Pemilu 1998-Indonesia

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Pemilu 1998

Mengatasi keraguan luar negeri Mengatasi keraguan luar negeri {Pengunduran diri mantan Presiden Soeharto tidak secara langsung disusul oleh pembukaan kembali “keran” pendanaan dari IMF. Salah satu sumber opisisi terhadap dukungan kembali kepada Indonesia adalah Parlemen Amerika Serikat. Dampak dari perpanjangan “musim kemarau” dukungan keuangan dinilai cukup berat} Ada kesan di Indonesia bahwa DPR/Senat Amerika Serikat belum yakin akan manfaat mendukung dimulainya kembali bantuan keuangan internasional kepada Indonesia. Anggota DPR/Senat dari beberapa aliran pikiran termasuk kelompok kesejahteraan sosial/HAM dan pemela gerakan demokrasi dari belahan kiri serta pendukung kuat pasaran ekonomi bebas dari belahan kanan meluncurkan kritik yang tajam terhadap pendekatan Dana Moneter Internasional (DMI) di Indonesia dan negara Asia lainnya selama 10 bulan terakhir ini. Khususnya mengenai Indonesia kedua kelompok ini serta kaum konservatif Kristen dari belahan kanan menaruh perhatian mengenai perkembangan prasarana dan pranata sosial di Indonesia. Hal yang menarik perhatian mereka antara lain termasuk: • Prilaku tata usaha ekonomi dalam negeri yang terlalu diwarnai oleh struktur pasar yang bersifat monopoli, oligiopoli, monopsoni, oligopsoni serta tingkat korupsi, kolusi dan nepotisme yang tidak sehat; • Ancaman terhadap rukun keagamaan nasional yang dianggap nampak dari kurang perhatiannya pihak wajib terhadap prilaku diskriminasi sosial dari pihak agama majoritas terhadap pihak minoritas (terutama oleh pihak Islam terhadap pihak Kristen/Katolik); • Pranata negara yang dianggap tidak cukup diwarnai kedaulatan rakyat, sebagaimana dicerminkan oleh lemahnya daya kuat legislatif, kurang merdekanya lembaga hukum, kurang bebasnya lembaga non-pemerintah misalnya lembaga serikat pekerja, pers, serta pembatasan hak sipil terhadap tokoh-tokoh yang tidak sependapat dengan Kepala Pemerintah. Inti perlawanan ketiga kelompok DPR/Senat Amerika Serikat ini terhadap penyampaian bantuan keuangan kepada Indonesia adalah bahwa bantuan ini bisa disalahgunakan oleh kelompok yang berkuasa di Indonesia serta memperkuat posisi mereka dalam kerangka politik negara. Pikiran politikus AS ini adalah pengeringan kesempatan main uang dalam negeri akan menjadikan kepemimpinan sistem politik lama hancur. Pendeknya dukungan keuangan kepada pemerintahan Soeharto, menurut mereka, akan menghambat berjalannya pembaharuan luas dalam negeri Indonesia. Mundurnya Soeharto sebagai Presiden dan digantinya oleh Prof Habibie dianggap oleh kalangan tertentu di AS sebagai perubahan tanpa pembaharuan, yang bisa menjadikan Orde Baru bertahan lebih lama. Anggapan ini sebenarnya berdasarkan asumsi yang secara fundamental salah. Presiden Habibie tidak memiliki kemampuan untuk menentukan nasib kebijakan negara seperti pendahulunya. Gelombong sejarah serta tuntutan masyarakat sedang berkiblat kepada pembaharuan, dan Presiden Habibie, kalau berani melawan gelombong ini, dengan tegas akan memendekkan kepresidenannya karena kekurangan keabsahan kepemimpinnya secara politik dikarenakan keabsahan politik saat ini justru diukur oleh dekatnya calon pemimpin kepada gelombong pembaharuan tersebut. Misalnya walaupun Presiden Habibie selama 20 tahun terakhir ini terkenal sebagai orang Indonesian yang paling berani melawan arus rasionalisasi ekonomi, namun saat ini penjelmaan visi ekonominya mustakhil karena negara tidak mempunyai dana cukup untuk membiayainya. Kelihatan anggota parlemen AS belum bisa diyakini akan keadaan baru ini. Demikian juga anggapan bahwa Presiden Habibie mampu memblok pembaharuan politik tidak mempetimbankan, secara realistis, bahwa rindunya akan deregulasi politik yang lama dipendamkan oleh masyarakat karena kekuatan kepala negara/pemerintah dulu, akhirnya bisa dipenuhi. Kelompok dan instansi masyarakat ini termasuk gerakan mahasiswa, lembaga legisaltif, lembaga hukum, dunia pers dan pegawai negeri. Zaman pemusatan kekuatan negara yang juga bersifat kekuatan jaringan pribadi yang dikembangkan selama 30 tahun oleh mantan Presiden Soeharto hanya bisa dihidupkan kembali dalam satu skenario. Yaitu kalau ekonomi tetus menciut sedemikian jauh sehingga kesatuan sosial dirobek di bawah tekanan inflasi (yang disebabkan oleh mata uang yang terus depresiasi tajam) dan penangguran (yang disebabkan oleh suku bunga yang sangat tinggi serta keadaan likuiditas ysng sangat ketat. Dampak dari keadaan ini akan meruntuhkan sistem kesejahteraan sosial, yang berdasarkan dukungan jaringan keluarga dan persahatan pribadi, karena terlalu banyak orang dalam jaringan harus didukung oleh terlalu sedikit orang yang masih mempunyai pendapatan. Dalam keadaan darurat begini, tidak mustakhil muncul kerusuhan sosial yang lebih besar dari pada bulan Mei. Balasan dari keadaan anarkis adalah sistem pemerintahan yang bersifat keras dan tertutup terhadap pendapat luas. Pemerintahaan ini bisa dikepalai oleh seorang berlatar-belakang militer ataupun agama. Satu hal yang mutlak harus dilaksanakan untuk mencegah malepetaka tersebut adalah mulainya kembali pencairan dana bantuan kepada Indonesia. Bukannya dana dari DMI sendiri bisa menyelematkan Indonesia melainkan dukungan dari DMI akan memberikan petanda kepada pemain-pemain yang lain termasuk lembaga keuangan internasional yang lain, donor bilateral serta penaman modal berjangka panjang dari pihak swasta bahwa mereka juga bisa mulai kembali melakukan kegiatannya di Indonesia. ....selanjutnya {The footnotes in this document were added on 27 December 2008, as I reviewed the original document – all with the comforting distance of 10 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-06-07 Spanners in the works The first week of the Habibie presidency was considerably smoother than could have been expected, indeed that he is still President is more than many pundits had expected. The first tentative steps towards de-Soehartoising Indonesia have also begun. A reform oriented informal national consensus remains in place. Some political prisoners have been released, while others have been permitted to speak to the press for the first time in decades. The need for general elections