SURVEY: INDONESIA

The faltering firefighter
Jul 6th 2000
From The Economist print edition

A blind man surrounded by problems is getting less help than he should from blurrier-eyed colleagues. Brian Barry reports
 

	Gus Dur and the unseeing past

THE biggest physical explosion ever recorded took place in 1815, when a volcano in the part of the world that is now called Indonesia blew its top. The eruption of Mount Tambora, on the island of Sumbawa, killed 92,000 people and released 100 times more energy than a nuclear bomb. But perhaps because its name is less thunderous than that of Krakatau, at the other end of Java, which blew up later, most of the world’s people have never heard of the earlier bang.

A century and a half later, another explosion, this one political, produced even more carnage but was just as quickly forgotten by the rest of the world. In late 1965, after what the Indonesian army called an attempted communist coup, soldiers and armed vigilantes unleashed a wave of terror. About half a million people were killed, most of them in central and eastern Java. So began the “New Order” of Indonesia’s second president: a general named Suharto. America’s CIA described the bloodshed as “one of the worst mass murders of the 20th century”. Yet not long afterwards the world’s fourth-biggest country—like its long inactive volcano—had largely faded from the world’s attention.

That changed in May 1998. Mercifully, far fewer people have died in the two years since Mr Suharto fell from power than were killed in 1965-66, the “year of living dangerously”. But Mr Suharto’s immediate successor—his vice-president, B.J. Habibie—did two things that pushed Indonesia back into the spotlight. Only a month after taking office, he abolished the state’s control over newspapers and television. A year later, in June 1999, he carried out his promise to hold a seriously free election, the first Indonesia had had in 44 years. Thanks to a free press and a free election, the world has been able to watch this country begin a historic transition.Out of the ruinsIndonesia’s economy collapsed even more spectacularly during the East Asian crisis of 1997-98 than those of its battered neighbours. Real GDP fell by 20% in 18 months and at one point the country’s currency, the rupiah, had lost over 85% of its value against the dollar. But the economy’s ruination brought the possibility of political rebirth. Mr Suharto resigned in disgrace after 32 years in power. The military-backed regime that he had created began to crumble, in the face of widespread disgust and the street protests of the reformasi movement. The ruling Golkar party was no longer able to decide who was going to be allowed to win an election. After only 17 months at the helm, the change-beginning Mr Habibie followed his change-blocking predecessor into retirement.

The process which brought about the transition was as entertaining as it was surprising. No fewer than 48 parties took part in the parliamentary election, all but three of them brand-new, and sought to distinguish themselves from each other by pointing to the personalities of their leaders. These included the tiny and theatrical Mr Habibie; a fork-tongued Muslim activist called Amien Rais, who vowed to help both disgruntled Muslims and their persecutors; the silently stubborn Megawati Sukarnoputri, daughter of Indonesia’s first president (and now herself vice-president); and Abdurrahman Wahid, an almost blind Muslim cleric with a knack for one-liners. A four-month pause between the parliamentary election and the choice of a president added to the suspense: but in October the new assembly gave the top job to Mr Wahid.

There has also been plenty of violence. The armed forces have shot demonstrators in Jakarta, clashed with separatist rebels in Aceh, and backed pro-Indonesian militiamen as they slaughtered pro-independence voters in East Timor. Just as often, the security forces have stood feebly by as other people did the killing. Battles between Christians and Muslims have cost more than 2,500 lives in the Molucca Islands alone. Ethnic clashes in Borneo last year included some head-hunting by local Dayaks. And even when no religious, ethnic or political excuse is available, a lot of Indonesians still get killed by mobs furious over some minor piece of misbehaviour.

The outside world has watched these events with concern, but also with hope. Indonesia’s attempt to change itself will help to decide the prospects for democracy in two overlapping parts of the globe, Asia and the Islamic region.
 

Click to enlarge

With 210m people, Indonesia is the giant of South-East Asia. If it joins Thailand and the Philippines on the road to a democratic system, it will weaken support for autocrats elsewhere in the Association of South-East Asian Nations. Since more than four-fifths of its people follow some form of Islam, it is also the world’s biggest Muslim country. Add the religious diversity of the other fifth, and a history of weaving varying strains of Islam into its original culture, and Indonesia could be a shining example of democratic pluralism for all Muslims.The man with the giant’s jobIts chance of succeeding seemed to improve sharply with the election of Mr Wahid, the former head of the world’s biggest Muslim organisation, Indonesia’s Nahdlatul Ulama. Mr Wahid, who got much of his education abroad, has long been a champion of an open-minded version of the Muslim faith. He has argued that religion should remain separate from government. He has sought to bridge the gulf between different faiths. If his presidency succeeds, his authority could reach far beyond Indonesia.

The outside world is also interested in what happens to Indonesia because, since Mr Suharto fell, this country has become fertile ground for the work of non-governmental organisations (NGOs). Environmentalists, long vexed by the destruction of Indonesia’s primal forests and the damage done to its vast marine life, believe that the new government, desperate for foreign aid, will at last allow them to do something to stop the depredation. Many other NGOs hope they will be able to improve the health, education and welfare of a people whose average income is now only $600-700 a year.

These are lofty goals, and during the first two years of its transition Indonesia has understandably made only modest progress towards them. But it is cheering that the world’s fourth-biggest country is at last getting the attention it deserves.

