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Indonesia Update

By Craig Charney, Wayne Forrest, and Mary Natalegama | Transcript | January 31, 2008 | 19 pages

Craig Charney offers an Indonesia Update at the Council on Foreign Relations

Speaking at a panel after the death of Suharto, Indonesia’s longtime dictator, Craig Charney spoke on our polling on the consolidation of democracy as part of a panel on the consolidation of democracy. He underlined the progress the country has made, the important contribution of U.S. democracy assistance, and the challenges ahead in confronting corruption and the abuses of the past.

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Indonesia Update [Rush Transcript; Federal News Service]

Speakers: Craig Charney, President, Charney Research, Wayne Forrest, Executive Director, American-Indonesian Chamber of Commerce, and Ambassador R.M. Marty Natalegawa, Permanent Representative of the Republic of Indonesia to the United Nations

Presider: Calvin Sims, Program Officer, Journalism, The Ford Foundation

January 31, 2008
Council on Foreign Relations

CALVIN SIMS:  Can you — can you hear me?  Good morning and welcome to the Council on Foreign Relations.  It’s bright and early.  We appreciate everybody coming out this morning to talk about Indonesia. 

Our panel is going to start in just a few moments, but I want to remind everybody — and by the way, I should introduce myself.  I’m Calvin Sims and I’m at the Ford Foundation.  I’m a former foreign correspondent for the New York Times.  I was based for two years in Jakarta in the early — in 1999 and 2000. 

Our panel today will consist of Craig Charney, who is the president of Charney Research; Wayne Forrest, who is the executive director of the American Indonesia Foundation; and Ambassador Marty Natalegawa, who is the Permanent Representative of Indonesia to the United Nations. 

This meeting, unlike most Council meetings, is on the record, which means that everything that is said here can be attributed to those who say it.  And so the way the program will progress this morning is that the four of us will have a brief conversation that gives a bit of an update on Indonesia, and then we’ll open it up to the floor.  The morning will probably go very quickly because we’ll — we’ll end the program exactly at 9:00 so that you can get to your offices. 

I think the subject on everybody’s mind, when it comes to Indonesia, is, of course, the recent passing of ex-president Suharto last Sunday.  And so I’d like to start out by posing to the panel:  What impact, and what is the significance now, of the death of Suharto, who ruled Indonesia for 32 years and whose legacy is somewhat mixed? 

So I’d like to start with Mark (sic), who’s done extensive polling in Indonesia —


SIMS:  — I’m sorry, Craig, who’s done extensive polling in Indonesia.  If you could, sort of, give us your thoughts on what is the significance of the passing of Suharto? 

CHARNEY:  Well, to paraphrase Shakespeare, one could say that nothing in his time of office suited him so well as the leaving of it.  (Laughter.)  You know, after decades in office as a sort of developmental despot, one of the most important legacies of Suharto is the fact that a democracy had taken the place of his authoritarian regime. 

It would be a bit too harsh to say “no thanks” to him.  Certainly it wasn’t his will or his intention, but, nonetheless, as a result of these social forces that emerged during his rule, the social consensus that emerged in favor of democratic institutions in reaction, in part, to the way that he ruled — and that have been documented by our polls over the past decade — there has been a new democracy.

I know that 10 years ago, when I first spoke at the Council after our first poll in Indonesia, I said Indonesians want a democracy and that the transition was probably going to be successful.  And I faced a room full of skeptical businessmen — very skeptical.  In fact, there was only one person in the room, I discovered, who agreed with me.  But I was greatly relieved when I discovered that his name was Clifford Geertz, the American who probably knew more about Indonesia than anyone else in the country. 

And, indeed, the consensus in favor of democracy has been perhaps one of the most important factors of an Indonesian society which has only strengthened over the past decade.  On the other hand, one of the legacies of Suharto that’s been most deleterious has been the damage to the rule of law, and the weak legal institutions which prevail in the country.  And that remains an issue, and it remains both an important political issue in terms of corruption, and an important issue for business as well. 

And while there is some evidence that corruption is starting to recede — and I can talk about that more in detail, that is one of the more pernicious legacies of the Suharto era, when all was done through deals with the man at the top.  And, as a result, institutions didn’t really have a very powerful role. 

SIMS:  Wayne, could you give us a sense of what the reaction has been to Suharto’s death in Indonesia?  I know you’ve been in touch with the ambassador, American ambassador there.  What’s it like on the ground? 

WAYNE FORREST:  Yeah, we had a scheduled conference call with Ambassador Hume last night.  And he had been to the funeral, he had been to the house — the house on (Chindonna ?) Street, Suharto’s house.  The reaction has been one of real bereavement.  There has been some coverage of, you know, some of the abuses of his era, but overwhelming response of people, both in and out of the government, has been, we’ve lost somebody that was great — one of our great people has been lost. 

Ambassador Hume describes traveling 40 kilometers — from Solo, a central Javanese town, to the cemetery — lined two or three people deep on either side of the road for 45 kilometers out into the countryside.  People were really quiet.  He was right there with President Susilo Bambang, who was crying.  Former — he was an adjutant under Suharto, but really a very reformist general who’s now the president. 