based on a new election law, including new party system, are agreed by all making their views public. The sensitive issue of winding back commercial privilege accorded to the Soeharto clan and close friends has already begun. Thus far the process has been extraordinarily smooth. This appearance of tranquillity does not mean the country's stress fractures have healed. Far from it. What it means at this stage is that the recognition for substantive reform of the political system is seen as either desirable (by idealists) or unstoppable (by realists). While this is all well and good when the country is looking at broad principles, there are numerous potential pitfalls where differences of opinion, or more importantly interest, could degenerate into conflict. Matters over which conflict could emerge include: • the use of district voting (single member electorates) or proportional representation (multimember/party electorates); • What restriction, if any, will there be on political party participation. Will the electoral system be open to such organisations as the People's Democratic Party (PRD), Indonesian United Democratic Party (PUDI), or even the Indonesian Communist Party (PKI). What about ethnic-geographic organisations such as the Free Papua Movement (OPM) or Independent Aceh (Aceh Merdeka) or some Maubere (East Timor) independence organisation; • Will or will there not be restrictions on participation by certain individuals in the elections either as candidates or even participants such as ex-political prisoners/guerilla leaders? Would renouncing violence be sufficient to gain admission? • Will or will not members of the Armed Forces be permitted a free vote, or will their leadership continue to seek special consideration for representation in the legislature as compensation for disenfranchisement at the polls? • Will the Head of State/Government continue to be appointed by a national congress, or will this be devolved to a popular vote? • To what extent will the national electoral institute be independent of government/executive influence? • To what extent will other components of the state, especially the civil and military wings of the bureaucracy, play a neutral role in the electoral process and election campaign? • What role, if any, will Pancasila play in determining who or what parties are eligible for admission to the electoral races? • What restrictions, if any, will apply to issues which may or may not be raised during the campaign process? • What restrictions, if any, will apply to campaign methods which may or may not be used during the election? ....selanjutnya {The footnotes in this document were added on 31 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-06-01 Indonesia: looking ahead Most people have grossly over-discounted Indonesia. The currency, for example, has fallen 50% further than say the Thai Baht. Economic fundamentals alone can not account for this. One of the important contributing factors is political uncertainty. Simply put, market players have no idea what a post-Soeharto Indonesia would look like. Free market (especially financial) reforms only began 10-12 years ago (although basic market re-orientation commenced 30 years ago). During this 10-12 year period, Pres. Soeharto was unchallenged. Analysts have not had to look, with any seriousness, at countervailing or alternative forces in Indonesian society. Consequently they actually do not know what the bounds of the plausible contain. This means that they have to consider the most radical options, which are pretty uninspiring, as indeed they are in any society at it extremes. A triangle of probability The future of Indonesian society is not, to me, a mysterious black hole. I gain comfort by being able to put edges around the improbable. ....selanjutnya {The footnotes in this document were added on 31 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-05-30 A small step for Indonesia, The first step for reform The Habibie presidency will be a transitional phase. There is a possibility, ever so remote, that he might seize the opportunity and transform himself into the national hero of reform. This will be a tall order for this leader. His elevation to the presidency, even on a transitional basis, will mercifully break some of the tired old cliches surrounding the presidency, namely that the President has to be a Javanese military man. Habibie is a civilian and of Sulawesian background by birth and early development, although his mother is Javanese1. The country is nowhere near the end of its political crisis. The announcement by Pres. Soeharto to resign on Thursday should not be seen as ending Indonesia's political problems. His resignation does however represent an important step along the path to moving Indonesia to a substantive Post-Soeharto era. His replacement by Prof Habibie in a hasty but relatively well orchestrated and mildly dignified ceremony at the State Palace was met with great relief from elements of the Indonesian middle classes and international stakeholders in Indonesia. Nonetheless not all are satisfied. The mood of the students in and around the Parliament House remains defiant. They do not see Habibie as a credible or legitimate leader2. Key issues of legitimacy remain unresolved. The dignified little ceremony will, in hindsight, be seen as altogether too hasty. Why were there no leaders of the Parliament invited to the ceremony? Is it really possible to say that “I will relinquish all of my presidential powers at the end of this speech?” There was something of a shotgun wedding atmosphere to the ceremony. The Parliament should be expected to continue to demand that they have the right to anoint the President. In this regard the Parliament has the support of the students. The Parliament, however, has its own problems with legitimacy. The students do not see this Parliament as a legitimate reflection of the will of the population, and remain quite suspicious of the reform credentials of leaders of this institution. For elements of the elite outside the Parliamentary structure, particularly the Megawati faction, the use of this Parliament to undertake this succession function is also problematic. Like the students they do not see this Parliament as legitimate. Unlike the students they may not wish to take the expedient approach that the students may seek to take. 1 The issue of “Javanese” has to me, over the years, become increasingly less an issue of “genetics” and increasingly more one of “cultural connectivity”. For example try as he might, Prof Amien Rais, who hails from Central Java, has very limited appeal to fellow ethnic Javanese, while Megawati Sukarnoputri, who is mostly non-Javanese by ancestry has a much deeper appeal and support base among ethnic Javanese. Perhaps those old clichs about Javanese being obsessed with harmony and refined tranquility even at the expense of clarity hold some relevance certainly in terms of political connectivity. 