When Mr Wahid became president last year, he brought with him a powerful combination of affection and hope. This 59-year-old Muslim cleric suffers from some major physical handicaps: he is almost blind, and has had a couple of strokes. Yet during the dangerous Suharto years few people had resisted the regime’s coercion more consistently and cleverly than the man his fellow Indonesians call Gus Dur (Gus is a term of respect, Dur is short for Abdurrahman). Here was somebody, it seemed, with the moral authority to tackle the pervasive combination of corruption, collusion and nepotism that Indonesians sum up as “KKN”.

So far, things have not gone particularly well. Because his National Awakening Party is only the fourth-biggest in parliament, Mr Wahid had to set up a “national unity” cabinet which includes several other major parties. These other parties, naturally, would like to get their own leaders into the top job at the next election in 2004, if not sooner. In the past few months Gus Dur has made matters worse for himself through several bone-headed misjudgments, not least in some of the appointments he has made. And he is not very good at handling criticism, especially from the newly free, pugnacious media.

So far the one clear success of his presidency has been to bring the army under some degree of political control. The previous regime’s commander of the armed forces, General Wiranto, has been pushed aside, and some reform-minded officers have been put into key positions. Yet even this may not be enough entirely to cure the military side of the KKN disease. And Mr Wahid has barely begun to address the country’s other problems.

The economy is now re-expanding, but not yet with any convincing bounce. The government is hoping for 3-4% growth in 2000, and has pledged a list of reforms to the IMF; but Mr Wahid’s economic team falls well short of real competence. The justice system is also in bad shape: the commercial courts, in particular, are badly in need of reform. Religious intolerance seems to be getting worse. The Christians and Muslims who have been killing each other in Ambon and the rest of the Moluccas have caught the world’s headlines, but the trouble may reach wider than that. Many members of Indonesia’s 80% Muslim majority believe that under Mr Suharto their voice was never properly heard, and are now eager to reassert themselves.

There is also the threat of the country’s sheer physical disintegration. After East Timor won its freedom last year, the desire for independence grew in provinces such as Aceh and Irian Jaya (recently renamed West Papua). But unlike East Timor—a former Portuguese colony—these other places are all part of the old Dutch East Indies, out of which Indonesia was born. The government is determined to defend this Dutch-bequeathed definition of its borders. It is willing to offer more autonomy, under laws passed last year, to Indonesia’s 27 provinces and 350-odd districts. A successful decentralisation could foster wealthier regions and a healthier democracy. But the current autonomy plan is far from sure of success.

It would not be easy for anyone to confront so ominous an agenda. But Mr Wahid is the leader of a minority party presiding over a loose coalition, whose colleagues can run their ministries as their own fiefs and yet blame him for the slow pace of reform. Mr Wahid may face a tough test at next month’s meeting of the People’s Consultative Assembly, the highest legislative body. At times, though, Gus Dur’s biggest enemy has been himself. He botched a cabinet reshuffle in April. His brother was appointed to an important post and had to resign after a public outcry. An alarming number of associates (most absurdly, his masseur) have been accused of taking money in his name. Worst of all, he sometimes rejects criticism from the few good people around him. Mr Wahid, alas, has yet to justify the hopes he raised last year.

This survey will deal with each of the main challenges he faces. But in doing so it will try not to lose sight of how far Indonesia has come in the past year and the fact that, if it manages to continue that progress, it could eventually emerge as one of the biggest winners from East Asia’s recent turmoil.

The survey will also try to avoid another pitfall: that of paying too much attention to the main island, Java, on which sits Indonesia’s capital, Jakarta. With more than 100m people, its cultural clout and its domination of the country’s internal trade, Java is undoubtedly Indonesia’s centre of power; the rest of the place, some say, is just “a Javanese empire”. Java pulls in raw materials, cash crops and huge oil and gas revenues from the rest of Indonesia and sends back government and financial services, manufactured goods and semi-organised violence. Indonesia’s problems will never be solved until the mess in Jakarta is sorted out. But, to understand those problems, start by leaving Java behind.

Consider Sulawesi
Jul 6th 2000
From The Economist print edition

A quick tour of one big island’s troubles and hopes

FOR a look outside Java, a good place to visit is the island of Sulawesi, in the heart of eastern Indonesia. Sulawesi is nearly as big as the United Kingdom, and yet it makes up only 10% of Indonesia’s land area and contains only 7% of its population. And its size is matched by its diversity.
 

It consists of four separate provinces with considerably different levels of education, economic development and therefore GDP per head. Its population, apart from the usual complement of Javanese settlers, includes three dozen or so major ethnic groups. The Minahasans of the north are famous for their singing, the Toraja people of the highlands for their funeral rites, the Bugis and Makassarese of the south for their knowledge of the sea. About 80% of Sulawesi’s people are Muslims, but it also has large numbers of animists, Christians, Buddhists, Confucians and Balinese Hindus, not to mention a centuries-old college of transvestite shamans. Sulawesi, in short, is not a bad place to begin trying to understand the astonishing tangle of problems the whole of Indonesia has to cope with.Needed: better farmingStart with its response to the economic collapse of the late 1990s. The southern city of Makassar (also known as Ujung Pandang) was hit as badly as Indonesia’s other big cities. When interest rates soared above 70%, middle-class households parked their money in local-currency bank deposits. Consumer confidence plummeted still further, badly hurting the city’s traders and service workers.