The television is showing the good times.  It’s showing his great contributions to the country, especially the revolution against the Dutch where he was a young officer.  Later on, when he took over from Sukarno, they’re showing that as another great point of his era — the stabilization of the country.  Pictures of him with farmers, which was one of his great attributes, he always was very close to the farmers and he made sure that there were rice stabilization policies and things. 

His legacy with the little people is very strong and always has been.  So I would say, you know, on whole, it’s — it’s, right now, you know, it’s a positive legacy. 

Ambassador Hume made a very interesting analogy — I don’t know if it’s complete, but he says any — look at Americans, we sometimes only remember the negative things about President Nixon’s time in office, we don’t always remember the great things that he did.  And right now, at least in Indonesia, they’re remembering, you know, the really positive things.  And that may change, but right now that’s — that’s the initial reaction that we’re picking up through our filter.

SIMS:  This, despite a regime that was incredibly repressive, corrupt and, by some estimates, more than half a million people were killed during this regime in the bloodletting.  How do — how do we square that? 

FORREST:  Well, you know, the numbers are somewhat controversial even today.  You know, I’ve heard other — we had CIA briefings that were much, the numbers were lower, but that’s not really issue. 

The issue, I think, for Indonesia is that there are at least 40 years since that time happened.  And what’s happened in between is, you know, Indonesians, their incomes have gone up tremendously.  They’ve went from 70 percent of the population in poverty, when Suharto took over, to about 15 percent. 

Indonesians became more mobile, roads were built, every village had a school and a clinic.  Some even were able to begin to build — many now have electrification.  When I first started going to Indonesia in the early ’70s, you didn’t — you know, there were many villages that didn’t have that. 

So his picture as the father of development, the family planning that he did, all those things intervene for 30 years, taking away the sting of that initial period, which only lasted four months if you think about it.  They had the attempted coup in September of ’65, and there was this — there was this, sort of, vigilante bloodletting that went around.  It wasn’t always army led. 

You know, we forget that in Indonesia that bloodletting was not always spurred by the army.  There were a lot of occasions — in Bali, for instance, which was not a place where communism was necessarily thought to have a great root.  There was a lot of internecine fighting going on and many people lost their lives there.  But that’s — that’s sort of been pushed way back in the consciousness. 

SIMS:  Mr. Ambassador, I want to bring you into this discussion of Suharto.  Can you give us a sense of how the government — Indonesian government sees Suharto’s passing?  And, how would it like to see Indonesia portrayed in the aftermath? 

R.M. MARTY NATALEGAWA:  Well, I think the key thing is that first to recognize that (Pa  ?) Suharto, as any one of us, have his shortcomings as well as positive points — both as an individual and both as the leader of a country.  And as been described just now, during his tenure of his office Indonesia made great strides in development, in development of the state’s capacity.  But at the same time, we also had shortcomings.  There were — there were obvious shortcomings, hence we had the transformation, the “Reformasi,” in 1998. 

So it is a mixed picture and, therefore, in the response by the government, by the public, it’s reflected.  On the one hand, very much recognizing his shortcomings, his failings, but at the same time not wanting to reject or acknowledge — not recognize his achievements.  And I think that — and we see those things as being necessarily complimentary.  It doesn’t have to be either or.  You cannot have a black and white approach in terms of he must be demonized, or he has to — as if all he did was negatives, or completely have overly-rosy picture of what the late president achieved. 

But, speaking personally, I suppose I’m — my generation — someone who — I’m 44 years old — so for much of my formative years, it was during Suharto’s — President Suharto’s period.  Especially as a government official, you go through certain expectations and certain habits of thinking.  But then, overnight, there’s been changes that have happened, and we embraced those changes.

And now, 10 years after the Reformasi, the transformation, we are confident enough to acknowledge the strong points of former President Suharto and, at the same time, to recognize his weaknesses as well.  And this is, in terms of where we are, in terms of how history will judge the late president, I think that’s a task that’s left to academics and certainly (would ?) given over time, and not something that we want to be engaged in just now.

SIMS:  It’s 10 years since democracy was returned to Indonesia.  Craig, how would you describe the consolidation so far, 10 years later, of democracy in Indonesia?  Is it strong, is it vibrant?  What sectors have taken root?  What sort of parts are weak and need to be improved?

CHARNEY:  The changes are really very striking.  In a country that was notorious for rigged elections, there have not only been two national elections which have been clean as a whistle, but also literally dozens of provincial and, I think, hundreds of local elections which have been cleaned up and which are accepted as legitimate by the Indonesia populace.

Our surveys show that not only did civic education programs supported by the U.S. have a massive impact in strengthening support for democratic values and confidence in democratic institutions before the first election in 1999, but that those gains have continued.

In terms of the things that worry Indonesians, these two have been, you could say, normalized.  In 1999 when Indonesia seemed to be on the bring, people were worried about violence, they were worried about lack of leadership, they were worried about collapse, even as recently as 2003, about the ongoing war in Aceh. 

But with the settlement of the key regional issues surrounding Indonesia, including all those cases in East Timor, and the radical decentralization of government power and revenues from the center to the provinces — which have actually shifted the balance of bank deposits from only 30 percent in the provinces and 70 percent in Jakarta to the reverse, the sort of transformation normally seen only after major revolutions — there has been a tremendous stabilization of  Indonesia, as the agenda of outstanding issues inherited from the past has been resolved.