2 This was certainly my impression as I walked around the Parliament building that momentous Thursday morning. While they were all pleased that he had resigned, some held the view that it was really a political trick and they he would rule from behind the scenes. Others felt that he was indeed gone, but that his replacement was, as it were, merely a “different bottle, but same wine” or similar words to that effect!! Others believed it may be possible to start moving ahead but that sustained and serious pressure must be maintained to counterbalance the resistance to reform from the vested interests that would continue to populate the commanding heights of the political system. Such are the dramas of a political system seeking to re-invent itself behind the fig leaf of constitutionality. Indeed we will all have to get used to such public political squabbles as they will become a fact of life under the more deregulated political system that is about to emerge. The role of the military has been most interesting. Almost wholly absent from the street barricades has been any Kopassus troops. In full view have been marines, military police, and air force strike force. This begs the question of why the core support base of Lt Gen Prabowo has been kept away from the public3. For the students and Amien Rais, Prof Habibie lacks legitimacy, but a compromise with Habibie being seen as a “transitional” leader could be a way out. For the students and NGO leaders, an important issue now includes the calling of Soeharto and associates to legal account for their economic “successes”. Calls for this received very strong rounds of support from the masses at the Parliament. Habibie is not immune to these calls. The statement by military commander Wiranto that Soeharto would not be “chased around” will put him and his organisation at odds with the substantive reformists. This will be a tricky test of the political acumen of leaders as they navigate through this emotional mine field. In terms of the political give and take, the process of establishing which institution will have authority for developing and passing the new political laws will remain an issue of core debate4. This is even before substantive debate about the potential contents of these laws becomes an issue. Ultimately I would expect the Parliament to win this one. On economic policy, it was very important to identify that the new Administration will fully implement its agreement with the IMF5. 3 Interestingly the recently released book by former Pres. Habibie hints at possible concerns about the constitutional loyalty of these forces to the new Commander-in-Chief. 4 The implications arising from this statement actually set a major change in course for my life. Since 1996, when I first set pen to paper to seriously conceptualise what a post-Soeharto Indonesia would actually look like and demand, it was my fervent conclusion that any post-Soeharto era elections would be genuine, competitive, free and fair. Given the extraordinarily over-regulated system in place at the time, it was clear to me that the highest priority nationally would have to be given to changing the so-called 5 political laws of 1985 (that dealt with parties, elections, the legislature, referenda and mass social organisations). My view, given the essentially constitutional nature of the political transition, was that the only appropriate place to look for the drafting of these new laws would be the Department of Home Affairs. At the time I had a great concern that the “market” was so negative towards Indonesia that it would miss the great advantages in terms of stabilization that democratic elections would provide. In “market-speak” this suggested a “buying opportunity”. I realized that for me to waffle on to market players internationally about the absolute likelihood of free, fair and therefore acceptable elections would be meaningless in terms of shifting entrenched opinions, so I had to find these legal drafters and use their own words to boost the legitimacy of my convictions. Through the good connections of one of my favourite lecturers, Prof Bob Elson, I was introduced to Prof Ryaas Rasyid. After an engaging and at times animated two hour chat about the proposed new laws, Reformasi and history, he promptly asked me to meet the rest of his team, known eventually as “Team 7”. Remarkably we all clicked and to my surprise they asked me to come back the next night, a process repeated every night for the next few months! So during this period it was the financial market for me by day and the political market by night! Eventually Prof Ryaas asked me “to get a real job” and work with them full time. It was here that I was introduced to that wonderful organisation, UNDP, that agreed to recruit me to help the team. 5 I think this comment simply reflected the fact that I was still working for a merchant bank! ....selanjutnya {The footnotes in this document were added on 30 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind–sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-05-21 Jockeys for reform all developments. The following comments and sketchy analysis incorporates some information and details, (in what I believe to be chronological order) known by the writer at the time of dispatch. Monday 18 May • Students from assorted campuses plus leaders such as Amien Rais and Ali Sadikin move into MPR/DPR. Military attempt meekly to resist at one point but did not press