The rest of Sulawesi fared much better. North Sulawesi grows large amounts of exportable crops such as coconuts, cloves, nutmeg, cocoa and vanilla. These were affected only mildly by the collapse of domestic demand (and were also spared the crippling drought that destroyed much of Java’s rice crop in 1998). Even better, the farmers who grow them gained from the steep drop in Indonesia’s currency, the rupiah, which gave them higher local-currency prices for their exports. But that could not last for ever; the farmers have lost that advantage as the rupiah has climbed back out of the basement.

If they are to prosper in a more lasting way, Sulawesi’s farmers (most of the island’s population) will have to increase their productivity. That will not be easy. Although Indonesia did make substantial progress during the Suharto years, most notably achieving self-sufficiency in rice, it did so largely by bringing more land under cultivation and by using the superior strains of crops pioneered by the Green Revolution. It is hard to make much more progress along these lines. In Sulawesi, as in other parts of Indonesia, lack of co-operation among farmers leads to inefficient planting decisions and lots of waste. Not many of them can afford better equipment and fertilisers. But the biggest constraint, according to Dantje Sembel, head of the agriculture department at North Sulawesi’s Sam Ratulangi University, is people’s attitude towards the ownership of land.

Over the past 25 years, Mr Sembel has worked in the United States, Australia and Canada. What impressed him about these countries is the ease with which their most efficient farmers can buy land from less efficient ones. In Sulawesi, the ownership of farmland gives people dignity, whether it is used well or not, so they tend to sit on it. The method Mr Suharto used to change land ownership in many parts of Indonesia—seizing whole swathes of it, with little compensation—did not help. And even the present government, by its high tariffs on rice and sugar, blurs the signals by which a free market can help the efficient use of land.

Move away from the farms, and you find a small middle class which believes that a modernised North Sulawesi can achieve real prosperity. The province, after all, has a reasonably well-educated workforce, a decent port at Bitung, an airport in Manado, and a good chance to benefit from freer trade with Indonesia’s northern neighbours. The question is whether the new Indonesia’s politics will create an economy flexible enough to let North Sulawesi use these advantages.

Consider the choice facing Steve Tumewu, an engineer at a coconut-oil factory in Bitung. Steve was a student at Jakarta’s Trisakti University in May 1998, during the riots of Mr Suharto’s final days as president. He took no part in the demonstrations, dutifully finished his studies, and returned to North Sulawesi to work at the factory. But already he feels constrained by his home province’s isolation, by its shortage of industry, by its creaking transport system, and above all by its lack of modern communications. How wonderful, he says, if his superiors would bring the Internet and e-mail to the factory, so that he could swiftly communicate with the German firms that supply most of its equipment.

Steve still has hopes for his corner of Indonesia. Like most other people in Bitung, he talks enthusiastically about the new local-autonomy laws that were passed last year in Jakarta. With luck, these should help people like him to build up Bitung’s port so that it can compete with Makassar’s, thereby opening up the province to trade with north-eastern Asia, and encouraging investors to build more factories like the one where Steve works. One day, Steve says, he would love to run a modern local factory of his own. But he has lived long enough in Jakarta, and has met enough Germans, and has enough doubts about the prospect of a successful devolution of power from Jakarta, to wonder whether all this will really be possible. If he wants his career to be a success, he suspects, he will probably have to go back to Java.

Planning your career, however, is not the only reason that Indonesians move from one part of their country to another. James, an English teacher in nearby Manado, was also at Trisakti University in May 1998. But, unlike Steve, James—understandably, he does not give his other name—found the riots hard to ignore. That is because his father is half-Chinese. Like many other ethnic Chinese in Jakarta, James’s family had its home and shop burned down by mobs. His father died of a stroke he suffered during the attack, and James and his mother moved back to her home village outside Manado.Also needed: more toleranceIt is not only in distant Jakarta that such things happen. In and around the town of Poso, in Central Sulawesi, there have been several outbreaks of violence in the past couple of years. Sometimes it is Muslims attacking Christians, or vice versa; sometimes mixed groups from one village assault another village; in a recent series of clashes, the mobs coalesced into “Red” and “White” teams in order to fight each other. In South Sulawesi’s capital, Makassar, there have been frequent clashes both between Christians and Muslims and between ethnic-Chinese people and their enemies. And where, you ask, were the forces of law and order? Well, soldiers from Makassar’s army base recently attacked a police station after the two lots of uniformed men exchanged dirty looks outside a hotel.
 

	Another church goes up in flames

The optimists of North Sulawesi say that their province is relatively quiet because its people are better educated. Perhaps. But Makassar in the south also has pretty good education, and yet its leading lights are not always a calming influence. Listen to Taslim Arifin, who for the past 20 years has taught economics at Makassar’s Hasanuddin University. In the interest of science, Mr Arifin compared the profits of farmers with those of the traders, many of them ethnic-Chinese, who buy the farmers’ produce and sell things to them. He found, unsurprisingly, that the traders do better. He also found that Chinese and non-Chinese traders make similar profits. Even so, Mr Arifin is upset that so many Chinese are engaged in such a profitable business. “The Chinese need to realise that they are a minority and adjust themselves to the majority,” he says, “or society will teach them a lesson...That’s democratic.”