So when you ask Indonesians what’s on their minds today, they say it’s the economy, stupid.  (Chuckles.)  And other kinds of normal issues — governance, the ability of government to respond to national disasters and those sorts of things.  In short, the stuff that is normal democratic politics.

SIMS:  So there is a vibrant opposition.  Political parties are flourishing.  Who do we credit for this?  Has this come under SBY’s administration?  Has it been something that has been a natural progression as democracy came in?  The role of civil society there?  Who gets the credit for this?

CHARNEY:  I think there are there key factors.  One is leadership, both political and civil society.  Many institutions and individuals have changed their roles and changed their places. 

Wayne is correct in saying, for instance, that many of the murders and much of the repression of the 1950s was not just carried out by the military, but lay Muslim organizations like Nahdlatul Ulama and other Muslim groups were prominent in the killings.  By the 1990s, they had changed their leadership and changed their tack dramatically and actually become strongly committed to the democratization agenda.  And these organizations and their leaders, like Abdurrahman Wahid, played an important role.

Second is the transitional leaders themselves, particularly Gus Dur or Wahid, Megawati Sukarnoputri, his successor, as well as SBY, the current president.  All of them have played important roles, and even Habibi, Suharto’s former vice president, made a number of key decisions, such as his willingness to hold a referendum on East Timor, which were ultimately instrumental in moving forward on the — in resolving the outstanding issues.

But one last thing I want to put in a plug for, because I think it’s often not recognized, and that is that democracy assistance — not just from the U.S., but other countries — played an important role in stabilizing the transition.

We invested $75 million in the first election, in terms of programs to —

MR.  :  Ninety-nine.

CHARNEY:  Excuse me?

MR.  :  In ’99. 

CHARNEY:  Yeah, in 1999, in order to promote civic education, promote the democratic process, strengthen civil society and other organizations.  The Japanese and others played a similar kind of role in the election process and in other areas.

We did an evaluation study of this, and I was very skeptical.  I thought this sort of thing was really (outdoor relief ?) for unemployed political scientists like me.  But, in fact, what we found was there were measurable impacts in terms of changes in Indonesian democratic political culture.  Now, in part, that’s because this was done the right way.  It wasn’t Americans debarking — disembarking and saying, here we are.  Rather, it was a system done through and in conjunction with Indonesian organizations, with strong partners, at a time when the winds were blowing in the right way in support of the sorts of things we were doing. 

But what’s happened in Indonesia is really an unsung success, a real model for the way you can successfully intervene to strengthen democratic forces. 

CHARNEY:  This is particularly interesting because this is the world’s largest Muslim population, and we have been talking since 9/11 about whether or not Islam is compatible with democracy and democracy is compatible with Islam.  There was some fear, after the Bali bombings, that there was going to be a — a hijacking (would have been ?) a more secular practice of Islam in Indonesia by these extremists who are coming in.  That hasn’t happened. 

Wayne, tell me why hasn’t it happened, and how has this developed?

FORREST:  Well, having lived in the country — I lived in Indonesia in the ’70s, in Central Java.  Not that Central Java is the only part of the country, and there are so many different streams of the practice of Islam in Indonesia.  But Islam never came to Indonesia by the sword.  It was brought through trade.  And Indonesians are not Arabs, and they have their own identification of who they are. 

And there is an infection, a small infection that we thought could grow, that came in through Saudi Arabian Wahhabiism.  I mean, I remember going up to universities and seeing the literature that was supplied by the Saudi foundations, and they’ve captured some of the thinking of young Indonesians.  But this is a small minority. 

The great majority of Indonesians are secular-minded.  They may be more pious now than they were when I lived in the country.  I think you see the outward signs of an inward change of thinking that Indonesians are taking on other aspects of Islam — fashion, even other kinds of thinking that they didn’t see a generation or two ago.  But it’s not been reflected in the polls or in the elections that we want a religious state or we want to have any kind of religious governance.  They want moral conduct, perhaps, to change.

So, for instance, now you have all across Indonesia local districts that have adopted some — what we would call Shari’a code.  Now, when you evaluate — this was done by the — Asia Foundation evaluated these districts that have these codes.  And they turn out to be somewhat similar to many laws that we have in our municipalities.  You can’t drink in certain places or at certain times; you can’t smoke.  You know, it’s behavioral, but it’s not punishment-oriented.  And it hasn’t affected things in the way that you might think.

I would mention one other great influence on the growth of democracy in Indonesia was the Internet.  You know, 1999, where were we with the Internet?  It was exploding.  In Indonesia, the young people got news and information via that conduit that they didn’t have before, and I think that contributed greatly to the events that took place in ’98, ’99, and afterwards.

CHARNEY:  We should also note that Indonesia’s record in terms of the crackdown on terrorism is quite good.  Most of the bombers who participated in both of those attacks in Bali have been arrested.  There’s been a sort of nationwide crackdown on this extremism. 