the point to the limit. • Students demand to meet MPR/DPR Speaker Harmoko to convey views. • Students surprised that Harmoko agrees to meet and agrees to support the calls. • Latief1 tries to resign, announced by Mursjid, State Secretary. • Harmoko announces the he wishes for the President to resign. Calls for special plenary session of the DPR (not MPR it seems) • Gen. Wiranto, following an emergency meeting with Soeharto, calls press conference. • Gen. Wiranto, flanked by top brass, including head of KOSTRAD and BAKIN, announces that Harmoko's views were personal and not institutional. No questions taken. • Everyone assumes Wiranto's views represent military opposition to succession. I think the view is correct, even if it remains an attempt by ABRI at fence sitting. Tuesday 19 May 1998 • Harmoko is understood to be wavering a little. Perhaps a few thousand students in his office might put some more steel in his back! • Soeharto press conference turns into confusion when only Muslim leaders are allowed to stay. The meeting is behind closed doors. Leaders include representatives from most Islamic streams except Rais'. Included were Gus Dur, Cak Nur, Emha Ainun Najib, Dr Ali Yafie. Also Dr Yusril Mahendra and Saadilah Mursjid. Not included were Hasan Basri and, of course, Amien Rais. • White collars yuppies gather at Stock Exchange for a protest at 12.00. Tanks and personnel sent to JSX too. The establishment of a plethora of reform supporting organisations over the past 5 days represents both an attempt by people to have influence over the direction of these organisations, as well as attempts to trumpet their own initiatives and interests (perhaps even ambitions) in this regard. In general all are opposed to the looters and all support the student moves. I think the ABRI leadership is still trying to threaten the opposition movement by issuing statements such as Harmoko's view was only personal just to see if the parliament subsequently weakens its resolve. I do not believe this resolve will weaken, and is more likely to grow as new groups come out to loudly proclaim that ....selanjutnya {The document was drafted on Tuesday 19 May and completed on the morning of Wednesday 20 May, one day before the President resigned. The pace with which events were unfolding, and rumours spreading, was quite breathtaking. It was becoming increasingly hard not to get lost among the individual events and lose tracks of the key dynamics. While it was clear that the leadership of the day was clearly losing the plot, I had no intention of doing likewise! At the same time it was also not easy not to get so carried away with the events and thereby lose a capacity to analyse the unfolding events with some rigour. The footnotes in this document were added on 31 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-05-19 Looting and pillaging The student protests have now been overtaken, temporarily at least, by looting and pillaging by swarms of people, essentially the army of the unemployed. The degeneration of section of the capital on Thursday into rioting and looting followed indirectly in the wake of the shooting to death of some 4 Tri Sakti University students on Tuesday. A couple of interesting points should be made about the riotous behavior. This behavior consisted of 3 separate but related forms of action: • the theft of private property from shopping centres, retail outlets, warehouses and storage centres, and private homes; • the destruction of private and public property including vehicles (cars, trucks, motorcycles and public transport like buses, metro-minis), fittings and fixed properties, and some of the stolen booty; • the resort to extortion particularly against vehicles using toll roads such as those heading to the airport. Targets As long expected the prime targets for destruction have been the Sino-Indonesian business community as well as property linked to the First Family such as Timor1 cars and Bimantara2 cars and toll roads3. Prime targets appeared to have been firstly commercial shopping regions (commencing in the Chinatown region but fanning out to other commercial regions). The process of theft was followed some time later (while the theft was still ongoing) with burning of the facilities. Large scale deaths have occurred in these places as looters continued seeking produce as the flames were burning. Other targets have been strip commercial centres along major roads. While the mantra of “pribumi” or “pribumi Muslim” or “pribumi Betawi asli”4 may have saved some premises, it was not cause for total immunity. Flying flags at half mast have been another way to seek to differentiate the owner from Sino-Indonesian interests. Inscriptions in favour of reform, while sometimes successful, fundamentally miss the point, which in essence is that the looters and pillagers are a world away from the protesting students. ....selanjutnya {The footnotes in this document were added on 30 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-05-17 Game over The student protests have now been overtaken, temporarily at least, by looting and pillaging by swarms of people, essentially the army of the unemployed. The degeneration of section of the capital on Thursday into rioting and looting followed indirectly in the wake of the shooting to death of some 4 Tri Sakti University students on Tuesday. A couple of interesting points should be made about the riotous behavior. This behavior consisted of 3 separate but related forms of action: • the theft of private property from shopping centres, retail outlets, warehouses and storage centres, and private homes; • the destruction of private and public property including vehicles (cars, trucks, motorcycles and public transport like buses, metro-minis), fittings and fixed properties, and some of the stolen booty; • the resort to extortion particularly against vehicles using toll roads such as those heading to the airport. Targets As long expected the prime targets for destruction have been the Sino-Indonesian business community as well as property linked to the First Family such as Timor1 cars and Bimantara2 cars and toll roads3. Prime targets appeared to have been firstly commercial shopping regions (commencing in the Chinatown region but fanning out to other commercial regions). The process of theft was followed some time later (while the theft was still ongoing) with burning of the facilities. Large scale deaths have occurred in these places as looters continued seeking produce as the flames were burning. Other targets have been strip commercial centreI would say we are now at the end of the game for the Soeharto Administration1. This Administration, like others which based their legitimacy upon “economic performance“, obviously runs into difficulties when the economy stops growing. Often these “developmentalist“ administrations are also authoritarian and indeed usually argue that authoritarianism is a “pre-requisite“ for development to succeed. The downside is that legitimacy is lost when economic growth falters. In modern Western systems legitimacy comes from demonstrated popular support shown officially through general elections and more unofficially through regular opinion polls. When Administrations under these systems lose legitimacy, a new group with greater support replaces them, either through general elections or via a recasting of loyalties in the parliament. Unfortunately such Administrations as here in Indonesia2 also tend to try to blur the boundaries between the Leader, the Administration (national leadership), Government (the state), and the Nation. This is often reflected in the way the administration will resort to legal sanctions or bullying accusations against opponents when these people criticise policy. The flow of this convenient flow of logic for the powers-that-be is as follows: criticism of government policy = criticism of Government leaders = attempt at undermining national unity = act of subversion. The population often fails to disentangle the various elements and therefore have difficulty differentiating personal view from official policy too. The problem that arises here when legitimacy fails is that it becomes very hard to remove the de-legitimised leadership as they will continue to define their own survival with that of the country. Rarely do they leave gracefully. The biggest problem is that there is no agreed or legitimate process for replacing the de-legitimate leadership. This adds to the complication and tension. One more problem in a system, which offers no place for losers and where the winner takes all, is that should they fall, they also lose all. The modern Western system is rarely so unkind to its losers.i Muslim” or “pribumi Betawi asli”4 may have saved some premises, it was not cause for total immunity. Flying flags at half mast have been another way to seek to differentiate the owner from Sino-Indonesian interests. Inscriptions in favour of reform, while sometimes successful, fundamentally miss the point, which in essence is that the looters and pillagers are a world away from the protesting students. ....selanjutnya {The footnotes in this document were added on 30 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written.}

1998-05-13 Indonesia's political and economic prospects Executive summary Currency Board The most significant wild card issue which can influence the medium term political and economic situation is the currency board proposal. Its success will ensure the socio–political situation remains under the President's control. For the President a currency board offers the hope of containing inflation and basic food market instability, and therefore sustaining political stability. If this does not go ahead, or worse still fails after having been adopted, the socio–political fall out may well be too much for the President to sustain his position. Prof Habibie as Vice president In relation to March's elections, President Soeharto's support for Prof Habibie as his Vice President provides him with a buffer between himself and anyone who may seek to use the vice–presidency to roll the President. Ambitious military leaders will support Habibie as they see him as an implausible President and therefore someone over whom they can leap frog to the presidency. Succession scenarios I have identified some 9 possible succession scenarios1. They come under 3 broad categories, namely constitutional, quasi–constitutional and unconstitutional. Most of the constitutional outcomes contain one inherent weakness, which is that community pressure for real change and participation can't be contained when the anchor of the status quo (President Soeharto) has gone. This means the new leadership may crumble in the face of this pressure leading to a more substantive reform process commencing. Quasi–constitutional outcomes include something of a re–run of the process led by President Soeharto against President Sukarno (an ultimatum to leave gracefully). If at the end of the day no succession takes place and polite ultimatums are not taken up, more radical and uncontrollable scenarios will unfold. An effective new coalition can be fashioned The best scenarios in terms of seeing Indonesia back on the road to prosperity and stability are those which involve a coalition of military and opposition civil groups, as it provides some semblance of order and also releases the potential for long overdue reforms to commence. Minimalism will not provide the answer I believe it will most difficult for any post–Soeharto successor to try and sustain the existing status quo in terms of political infrastructure. Support for that system will simply be too insignificant to provide a basis for a stable and effective governance. Reform will therefore be a very high priority within the community. To deny that reform will be to invite a failure to garner sufficient support for the new leadership. This is a weakness in the “smooth” scenarios which can be found within the constitutional series of scenarios. ....selanjutnya {This report was written 10 days before the opening of the General Session of the MPR scheduled for March 1998. At the time, the currency has recently fallen to below Rp 10,000 to the US dollar and the accumulative impact of the currency collapse now was being reflected in the rate of inflation which in the month of January 1998 reached nearly 7%, the highest rate since the days of hyperinflation