As well as the violence in its own streets, Sulawesi has to cope with the consequences of the recent bloodshed in the nearby Moluccas, once known to European traders as the Spice Islands. South-East Sulawesi alone has 100,000 refugees from the Moluccas. There have also been quite a lot of arrivals from East Timor, people who fled from that Indonesian-occupied ex-Portuguese colony last September after its vote for independence and the subsequent explosion of violence.And, of course, less corruptionSo is everybody in Sulawesi preoccupied with thoughts of mayhem? Not at all. This island is a splendid illustration of the fact that Indonesia is so vast, and so variegated, that people in many areas can live with nearby horrors and yet still contemplate the good things that the post-Suharto upheaval may bring about for themselves.

Their hopes have grown with the new regime’s promise of more autonomy for Indonesia’s assorted parts. The trouble is that “autonomy” means different things to different people. For many of Sulawesi’s farmers, it means the hope that they will no longer have to pay interest to middlemen on the government’s “interest-free” loans. To other people, it means a gleam in the eye about lots more money for development projects such as new warehouses in the ports at Makassar and Bitung, and for roads and irrigation projects everywhere on the island.

Some of these hopes are going to be disappointed. Most of Sulawesi’s districts, though their inhabitants may not realise it, have been getting more money from the central government than they generate for it in tax revenues. It is only the richer parts of Indonesia where the opposite is true. The people in Sulawesi who are likeliest to benefit from more autonomy are the local power-brokers, the politicians and their business associates. They are busy thinking up the new taxes they would like to levy, especially on outsiders, and quarrelling with the central government over its attempts to rein them in. A dispute between the mayor of Minahasa, a district of North Sulawesi, and an American mining company, Newmont, has already got investors waggling their eyebrows: see the penultimate article.

In large part, though, what happens to Sulawesi depends on what is happening in the rest of Indonesia. A look, then, at the state of the wider economy.
 
 

It’s the economy, Wahid
Jul 8th 2000

Indonesia’s economic management still looks horribly wobbly, but keep an eye on what the Bank Restructuring Agency is doing
 

	A country on the shelf

FOUR days after he won the job, President Wahid gave his first big speech, to a gathering of rich and powerful people in Bali. Although economics was not something he had talked about much during the election campaign—or before it, for that matter—he now said that putting Indonesia’s economy right was one of his most urgent tasks. He did not say this only because he needed aid and investment from the foreigners in the room. For Mr Wahid, the economy matters because of the political challenge it poses. It is not enough just to give people democracy, he warned his audience. They must begin to see the economic benefits of democracy. If that is so, Indonesia’s new democracy is in trouble.

In an interview with Dow Jones Newswires in May, the economics minister, Kwik Kian Gie, said: “If I were a foreign investor, I wouldn’t come to Indonesia. The law enforcement is not there, but not only that, the whole thing is so confusing.” Mr Kwik was not being particularly tactful, or clever; but the facts are as bleak as he made them sound. The problems the economy faces are huge. The team that is trying to solve them is dysfunctional. Mr Kwik is not the man to change this. And the internal politics of the ruling coalition are such a mess that Mr Wahid has found it hard to sack Mr Kwik.

Mr Kwik’s artless remark sent things tumbling. The rupiah fell at one point to 8,650 to the dollar, its worst figure since September. In the next few weeks, when a series of scandals dealt a new blow to investors’ confidence, the stockmarket staggered downwards. A public offering of the government’s shares in Bank Central Asia went awry. The IMF, which negotiated a fresh $5 billion loan package with the government in January, had already suspended its lending once since then. And the resumption of the IMF’s loans did little to reassure the foreign investors who are indispensable to Indonesia’s recovery. As a result of all this, Mr Wahid’s economic team found itself in its deepest hole yet.

The government regularly and publicly tells the IMF what it proposes to do to put the economy on the right track. In broad terms, it wants to hack away as much as possible of the corruption, nepotism and concentration of economic power that shamed the Suharto era, thereby opening the way for healthy, sustainable growth. And, by convincing everyone that this is going to happen, it hopes to get growth going as soon as possible. “The faster you can do it,” says John Dodsworth, the IMF’s country director, “the sooner you can get the market on your side.”

And the sooner that happens the better. By 1999, when Indonesia’s GDP steadied itself after the East Asian crash, it had already fallen in real terms 9% below its 1996 level: see chart 1. Before the latest bout of turbulence, things seemed to be perking up. Real GDP grew by 5.8% in the final quarter of last year compared with a year earlier, and was 3.2% higher in the first quarter of this one. But the rupiah’s sharp slide in May, along with continuing worries about the cabinet, stirred fresh doubts about the official 3-4% growth forecast for 2000.
 

This year’s budget should help a little. The government is badly strapped for money, and borrowing in the international bond markets remains a distant wish. Yet, despite these constraints, it expects to run a budget deficit of 4.8% of GDP during the final nine months of this year, financed by a combination of asset sales and foreign assistance. That would deliver a healthy fiscal stimulus of one or two percentage points. As in other East Asian countries, strong exports have also been helping to prop things up. The main danger for Indonesia’s recovery is therefore the shaky state of consumption and investment. A large growth in consumption helped the GDP revival that began late last year. But the recent financial turbulence could deliver a fresh blow to consumers’ confidence. Double-digit real interest rates will not help. And, clearly, investors are rattled.
 