Mr. Ambassador, I want to talk a little bit, before we open it up to questions, about what has happened to the internal insurgency, the secessionist movement, that were very active in Aceh and in Irian Jaya, or West Papua.  What has the government done, and I guess it (hasn’t ?) done very successfully, to crack down on these secessionist movements there?

NATALEGAWA:  Let me just turn to some of the points that were raised earlier in terms of democratization in general.  The point by Craig, I think, is a very pertinent point.

And we Indonesians tend to be, by nature, quite modest and we don’t wish to trumpet our achievements.  But just to put things in context, our American friends here have described Indonesia just now as being the third largest democracy in the world, which is actually a statement of fact, when you take into account the number of people who vote — 80 percent participation rate at our elections.  And our British friends, a British friend of mine has described Indonesia as now being the election capital of the world — (laughter) — because we have so many elections that, you know, you really have, it’s just like —

MR.  :  Twenty-four/seven.

NATALEGAWA:  Twenty-four/seven, constant elections.  In my own personal case, for example, it just happened that the election booth was positioned about a couple of blocks from my home.  And the voting hours is from 7:00 to 2:00, 7:00 in the morning to 2:00 in the afternoon.  By 7:30, I’m still having my cup of coffee at home.  I can hear them with their public announcement, would Marty Natalegawa please come over here?  The last — the only person who haven’t voted yet.  (Laughter.)  And it’s only half an hour since the election booth opened, and I thought, you know, I can take my time.  But they’re already telling me, come on, hurry up, because they want to count.  The —

SIMS:  They wanted to go home early.

NATALEGAWA:  They want to go home early and start counting.  But it just shows how eager people are.

And one particular quality that I wanted to emphasize is how the electoral process has become very much tied into the decentralization process.  Because we have seen now elections not only at the national level, but also all the way down to the village level, to regency head, governor level.  So we have not — this is not only things that we do as in terms of electioneering, but we have as a result a new crop of generation leaders, young ones who are coming from the provinces, from the districts, that will, in about 10, 20 years’ time become national leaders.  And I think this is a fantastic way of identifying potential leaders for the future. 

And about the religious — the issue of religious, what do you call it —

SIMS:  (Inaudible.)

NATALEGAWA:  (Inaudible.)  I think the point Wayne said is it’s all — I share what he said just now. 

Just one thing to add as well, that this notion of increased sense of observance of religion is not only an Islam-related phenomenon, but in general in Indonesia, whether it be followers of the Islamic faith or others, Christianity.  There is tremendous revival of a sense of observance of religion, which is something that we must — that’s positive, as long as there is a sense of tolerance, interfaith tolerance, that we really cherish in Indonesia.

And this ties in, of course, to whole issue of terrorism that you raised just now.  We’ve been very — you know, I mean, like New York, United States, we’ve also become victims of terrorist attack.  Bali, 2002; Jakarta, 2005 — that’s the last major attack that we had to endure.  But from the very beginning, we were determined to make this fight against terrorism to be one that is not a war.

War — if it had been a war against terrorism, the answer would have been simple.  Just application of force.  But it is a struggle, so we employ all means as possible, addressing root causes — root causes not in the sense of trying to excuse such heinous acts, but try to put these acts in terms of context.  What makes these terrorists tick?  Why do they do these kinds of heinous things?

And we have been combating this terrorist threat through democratic means, rule of law, bringing people through the legal processes.  Even at the risk of being criticized by some of our friends who are less than patient than us and who said, look, why are you (operating ?)  to be a bit soft or reticent?  But we know that in the long run this is the way to go. 

And you can — I don’t want to mention countries by name specifically, but you can contrast Indonesia’s approach, counterterrorism approach, with some other countries that the United States will be familiar with in the South Asia region, for example, that you can see the contrast — the enforcement, hard approach, and the more comprehensive approaches we have adopted.  In the long run, ours, we think, is the most sustainable one — (that’s taking its ?) — course here.

FORREST:  Yeah, I think that’s a — it’s important to realize that Indonesia has successfully combated Islamic terrorism, not just recently, but in other times of its history.  And they legitimately have a right to say that we may have a way of going about this that others do not.

We recently had a very important man in U.S.-Indonesia history, George Benson, passed away.  Some of you may know who George was.  But he was a key U.S. military attache’ in the 1950s and 1960s who was responsible for starting a military training program with Indonesia.  Indonesia’s current president went through that training program here in the United States.

But George knew the Indonesian military very well.  He knew that they were not infected with Communism, which many of his superiors did.  When he passed away, I sent something out and I got an e-mail back from an old general, Saidiman (ph).  Marty might know who he is. 

Saidiman (ph) told me that he went — he took George on maneuvers against the Daru Islam, which was a terrorist group that was trying to establish an Islamic country, Islamic state, in the 1950s.  And he showed George the combination of soft and hard approaches that they had to putting down this rebellion.  And it wasn’t just guns and capture; it was talking, it was persuading the people in the areas that Daru Islam was active in.

And he said in his e-mails that George took that to other parts — other places in the world, like Vietnam, where he was a brigade commander, and tried doing similar things there and failed.  And Saidiman (ph), he even went on to say that the United States as a whole has never adopted that approach, like in Iraq.  I mean, he was drawing these larger conclusions which we could argue with.

