced in the political realm. The leftover framework of the IMF programs, in which they are still participating, and the budgetary constraint will help guide the new government in making the needed decisions for the economy. And, ending on an optimistic note, Dr. Pangestu said that now, with the partial democracy, Indonesians can remove the government if they do not perform well enough.

Mr. Jufi discussed the realities and prospects for political leadership in Indonesia. Currently, the majority of the press approves of the new President Wahid. One of Wahid?s first acts as president was to abandon the department of information. The media is now testing the new freedom of the press, and have been able to openly criticize the new government, something that was simply not done in the previous regimes in Indonesia.

Mr. Jufi expressed concerns about the economic team of the new government. The new president, he said bluntly, simply does not understand economics well. He agrees with Dr. Pangestu that the new cabinet is untested, saying that it is a ?chop-suey? cabinet designed for political rather than practical purposes. If Indonesia is to move forward, Mr. Jufi argued, it needs a good finance minister and a strong economic team.

The session concluded with a question and answer period.

Marygold Severn-Walsh, Junior Fellow

Carnegie Endowment For International Peace
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