	Clumsy Kwik

No Kwik fix

A large part of the problem is the maladroitness of Mr Kwik and some of the other ministers who deal with economic affairs. Although Mr Wahid’s cabinet contains several impressive people, few of these belong to the economic part of it.

In April, the president tried to be decisive by sacking two of the ministers in the economic team. One of them was Laksamana Sukardi, the minister for state enterprises, a former bank executive who was by no means the worst of the bunch. When Mr Sukardi was dismissed after arguments about directorships at several state companies, doubts were raised about the president’s judgment. Mr Wahid made things worse by accusing both him and the other ousted minister of corruption, even though in most people’s opinion Mr Sukardi had one of the cleanest pairs of hands in the cabinet. Result, uproar: and the president then found it even harder to get rid of either Mr Kwik or the equally uninspiring finance minister, Bambang Sudibyo.

Instead, the president has tried a couple of other devices. He has given Mr Kwik some new deputies, partly, it seems, so that they can tell the president what is going on in the economics ministry. He has also appointed a number of “special councils”, no fewer than four of them to look at economic and business matters. These counsellors have some clout, though in ways Mr Wahid may not have expected. In May some of them talked him out of announcing a set of capital controls after he had presented the move to the cabinet as a fait accompli. But the invention of the councils, like the divisions inside the cabinet, increasingly blurs the line between who is giving advice and who is giving orders.

For the moment, the best hope of bringing a little clarity to the economic scene rests with an almost brand-new organisation, the Indonesian Bank Restructuring Agency. Set up in 1998, IBRA is charged with three major tasks that account for a large part of the reforms the government has promised to the IMF. It must finish overhauling Indonesia’s four state banks, along with the private ones it has taken over. It must clean up the corporate loans that it took off the banks’ balance sheets, so that good credit can start flowing back into the economy. And it must sell off its stockpile of industrial assets, both to raise cash and to put the assets to better use.

The first two tasks are standard practice in banking crises. The agency has almost finished recapitalising the state banks, and has promised several sales of private ones. But by the end of May, after more than two years in operation, it had managed to collect on less than 2% of its 238 trillion rupiah ($27.4 billion) loan book, far less than its counterparts in other crisis-hit countries. One reason for this failure is Indonesia’s flawed justice system; see the article. The government, trying to strengthen IBRA’s hand, hopes that a new committee, which includes the attorney-general and the national police chief, will help it get tough on the worst offenders.

The agency’s third function is unique. Unlike other countries with banking crises, Indonesia has not just taken over bad banks and their loans. It has also seized the private assets of the owners of several banks. Some of these—such as the Salim Group, which controlled Bank Central Asia—were friends of ex-President Suharto, and misused their banks to finance their wild industrial schemes. When the post-Suharto government bailed the banks out, it required their owners, in return, to pledge personal assets from their corporate empires—“the biggest nationalisation of assets since the communist takeover of China”, says James Castle, a Jakarta consultant.

Selling those assets is now the government’s top priority. The appointment in January as IBRA’s boss of Cacuk Sudarijanto, a former telecoms executive, has got things moving. He has sold IBRA’s 40% stake in Astra, Indonesia’s biggest car company, for $500m, helping the agency to hit its target of 17.1 trillion rupiah by the end of March (partly achieved through 4.2 trillion rupiah in bond redemptions). In the current nine-month budget period, IBRA has been asked to raise another 18.9 trillion rupiah. The rest of the assets it holds could bring in an extra 100 trillion rupiah in the following two years, even if it captures only a third of their face value.

Unfortunately, Indonesia’s politicians are enticed by all those holding companies, and there is a danger that this will undermine IBRA’s determination to sell assets, and to do it cleanly. Mr Cacuk has tried to strengthen the agency’s independence and transparency (monthly reports are available on its website). But various political factions have been fighting for control of its assets. And it suffered a large embarrassment when the president’s brother, Hasyim Wahid, was named as an adviser (he later resigned). It is claimed that the president did not know about the appointment until journalists asked him, and that IBRA’s offer of the job to Hasyim had nothing to do with who his brother is. Still, it was a black eye for the agency.

It is too early to write IBRA off. The agency may after all be able to press ahead with its asset sales. Since that is one of the biggest tests of whether Indonesia’s economy is at last being cleaned up, these sales would help to persuade foreign investors to risk putting their money into the country.

These investors know that wars against corruption are never swift or simple. They are also aware that many of Indonesia’s economic problems are cyclical, even if the cycle has been more vicious than in neighbouring countries. And they still hope that Gus Dur will justify the expectations he aroused last year. Who knows, by next month’s meeting of the Consultative Assembly, or not long after it, the president may even get around to reorganising his cabinet and replacing Mr Kwik and company with some more efficient operators.
 
 
 

A matter of law...
Jul 6th 2000
From The Economist print edition

Not much justice round here

ALTHOUGH many of Indonesia’s industrial assets are now in the government’s hands, another vital part of the country’s life is still run strictly for profit. This part is, unfortunately, the law courts. In 1997, a clerk at the Supreme Court was captured on tape telling a businessman how it works. “If you give us 50m rupiah but your opponent gives us more, then the case will be won by your opponent.”