But I think the important point is that they were successful in the ’50s in putting down Daru Islam, and they’ve used similar strategies today with how they’re going about this similar activity.

SIMS:  So we’ve got some really good news in terms of the consolidation of democracy, the crackdown on terrorism, in Indonesia.  What are the challenges ahead?  And I ask that especially in terms of corruption, which is still a huge problem that has to be tackled there, and also a lot of the economic liberalization that needs to take place?  Craig?

CHARNEY:  Yeah.  There’s genuine public hesitancy about economic liberalization.  On the one hand, people are open to free markets and the idea of regional integration.  On the other hand, they’re reluctant to liberalize Indonesia’s restrictive employment legislation and so forth, which acts as a real shackle on growth.

And likewise, although corruption is down a bit, it remains prevalent, and that’s a reflection of the weak legal institutions that I alluded to earlier.

There are some other legal factors as well, but Wayne is more of an expert on these than I am, I think.

FORREST:  Well, I would say that the — right now, the elite political system is what they have, and it’s weak for making the kinds of changes that perhaps could allow Indonesia to grow faster.  So the government, the ministers, they have an agenda that’s very forward-looking.  They’ve proposed — they’ve actually withdrawn legislation that they know right now they can’t pass.

CHARNEY:  Are thinking of the (minerals ?) law, or —

FORREST:  Not the (minerals ?) law, the labor law.


FORREST:  But there are some other significant pieces of legislation that have not gotten through parliament.  So the institution of parliament is weak.  The institution of the justice system still needs a lot of improvement. There are still legal cases that float around that people know about, corporations will know about, that will give them pause. 

But all these things are overcomeable, if that’s a word — (chuckles) — if you want to do business in the country.  But they need to — these things will take time.  There were a lot of dirty dishes left over from the Suharto era, and it’s going to take some while to clean them.

SIMS:  (Off mike.)

NATALEGAWA:  In terms of challenge, I think there are basically two challenge.  One, and this is an overarching one, is democratic dividend.  You know, you have all the startings of democracy; you have your elections, you have your multiparty systems and decentralization, all the kind of things that we’ve been identifying just now. 

But in the final analysis, we have to ensure that all these democratic changes actually deliver in terms of the betterment of the conditions of life of the people in general.  And we’ve seen signs of such dividend, in terms of resolution of conflict situations.  I should have mentioned just now, like the situation in Aceh, in East Timor, in Papua now.  These are the kind of things that in the past we would have simply sweep under the carpet, and — because we do not have enough democratic resilience to be able to deal with these thing in an open and transparent way.

But now that the president and the government has a strong mandate, and if the government can carry out this very courageous, so to speak, policies — because it has — (inaudible) — in the area of conflict resolution. 

But not only that, we need to bring dividend in terms of economic betterment.  And Wayne just now referred to some of the challenge that we face.  But I think overall — I’m not an economist, and I certainly do not have the figures with me, certainly at this time of the morning.  (Chuckles). 

But overall, I think the picture in terms of where we are, Indonesia is today, the economic situation is not a tremendously negative one.  Our economy is robust.  Our stock market, the equity market apparently was for this year — last year was the fourth best in the world, as I saw in a paper earlier today.  And there are signs of things moving forward.  Of course, there is always room for improvement, and this is where the (government ?) — including the corruption issue.

But look at even the corruption issue now.  I guess people are now even more aware and conscious of the challenge of corruption, because it’s all over the place.  The news about the corruption.

MR  :   High profile — (inaudible) — governors.  Yeah. 

(Cross talk.)

NATALEGAWA:  Yes, high-profile cases.  Former ministers, governors, even serving high officials.  And they are now brought to the surface and people can talk.  And there is a process, legal process to deal with them.  In the past, I mean, you don’t hear of them. 

And now there is such robust attempt by the government to combat corruption, there is now beginning to be a risk aversion attitude in many areas of governance.  People who were managing huge projects, they are afraid to take decisions.

MR.  :  Right.

NATALEGAWA:  Because they fear that if they take decisions, even the most urgent ones, subsequently, down the years, they will be asked why did you take that decision?  And then get into all kind of (water ?). And so there is that swing in the pendulum. 

So one is democratic dividend.  We have to ensure that these changes actually bring betterment to the conditions of living of the people.  And the second one is democratic capacity building.

We must ensure that the capacity of our democratic institutions are — (inaudible) — whether they be the parliament just now — and this — one of my — the project that I’ve been thinking when I was — (inaudible) — ambassador in the United Kingdom was how to enhance cooperation within parliament — Indonesian parliament and parliaments elsewhere so we can learn lessons, lessons learned, not to reinvent the wheel, how to enhance the capacity of the parliament secretariat, and how to enhance the good governance of staffing, the good governance of political parties. 

How can you have an open, democratic, transparent system if the political parties themselves are not modern, are not transparent, do not follow good governance principles?  So there’s plenty of opportunities for strengthening of capacity, including in our court system.  And this is where we are trying to build bridges and identify friends beyond Indonesia who’ve gone through all these things, and to be able to — so that we don’t have to reinvent the wheel and we can sort of do these things in a bit more — (inaudible).

SIMS:  We want to take some questions now from the audience. 