in the 1960s. Fears about the impending welfare catastrophe of the crisis were mounting. Student groups were now becoming more active with demonstrations across the archipelago taking place on a “rolling” basis – different city each day. The Government was clearly ruffled. Also if I recall correctly the expected “kick–in” effect to boost confidence in the wake of the radical IMF agreement of January failed to materialise as most considered it too ambitious and unrealistic to achieve and at the same time Pres. Soeharto was also clearly and publicly squirming to evade the necessary disciplines through seeking such alternatives as a currency board. The footnotes in this document were added on 31 December 2006, as I reviewed the original document – all with the comforting distance of almost 9 years of hind–sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto–criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-02-19 Why the New IMF package will also fail to restore confidence The new IMF package for Indonesia has just been announced. The reform measures cut away almost all remaining vestiges of monopoly, market distortion and blatant favouritism which had long been criticised within and beyond Indonesia for over 25 years. Included too were assorted marketing arrangements which had long fallen from the front pages of newspapers and from the rhetoric of permanently indignant Government critics. Included were tacit admissions of mistakes particularly from the IMF that trying to depress domestic demand through fiscal tightness was an inappropriate option in an economy already heading towards contraction. The agreement to permit a budget deficit should, therefore, have been welcomed. Announced greater monetary policy autonomy for the Central Bank should also have been read positively. To be frank this package went further than anyone could have expected. Yet the forex markets has fallen back below their pre-announcement highs. It could, and no doubt will, be argued that expectations had been raised too high from the depression of the week before. However this seems at complete odds with the fact that this package went further than anyone had expected. So dashed expectations can not adequately answer the lack of sustained enthusiasm post the announcement. This suggests other factors continue to way down peoples'; sentiment towards Indonesia. The scale and nature of Indonesia';s external debts represents one such factor. Indeed it is accepted as common knowledge that Indonesia';s excessive (unsustainable) foreign debt represents the Achilles Heel, which has led to the undoing of Indonesia';s quarter century of economic advance. There can be little doubt that once the fact of secure exchange regimes was breached, the rest of the external and then internal structure began to crumble. At the risk of being labeled a willing and deliberate heretic, I would suggest that the whole debt issue is merely one manifestation, albeit the most profoundly destabilising, of a more important flaw in the modern Indonesian political economy. This flaw is not the quality of outcome, which even under the IMF Plan mark 2 is impressive. Rather it is the quality of process. This refers to the quality of the mechanisms which come together to produce the outcomes, including the impressive outcomes. Regardless of what is now unfolding, it is an undeniable fact that the economy grew by 7% per year for over 25 years. It is also an undeniable fact that the standard of living of Indonesians have never been higher, nor life expectancies longer, nor education opportunities so extensive. Upon the basis of these outcomes, we may be tempted to ask; “so what';s wrong with the processes if they achieved such outcomes?” The answer to that question is revealed if we ponder the following series of questions: 1. What is Indonesia';s real level of external debt, public and private? 2. Upon what basis are these figures calculated? 3. Why is there such heated controversy over the simple arithmetic question of how much is there? 4. The second IMF package was impressive. To what extent will it be implemented? 5. To what extent can lending institutions, including foreign lenders, seek redress through the legal system to secure their assets held by bad debtors? 6. To what extent should lenders or indeed current asset holders expect impartial and predictable processing of legal claims and counterclaims through the legal system? 7. To what extent can the existing legal framework and infrastructure cope with a significant increase in corporate case loads? 8. More basically to what extent will the legislature be involved in either legislating any of these reforms or in supervising these changes? 9. Indeed were the people';s representatives consulted in developing this package? 10.If not to what extent should we expect public support for this package of reforms? 11.In this regard to what extent should the business community, local and foreign and investment community, local and foreign, expect a sustained level of support for the implementation of the package? 12.What kind of popular support does this package have? 13.What legitimate means are there for determining such support? 14.In the absence of support, what approaches will have to be followed to ensure the program is implemented, if indeed it can be? 15.What kind of impact could such approaches have on severely bruised confidence levels about this country, domestically and internationally? 16.What kind of approaches are being made to bring community leaders, both formal and informal, on side to support the reform and restructuring measures? 17.How can we tell if the program is being implemented? 18.In regard to the banks which were closed, what criteria were used to determine if Bank A would be closed and Bank B would stay open? 19.Who was involved in determining which banks would be closed and which ones would make it over the threshold? 20.What will the central bank do in future in regard to banks in contravention of prudential limits? 21.How can we be certain such policies would be applied without fear or favour? 22.What was done before the closures to bring banks into line? 23.Who is responsible for banks continuing to operate when in breach? 