Can the new government get the law back into the courts? As in every country whose legal system has for too long been manipulated by a dictatorship, it is going to take time. Indonesia, one of the most corrupt places in the world (see chart 2), will be lucky if a respectable justice system emerges within a couple of generations. The essential thing is to make a clear-cut start. If honest people are to trust the system, and dishonest ones to fear it, the government must demonstrate that it will not tolerate the most outrageous kinds of behaviour, and then steadily extend its definition of outrageousness until the idea of equal justice under the law has really taken root in everybody’s mind.
 

So far, things have not gone very well. One example is the government’s failure to deal with the question about Bank Bali. Last summer it became apparent that money had been siphoned out of the bank to people close to Mr Habibie’s election campaign. An audit by an international accounting firm found out what had happened, and a list of suspects was drawn up. But the government has failed to get the courts to hold these suspects accountable. Then there was the attempt by Mr Sukardi, before he was dismissed from his job as minister for state enterprises, to do something about Texmaco, IBRA’s biggest debtor, with 16.6 trillion rupiah ($1.9 billion) in unpaid loans. The president, the attorney-general and Mr Sukardi’s own party all told him to drop it. Eight months into power, the new government still cannot say what it regards as intolerable.

Except, perhaps, ex-President Suharto; and even there only up to a point. Mr Wahid has promised to prosecute the 79-year-old former dictator for corruption (though he has also said he may then pardon him). The attorney-general, Marzuki Darusman, argues that his office is making progress in this direction. Mr Marzuki, a politician as well as a former head of the human-rights commission, keeps insisting that Mr Suharto should submit himself to questioning, though the ex-president’s doctors routinely say his health is not up to it. In May, Mr Marzuki put Mr Suharto under house arrest. He has also pursued some of Mr Suharto’s friends and relatives, though on a rather narrow range of issues. One close Suharto associate, Bob Hasan, has been questioned at length over a scheme to make aerial maps of forests with government money.

Many people are starting to wonder whether Mr Marzuki is the right man for the job. He was slow to admit the scale of the problem. He is quick to make excuses for himself. And there is little doubt that many of his prosecutors (along with many of the policemen who also conduct corruption investigations) are themselves corrupt. It might be better, some say, to have a tough, conviction-hungry non-politician in the attorney-general’s chair.From the roots upThis is only part of the challenge. There pretty clearly needs to be a reform of the whole judicial structure. It could sensibly begin in the courts that deal with commercial cases.

In 1998, the Habibie government set up a special court to hear bankruptcy cases. It staffed the new court by transferring judges from the civil courts and training them in the relevant law. Alas, this seemed to make little difference. Creditors could not win even the most straightforward bankruptcy cases. Some indignant people in Indonesia now half-seriously suggest—since the country’s laws are loosely based on the Dutch legal code—that the only way to get honest judges would be to borrow some from the Netherlands.

The government has not gone as far as this, but it has attempted something else pretty novel. It proposed to appoint four ad hoc judges from outside the existing judiciary. This too failed. The proposed judges wanted the right to do something not permitted in Indonesia: issue dissenting opinions. The existing judges, however, refused to give their consent to this.

But the need for radical change goes well beyond the field of commercial law. There is the question of whether President Wahid, for all his apparent success in taming some of his more insubordinate generals, can really bring the country’s armed forces under the rule of law. Perhaps 200,000 people have died in East Timor since Indonesia invaded it in 1975. The army has killed tens of thousands more in the rebellious province of Aceh. Most of these deaths, it is wearily said, happened too long ago for anybody to be prosecuted (and certainly nobody is at present planning to put Mr Suharto on trial for them).

But the outside world, with its renewed interest in Indonesia, will be watching to see how the country deals with last year’s violence in East Timor, when Indonesian soldiers supported pro-Jakarta militiamen in their murderous attacks on local people who had voted for independence. An Indonesian commission has named 33 people involved in the violence, and has said the government should consider prosecuting them. There has already been a trial over a recent mass killing in Aceh. Yet the government seems to have no clear course of action in mind. President Wahid has shown an interest in South Africa’s policy of “truth and reconciliation”, with its emphasis on forgiving, and has hinted that even if a few generals do get brought to justice for their actions in East Timor, Aceh and elsewhere he will then give them pardons.

In the end, the birth of a proper legal system, like the revival of the economy, depends chiefly on the amount of resolution Gus Dur brings to his presidency. He has his wobbles. In the case of Chandra Asri, a chemicals firm that fell into the Bank Restructuring Agency’s hands over bad debts, Mr Wahid bypassed the agency and cut a deal with a big Japanese corporation that was also a creditor.

He has to make up his mind. Indonesia, like so many other countries, has too long been a place where “the law” was no more than a convenient instrument for the use of a handful of people at the top. If he wants to guide Indonesia into the modern world, where the law is the foundation of both democracy and economic prosperity, Gus Dur needs to turn his back decisively on that near-feudal past.
 
 

...and, of course, order
Jul 6th 2000
From The Economist print edition

Indonesia is bringing its army under discipline. Now it needs a serious police force
 

	Wiranto went

THERE is a half-satisfactory explanation of how Indonesia’s armed forces came to be the way they are. If you are a poor, new-born country consisting of 17,000 islands spread over 1.9m square kilometres, with a huge population of assorted ethnic origin and religious belief, how are you going to guard yourself against your potential enemies? Indonesia’s answer, when it had broken free from the Dutch empire after 1945, was the concept its leaders called “total people’s defence”.