We have a microphone, and we ask that you stand to ask your question and identify yourself.  And if you could ask a question and not necessarily make a comment, and feel free to address it to any one of the panelists. 

We can start here with Robin.

QUESTIONER:  Unsteady as I am.  Robin Duke, Interpeace. 

You haven’t mentioned women, and one of the reasons that I think Indonesia has developed the way that it has is because Suharto was very good on women’s issues and on education. 

And I cite Marshall Green, with whom we all worked, and the U.N. agencies, to bring family planning and education about that into the country.  And it has been accepted by the Muslim population, and this is, as you say, the biggest Muslim population in the world.  And I think that’s a very important aspect of their future development.  Would you just comment on that, please?  Thank you.

MR.  :  Well, as any of you — any of us that have lived in Indonesia know that when the husband comes home from work, he often gives his wages to his wife.  That’s common practice.  And if you go to the marketplace, it’s run by women.  That’s really — so it’s ingrained, I think.  And it was a constitutional principle when the country was formed.

And there are women’s credit societies all over the country, mutual credit societies where they loan money to each other.  A lot of the cottage industry is still developed by women.  And some of the programs that you see for small business development, microloan programs, they have been very successful, not only to state banks, but also some of the private banks that are doing this are obviously aimed at women.

Leadership has played a strong role.  Indonesian women are much more up in the public consciousness.  And in certain farming regions they’re trying to get the husbands out into the fields when the women are pregnant so that they don’t have to work in the fields.  These kinds of things have all gone forward with leadership that I can see.  There’s Ministry for Women’s Affairs.

You’re seeing more and more women in business life.  You know, I’ve always felt it was part of the fabric.  I never felt it was something that had to be engineered.  But that’s my impression.  It was something — women’s rights didn’t have to necessarily become a huge issue in Indonesia.

CHARNEY:  Well, one woman in particular deserves a lot of credit as well, and that’s Megawati Sukarnoputri, the first female president of Indonesia and an outstanding figure in the Muslim world.  Admittedly, she owes her providence in part to being the daughter of the first president of Indonesia.  But nonetheless, she was an important figure.  And she is just one of many important leaders.  In the current cabinet, for instance, both the minister of Trade and minister of the —

FORREST:  Finance.

CHARNEY:  — of Finance are women.  One of the things we’ve also seen in our surveys is very broad support for women both making up their own choices in terms of their vote, rather than being advised by their husbands, and strong support for women as political leaders as well, despite the fact that this is a Muslim country.

Part of that, again, I have to say, is also due to U.S. efforts, because we found that there was a measurable difference between the 55 million people who’ve been exposed to USAID-funded ads favoring women’s political equality and those who had not.  The ads themselves caused a bit of a sensation because they had an old women speaking Japanese, not even Bahasa Indonesia, in Japanese traditional dress, sprightly saying to all the women, “This time make up your own choice.”  It became a kind of national catch phrase, an Indonesian version of “Where’s the beef?”  (Laughter.)

SIMS:  We should also note that there was an anti-pornography law that was presented in the Parliament and it was very sexist against women.  And it was the women’s groups that actually banded together to actually throw that law out and have it be rewritten.

We’ll take another question.  How about over here?

QUESTIONER:  Thank you.  (Inaudible) — Structured Credit International.

I’m wondering if you might comment on the economic sort of policymakers.  And the reason I ask is, pre-’97, Indonesia, for a long time, had a fairly powerful group of economic ministers.

FORREST:  Berkeley Mafia.

QUESTIONER:  Yeah, exactly.  And they were extremely successful in careful macroeconomic management, regular micro devaluations, and fairly liberal financial policies and economic policies.  And then with the change that took place after the Asian financial crisis, the focus shifted to democracy, to more of the political stabilization kind of focus.  So the issue is really how has the economic policymaking infrastructure (fed ?), and has that stabilized?  Because that’s fairly crucial to the outlook for economic reforms and for continued growth and development of the country.

SIMS:  Who wants to take that?

FORREST:  I mean, the current crop of economic leaders are very distinguished economists.  Almost all of them were American-educated and had careers outside government, either in international financial institutions like the IMF or the World Bank.

Since ’97, the government has passed a law making the central bank completely independent.  So that’s one big difference that we have today.  The macro policymaking is still very much in, I would call, the liberal economic arena.  I would say also since ’97-’98 — and this occurred more in the previous cabinets — there have been some economic nationalists and there’s been, you know, just like in many governments, a pendulum between some protectionism and not.

I mean, currently Indonesia doesn’t have a strong protectionist policy at all.  In fact, they removed some protections more recently because of rising food prices.  They’re very concerned about the price of soybeans, for instance, and they were trying to encourage a lot of local soybean growth by putting a tariff on imported soybeans.  But they don’t have enough to go around yet, so they had to drop the tariff right away.

So they’re very responsive.  It’s always a policy that takes — and this was, I think, developed under Suharto — takes the great majority of mostly poor people in mind.  So they’re commodity-based.  They’ve taken away some subsidies on energy, mostly for the higher-price fuels, and kept the lower-priced fuels subsidized somewhat.