24.Are these regulators to be held to account, and if so how would we know? 25.Cancellation of major infrastructure projects was accomplished on the basis of what criteria? 26.How can project managers, employees, potential consumers and financiers to be sure that their projects are not also about to be stopped? 27.What compensation can project managers, employees, potential consumers and financiers expect from the Government/IMF as a result of the material losses arising from the stoppage of these projects? 28.Who was involved in the process of deciding which projects to stop and which were to go ahead? 29.Reopening the palm oil sector to foreign investment, what were the reasons for closing this sector 3 months ago? 30.Why now a sudden about face? 31.Who was involved in making the decision to close this sector to direct foreign investment, and reversing it? 32.Will anybody be held accountable/responsible for this destabilising policy flipflop? If not, why not? 33.If yes, how could you actually tell? 34.More fundamentally what mechanisms are in place to ensure another flip-flop in policy is not lurking around the door? 35.The introduction of the National Car Policy was in the national interest, so was its closure. What were the core factors leading to an about face on national interest? 36.Is the National Car project really dead or just hibernating until the spring returns economic growth? 37.Indeed can we believe that a return to growth won';t see a return to the distribution of special arrangements in favour of particular groups, all, of course, in the national interest or the interest of some underprivileged group in the community? 38.Who will be meeting the liquidation costs for the closing of the BPPC? 39.How will it actually be closed? 40.Will a free market emerge between cloves'; farmers, their cooperatives and businesses, and users of cloves, especially members of GAPPRI (cigarette manufacturers) emerge? 41.How can we tell if the cement cartel has disappeared? 42.What guarantees are there the APKINDO trade monopoly on plywood will not be reconfigured to produce a new form of market distortion in this important export? 43.How can we tell if the Reforestation Fund is being used for related purpose? 44.How can we tell if IPTN is no longer in receipt of state subsidy? 45.Where will the funds collected for the 2130 Project now go? 46.How can we be assured that the removal of Bulog from market intervention in say the wheat flour market won';t be replaced by a market distortion in favour of the dominant producer? How could such an emergence be stopped? 47.The Central Bank has now been given autonomy to set certain key interest rates, such as SBIs, presumably without regard to the Monetary Authorities. How can the application of this authority be verified? 48.What are the key determinants and factors which will be considered by Bank Indonesia in carrying out this new policy? 49.In regard to the financing measures to support SMEs and exporters, what criteria will be applied in determining eligibility? 50.What guarantees are there that these funds won';t be misallocated for other purposes or technically excluded groups? 51.What guarantees will there be that all agreed allocations for particular firms actually gets to the firms concerned and are not consumed through above realistic administrative charges? 52.Why is there an IMF official associated with such a high level national policy making committee? When was the last time an IMF official was elevated to such high office in a recipient country? 53.At whose desire was this appointment proposed? 54.Does not the perceived “need” for such an outsider suggest something about the state of the policy making, implementing and supervision processes is not right? 55.What kind of socio-political and ideological response should be expected from the populace, who have a demonstrated history of nationalist sensitivities? What are the investment implications, especially for foreign investment, of a possible nationalist backlash against the whole (allegedly foreign inspired) reform package? Most of these issues relate to issues of public policy process. Confidence can be most quickly established if there is some transparency in the way decisions are made. In this regard, the policy making process could be considered like a step production line. The decision making process The first step is formulation, which is a complicated process of a particular group reaching a conclusion about how to address an issue. It includes issues such as what pressures have led to a need to have to reach a decision. It also includes issues such as what factors for consideration will be prioritised, what interests are to be prioritised as well as the more mundane issues as who will be involved in the decision making process and what information inputs will be used to reach a decision about action. It should also include an understanding of the strength of support for the decision, and upon what bases dissent is based. The decision is made The second step is the announced results of these deliberations. The action plan comes out of the decision making process. The decision is implemented The third step is the implementation process. This process should also include effective supervision to ensure application conforms to procedure and stated policy. The implementation is evaluated The fourth step is review of results. Did they meet targets? What were the sideeffects? Unfortunately in the case of Indonesia the crucial first stage generally takes place outside the public eye. The whole process is simply too opaque to judge the level of support for positions announced. Structures appear to be too unregularised to permit a stable understanding of the decision making process. While there is usually some clarity in the actual announcements themselves, there often remain unanswered questions and ambiguities in stated positions. This undermines the standing of the decision. While ambiguous commitments are certainly not a trait specific to Indonesia, it is nonetheless a somewhat more common habit here, and most probably arises from the consensus approach to decision making. ....selanjutnya {This