Since Indonesia’s navy could not possibly be expected to protect all those wriggling coastlines, the armed forces were divided into a number of separate territorial commands or Kodams (there are currently 11 of them), each responsible for a different chunk of the archipelago. Each command was told to build its own supply chain, which fitted in nicely with the soldiers’ taste—common among Asian armies at the time—for enhancing a slim official budget by running businesses of their own. So arose a system of regional “profit centres”. One officer who excelled at running his profit centre was a young colonel in Java called Suharto; he set up partnerships with two ethnic-Chinese businessmen, Bob Hasan and Liem Sioe Liong, founder of the Salim Group.

The command structure made a certain amount of sense. Unfortunately, Indonesia’s officers added to it the idea of dwifungsi (“dual function”), which inserted the armed forces into the government. A large block of seats in parliament was reserved for military people, and active or retired generals were given powerful places in the cabinet. Even more perniciously, dwifungsi was applied to the territorial-command hierarchy. This allowed the army to place members of its “socio-political wing” alongside government officials right down to village level. The idea was to keep in touch with local communities, explain to folks how great it was to be Indonesian—and deprive potential rebels of a base.

“Total people’s defence” was not a bad way for a country of Indonesia’s special nature to try to face up to its enemies. It had, however, one obvious flaw. It ignored the high risk that the enemy would turn out to be the army itself. And this is what duly happened. By the time Mr Suharto fell from power, his armed forces were to a dismaying degree corrupt, calculating and divorced from the people. They turned rape, torture, death and disappearance into standard tools of administration. They terrorised the provinces of Aceh, East Timor and West Papua. They shot demonstrators in Jakarta during the anti-Suharto upheaval of 1998. They remained the most potent threat to Indonesian democracy almost up to the moment of Mr Wahid’s election.Kickin’ brassThe generals stayed neutral in last year’s parliamentary election. But the armed forces’ 38 reserved seats gave them plenty of leverage in the fragmented new parliament, and hence in the choice of a new president. General Wiranto, Suharto’s former adjutant and his last armed forces’ commander, plainly had his eye on the vice-presidency. Even after the army brought international criticism down on itself by trying to block East Timor’s independence, he could assemble the various parties’ leaders almost at will. In the end, though, the generals chose not to risk causing a revolution. They decided to back Mr Wahid and Miss Megawati for the presidency and vice-presidency, and General Wiranto settled for a humbler job as minister for security and politics.

The new President Wahid promptly exploited his victory. He made a civilian, Juwono Sudarsono, the minister of defence. He gave some new powers to the long-neglected navy and air force, thereby demoting the army. After a couple of months he removed General Wiranto from his ministry, citing a report on human-rights violations in East Timor, and confounded experts in military coups by boldly doing this when he himself was out of the country. Having got General Wiranto out of the way, Mr Wahid then promoted some reformist soldiers.

The other generals are falling into line. The forthcoming meeting of the Consultative Assembly will probably strip them of their remaining seats in parliament after the next election. They are also talking more seriously about a reform of the territorial-command system. The dangers of this have been seen: several well-known generals have now brought themselves to criticise it publicly.

Mr Wahid is not yet fully in control of the armed forces. There will be resistance if he puts any high-ranking officers on trial for the brutalities they have authorised. The government has promised the IMF that the generals’ off-budget business activities will be properly audited, but has so far done little about it. And the new defence minister, Mr Juwono, points out that the generals are only part of the problem. Middle-ranking officers must also be persuaded to abandon their hopes of stockpiling wealth. He is even more worried about the rank-and-file, describing them as “underfed, underpaid, under-trained and under-loved”. If the army is to clean up the off-budget activities the soldiers live on, and stop using postings to local government as a sort of pension scheme, it will need more money from the budget—and the competition for that is fierce.The missing policeman’s lotThe country’s even bigger security problem, though, is the absence of anything that resembles a genuine police force. The existing force, such as it is, has been put directly under the control of Mr Juwono, the defence minister, which may help to get things moving in the right direction. A new national police chief has been appointed, to widespread nods of approval. But most policemen have no proper training and no idea how they should respond to what is happening around them. The result, in many parts of the country, is something close to anarchy.

When a student was arrested in Medan recently for gambling, his friends went to the police barracks and kidnapped several of the policemen inside it. Elsewhere the police have stopped playing any role whatsoever in the business of law and order. The current procedure goes something like this. A theft is committed; a mob forms; a suspect is nominated; the supposed culprit runs for his life. There have been dozens of such episodes in Jakarta alone so far this year. Some of those caught have been stabbed or beaten to death; others burned alive.

The absence of anything like a proper police force has had its grisliest consequences in the Moluccas, where fights between Christians and Muslims have killed more than 2,500 people in 18 months. The hatred that causes this bloodshed is not just a matter of religion. Some of it is the result of land disputes, some of rivalry between sultanates; some is chiefly ethnic in origin, some pure gang-warfare. Muslims in other parts of Indonesia who believe that a Christian conspiracy is at work, and outsiders who claim to see an anti-Christian jihad, are both grossly oversimplifying. What they should join in lamenting is the virtual disappearance of anything that can be called impartial law-enforcement. In its absence, local people have had to arm themselves. Among the crude home-made weapons found in one recent episode, according to the Jakarta Post, were bombs, a bazooka, some pistols and rifles, machetes and, just as fatal, 18 arrows.