You know, we may see some of those things come back that were very common under Suharto and which it’s part of the nostalgia today, which is, you know, stabilized prices for eight or nine basic commodities — rice, cooking oil, things like that.  You know, they’ve unshackled those at the risk of rising prices.  And that’s why today people will say — and correct me if I’m wrong; I think it came up in Craig’s surveys — “Life was better for a lot of us under Suharto, but we don’t want to go back to those days.”

SIMS:  Ambassador?

NATALEGAWA:  I think this point — I mean, just now, one of the — (inaudible) — in the process has been the notion of the so-called Berkeley Mafia, to refer to a number of prominent government economists and ministers who basically were the architects of Indonesian economy then.

But now I think there’s less tendency towards idiosyncrasy.  We wish to strengthen our institutions.  We are not interested in having certain characters and personalities be as if they are the economic guru of Indonesia.

As I said before when I talked about the importance of strengthening our democratic institutions, capacities, as part of that is the strengthening of our bureaucracy.  And if you were to look at all Indonesian government departments, including Finance, Trade, the central bank, including my own Ministry of Foreign Affairs, we’ve all gone through an effort at reform, hopefully based on merits rather than the old-fashioned, you know, business-as-usual type of setting.

So I think we are very much mindful, Indonesia is, that while we have the resources, the potential and all the assets that we have, we are competing with our neighbors — your Vietnam, your other Southeast Asian countries, India, China even more — that we must make our economy competitive, not only in terms of the — (inaudible) — in terms of economics per se, but the whole governance.  And the bureaucracy is one area which is within the government’s control.  We can do something about this, and the government is doing something about it by reforming its bureaucracy.

I’d just like to very quickly refer to the women issue, if I may, before opening the floor.  I’m very grateful that you had raised the question.  I should have mentioned the importance of that matter also.  But on the other hand, though, I think it is a reflection of how women issues, empowerment of issue, has now become such a mainstream, normal issue.  It’s no longer — (inaudible) — highlighted as an issue, a problem, a challenge that needs to be — (inaudible).  It’s very much become part of the norm.

And we are very — Indonesia is very much conscious that most of the achievements can be made actually by focusing and empowering women’s roles, whether it’s in the area of family health, in the area of economic development and regional development.  And if I was to think now — because I do this exercise back in my office sometimes — I ask my colleagues, “Identify people” — current Indonesians, not previous past history type of thing — “current Indonesians whom you admire most, whom you respect and you like to think that they’re good role models.”  And invariably when leaders — not in government but in civil society, because they’re prominent.  I’m glad that you mentioned the anti-pornography bill that was rejected.  And here I think the role of the women in civil society was particularly prominent.

And just one final point, by the way.  My ministry, Foreign Affairs, we have a very competitive recruitment system into the Foreign Service.  About every year we get about 40,000 applicants and we accept about 55 people out of that 40,000 applicants.  And out of that 55 or so or 75 or so, the past three or four years, more than 60 percent have been women.  And this is based on merit.  We don’t know what is the gender of the person who applied, because it’s all based on — (inaudible).  And invariably it’s the women who come top in our system.  And 10 to 20 years from now, probably the one who’s sitting here as the permanent representative of Indonesia at the U.N. will be a woman diplomat rather than a male diplomat.  And I look forward to seeing that happen.

SIMS:  Let’s get some more questions.

QUESTIONER:  Jonathan Chaddis (sp).

One of the more interesting things about Indonesia and the Suharto legacy is the failure to recover money from the family.  If you look at the Philippines and Marcos and Nigeria and Sani Abacha, they’ve been infinitely more successful in bringing money back into the country.  Is this now a dead issue?

SIMS:  Who wants to take that?  Yeah.

CHARNEY:  It’s not.  The current government just this week, post-funeral, made announcements that they are still seeking to work with the World Bank and the U.N. commission to track this.  So I don’t think it is a lost cause at all.

FORREST:  But there’s a general issue that this raises, which is the fact that one of the shortcomings in Indonesia’s transition has been the failure to come to terms with the past.  You know, we found in one of our surveys there was overwhelming, 70 percent, support for a truth commission to examine the past prosecutions, for example.  But, you know, the past has not been disinterred either — the half million-plus who were killed in the ’60s, the legacy of brutality in East Timor, Aceh and other parts of the country, the suppression of the — (inaudible) — riots and other cases; the whole sorry history of repression.

And there are various reasons, and some of them may be good ones.  There has been some binational efforts, actually, between Indonesia and East Timor in particular to establish a binational truth commission to look at the events there.  But I think the question of restitution and the recovery of stolen funds actually has to be considered as a subset of the more general set of issues of facing up to the past.  And that, unfortunately, remains part of the agenda for the future.

QUESTIONER:  How do you start to crack down on corruption when you still have Suharto’s children who get all of these sweetheart deals, and by some estimates stole billions from the state coffers?  If you don’t start to address it at that level, what hope is there for the rest of the society?

CHARNEY (?):  That’s a good question.  (Laughter.)

NATALEGAWA:  Yes, asset recovery, ill-gotten asset recovery, is a key plank in the government’s effort as part of our good governance promotion, good governance transparency, anti-corruption.