document was written just after the infamous “;crossed arms standing over Pres. Soeharto”; photo. At the time I was bed ridden with typhoid and recall being both bored with illness and then very frustrated by what I thought was a stupid and unenforceable agreement. If a key objective of these IMF agreements is to raise market confidence in the economic management of the country concerned, then surely this is an objective guaranteed to fail if the agreements are simply not able to be implemented. I recall laying in bed watching TV and listening to the assorted policies changes which the Government had signed up to make, and concluding instantly that this was impossible to achieve. These changes essentially would force the Government to commit political suicide, and that was not going to happen – certainly not through some agreement. The result of an unenforceable agreement, of course, will see the Government abrogate these commitments, which will in turn further undermine confidence, leading to further capital flight and to further weakening of the currency. The ultimate impact of this unenforceable agreement would simply be to amplify the Government's failings and accelerate its eventual demise, hardly a recipe for rebuilding confidence. In some ways I was surprised that much of the Jakarta commentariat took this agreement seriously and actually believed that there would now be light at the end of the crisis tunnel. To me it was just a technocrat's Christmas shopping list of economically rationalist desires that was completely de-linked from political reality. Even if we concede that each of the white elephants and sacred cows put up for slaughter in that agreement were a drain to the nation, this misses the point of the whole exercise, which was to raise the level of confidence in the system. Setting the country up for another failure would simply fail to achieve that objective. At another level, that is at the political level, the agreement did reveal that the limits of reform to which the Government of the day could commit, was simply insufficient to steer the country through the crisis. In essence the agreement declared the need for “;regime change”;. One often wonders whether these IMF rescue packages are not actually framed with such a logic in mind. I am not promoting some kind of conspiracy or Dependency or Centre-Periphery theory, as the same could be said for the impact of the Sterling Crisis and the UK's IMF program. Clearly the Thatcher revolution, which finally killed British syndicalism, represented clear evidence of regime change in this developed nation. I look forward to being corrected, but I can only think of the example of Chile under Pres. Pinochet whose regime survived for several years after calling in the IMF to assist Chile overcome its financial crunch in 1982. Perhaps it might be seen that any government calling in the IMF is basically admitting its own failure to manage its economic circumstances. The footnotes in this document were added on 1 January 2007, as I reviewed the original document – all with the comforting distance of almost 9 years of hind-sight! The comments are intended to provide both a little historic context that may now have been forgotten with time and also to provide some auto-criticism of where I believe my analysis was flawed or perhaps biased. From the original document I have also corrected typing mistakes and grammatical errors without changing the integrity and substance of what was initially written. The footnotes therefore do not represent part of the original document.}

1998-01-16 Indonesia Update speech: 1998 {Each year in September, the Australian National University in Canberra, Australia, hosts the “Indonesia Update”, a gathering of analysts, researchers, policy makers, officials, academics and students interested in contemporary Indonesian developments. It is a marvelous and multi–disciplinary series of exchanges. I had the privilege of being a presenter at the 1998 Indonesia Update – the first to take place following the resignation of former President Soeharto.} ”There was no real ”lender of last resort”, offering long–term loans for infrastructural development of the economy and stabilizing the temporary disjunctions in the international accounts. These structural inadequacies were concealed when vast sums of dollars flowed out of the US in short term loans to governments , all willing to offer high interest rates in order to use such funds – not always wisely – both for development and to close the gap in their balance of payments. With short term money thus being employed for long term projects, with considerable amounts of investment still going into agriculture and thus increasing the downward pressure on farm prices, with the costs of servicing these debts rising alarmingly and, since they could not be paid off by exports, being sustained only by further borrowings, the system was already breaking down in the summer The ending of that boom and the further reduction in American lending then instigated a chain reaction which appeared uncontrollable: the lack of credit reduced both investment and consumption; depressed demand ... hurt producers of foodstuffs and raw materials, who responded desperately by increasing supply and then witnessing the near collapse of prices – making it impossible for them in turn to purchase manufactured goods. Deflation, devaluing the currency, restrictive measures on commerce and capital, and defaults upon international debts were all the various expedients of the day ” The reference to the summer was not the summer of 1997. It was the summer of 1928 in the lead up the Great Depression. The Governments were not those of emerging South East Asia. They were the Governments of emerging East and Central Europe.1 ....selanjutnya Speech by Kevin Evans, Strategist with ANZIB (Australia New Zealand Investment Bank), Jakarta to the Indonesia Update. This Update is a gathering in September each year of Indonesian experts and is conducted at the Australian National University, Canberra). This speech was the economic presentation for the 1998 Indonesia Update.

1998-01-01 Back to Top

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