I have a little bit of experience dealing with this directly because, as I said, before being here I was in London, and a case came onto my desk of a certain asset that belonged to a certain individual from the previous administration that had been placed in the island of Gunsi (sp).  And we make claim to the assets, and now there is a pending case in Gunsi (sp) between the Indonesian government and the gentleman concerned on this asset.

But in the pursuit of that effort, it became very obvious that there are so many legal hurdles that have to be overcome.  Even with the very best of political intentions and will, the whole system is so complicated, certainly for a country that is learning this, as Indonesia is trying to learn by doing, that it’s very difficult to make claims, extrajudicial claims, to assets beyond our shores.

In the British case, Singapore is also another case.  We often hear there’s ill-gotten assets that’s supposed to have been taken and being deposited in Singapore; nothing to do with the government, but that’s a fact of life.

We’ve been working with the Singapore government to try to have extradition treaty worked out, with the regional governments as well, to have legal treaties to govern the recovery of assets.  In Indonesia this week we are hosting a U.N. conference on anti-corruption in Bali.  At the moment, as we speak, it is ongoing.

Again, just — I know we are hosting the conference, but we are just trying to make a point.  We wish to be at the epicenter.  We wish to be in the middle of all this global effort at asset recovery.  But asset recovery is not only a national effort.  It is a global effort.  It’s (no good as ?) trying to do our best, but the party required to work with us are less than forthcoming.

SIMS:  A few more questions.  How about Kira Kay?

QUESTIONER:  Thank you.  Hi.  I’m Kira Kay.

Nobody has really talked about the military, which I think a couple of years ago would have been surprising.  If you could give your opinion on the current status of the TNI as a political force and also potential impact of their illegal activities, income-generating activities, illegal logging, gun running, drugs.  Is that having an economic impact, an impact on security, or is it getting under control?

SIMS:  Craig.

CHARNEY:  Politically, the institution of the military has only gained from receding from politics.  Its prestige was pretty much at low ebb, as near as we can tell from polling that we did, at the time of the transition.  On the other hand, we find that from some unpublished work that will come out later this year more than 90 percent of Indonesians have a favorable attitude towards their military now.

And you must realize that, you know, whatever they’re doing in the economy now, their role, the so-called defunxi (sp), the dual military administration that shadowed the civil administration at every level, you know, as well as the dismantling of the military apparatus that was in Parliament and others, has had a tremendous restorative function in helping to reduce at least the political role of the military to more normal terms.

On economic pieces, here I’d better leave the question to those better qualified to speak.  Wayne or Ambassador?

FORREST:  Well, my comment there is that the budget for the military, the national budget for the military, has not risen to the level, I think, where their influence would recede.  So they’re still somewhat dependent on either straight business activities or non-business or, you know, illegal activities.

The current defense minister has made a point of bringing at least the legitimate businesses out into the open, with the idea of accounting them and perhaps leading to their sale.  And that’s, you know, a very, very strong good first step.

Other issues of especially the field command — they’re sort of the capillaries in the system — how they’re fed and how those units have to finance themselves, that’s a larger issue that has not yet been completely dealt with.  And some things will follow on from that.

SIMS:  Shall we get another question?


QUESTIONER:  Elizabeth Bramwell, Bramwell Capital.

I was wondering if you would comment on the economic diversification of the country and the outlook for the mining industry and sources of foreign exchange.

FORREST:  I think I can tackle that since I have a lot of mining members; not a lot, but I have the three American mines that are in Indonesia we know of quite well.

The situation for mining in Indonesia is not a very strong one at the moment.  Before 1998, Indonesia had 5 percent of the world’s budget for exploration.  Today, 10 years later, it’s less than 1 percent at a time when commodity prices, mineral prices, are going through the roof with demands from China.

They’re doing very well in coal.  They’re a very large coal producer.  Their existing mines are doing beautifully because of the prices.  The exploration — it’s the money that they’re leaving on the table; I think that’s the most problematic.  There’s a Forestry Ministry permitting process that’s not been handled very well.

The decentralization has not been handled very well for mining, and the government knows this.  There’s no secrets here.  And, you know, there’s a new mining law that’s being debated.  We’re not quite sure exactly what’s in it.  It seems to change.  Some of the elements in that mining law would be more advantageous.  Some would not.  There’s a lot of commenting by the Indonesian Mining Association, and it just has not been resolved yet.

The country’s diversified from oil and gas.  That’s an established point.  They’re an OPEC member, but they are now at a point where, at least for petroleum, they’re almost a net importer some months.  They still export petroleum.  That sector is also — the drilling has gone down somewhat because of some issues involving contract extensions.

There are local — there’s also issues with Pertamina that haven’t been resolved.  Pertamina is the national oil company.  But they’ve been changed into a limited liability company and sort of set off from the state in a way, but they’re still tethered to the state.  So there’s a little ambiguity, I would say, in that industry how the future will go.  And it’s reflected now in the current situation, where they’re not at optimal production when they should be.

SIMS:  Well, in keeping with Council protocol, we’re sort of up against the hour.  But I want to thank all of our panelists, Craig Charney, Wayne Forrest and Ambassador Natalegawa, for joining us.  And thank you for getting up at this early hour for this session.  (Applause.)








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