The central government in Jakarta can be equally limp-wristed. In April, angered by reports of Christians killing Muslims in the Moluccas, a Muslim group called the Jihad Force assembled outside the presidential palace with machetes and swords. A couple of thousand of them spent a few days training themselves to use their weapons. They then sailed from Java, reaching the Moluccas in late May. After several attacks, in which they have killed about 200 people, they have still not been stopped.

Indonesia needs a police force worthy of the name. But even that will not work everywhere. Consider what is happening in Aceh and West Papua, at the far western and far eastern ends of Indonesia.
 
 

That rending noise
Jul 6th 2000
From The Economist print edition

Separatists are tugging at both ends of a manifestly fragile country
 

	Eluay wants out

WHEN voters in the rest of Indonesia were choosing among 48 parties in last year’s election, Ibrahim, who lives in Aceh, was offered only two options. Rebels of the Free Aceh Movement instructed him and his neighbours to boycott the election. Indonesian soldiers and policemen insisted that they turn out and vote. Afraid to defy either side, Ibrahim plumped for his equivalent of the Third Way, and went off to stay with his relatives in a neighbouring province.

A lot of Acehnese feel equally trapped. The fight for an independent Aceh has been in progress, on and off, for half a century. On May 12th a three-month ceasefire negotiated between Mr Wahid’s government and the rebels came into effect, after an outburst of violence that had killed 345 people since the beginning of the year. But it will be very hard to turn the ceasefire, even if it lasts its due three months, into an agreed peace.

The desire for an independent Aceh grows out of a widespread feeling that this region is different from much of the rest of Indonesia, and especially from “imperial” Java. For centuries the sultanate of Aceh, which sits at the entrance to the Malacca Strait, benefited both economically and culturally from its contact with the Muslim traders whose ships sailed past its shores. “Mecca’s verandah”, as it was called, became a major trading centre in the 17th century and one of the most devoutly Islamic states in the region. It fought off several great powers until, at last, it fell under Dutch rule in 1903 after a fierce 30-year war. Then, starting in the early 1950s, the Acehnese fought a ten-year rebellion against the new Indonesia of which they found themselves a part, and rose intermittently against President Suharto’s soldiers in the years after that.

A century after they lost their independence, most Acehnese still have several things in common. They remain devoutly Muslim, even if their opinions vary on things like sharia law. They are straight talkers, easily infuriated by the Javanese, who never seem to say what they mean. And whether they want autonomy or full independence, and whatever they feel about the use of violence, they loathe the Indonesian army.

Since that army is determined to stay in Aceh, President Wahid is not going to find it easy to bring peace to the region. Some Acehnese, to be sure, are tired of the violence. But many others are as staunch as ever in their demand for independence: a rally in November assembled tens of thousands of people in a province with a population of only 4.3m.

Mr Wahid’s policy is basically to promise the Acehnese everything he can short of full independence. It is not much use talking vaguely about autonomy, since Aceh is already one of Indonesia’s two “special autonomous regions” (the other is Yogyakarta, in central Java). Mr Wahid has to be specific. So he is offering to let Aceh keep a much bigger share of the money it earns from its huge supplies of oil and gas; a law passed last year has already taken a step in that direction. He also says that the central government will help to reinvigorate the island port of Sabang, which was choked off by the Suharto regime in an attempt to bring Aceh to its knees.

More money, though, will not be enough to win the Acehnese over. They also want clear evidence that Mr Wahid is willing and able to bring the army under control. There are some signs of progress.

The new government’s human-rights minister, Hasballah Saad, comes from Aceh. He promises to hold the army accountable for past acts of violence. The first small step came in May, when a military-civilian court sentenced two dozen soldiers to prison terms of up to ten years for killing an Islamic teacher and 56 students in a raid on a boarding school in West Aceh. They said they were only following orders. As they were driven away after their conviction, they sang patriotic songs. The officers who gave them their orders have not yet been tried.

The president’s attempt to end the war in return for something less than full independence is not necessarily doomed to failure. Many Islamic teachers in the rural parts of Aceh, and their students, are inclined to trust this scholarly Muslim. A lot of Aceh’s women are tired of the fighting. But plenty of other Acehnese are unwilling to compromise. They say there is no basic difference between the new Indonesia and the old one, and that Aceh is different from both. They want a referendum on independence like East Timor’s, nothing less.

Even if a majority of Acehnese can be persuaded to make peace now in return for a generous ration of autonomy, many Indonesians worry that in the end this will only increase their desire to go their own entirely separate way. But the government has little choice. Its best hope is to stop the killing for a decade or so, give the Acehnese a chance to earn a decent living—and then see if they are willing to remain at least loosely a part of Indonesia.The danger of changing namesIt will be just as hard to appease the people of West Papua, at the other end of the archipelago. Until last year, West Papua—annexed by Indonesia in 1969—had been known as Irian Jaya. The word Irian is widely, if wrongly, believed by Indonesians to be an acronym for the phrase meaning “Join the Republic of Indonesia Against the Netherlands”. So, when Mr Wahid approved the change of name, many people thought he was willing to recognise West Papua’s independence.

There are several differences between West Papua and Aceh. The West Papuans have a much higher proportion of Christians, which arguably gives them an extra reason for wanting to leave predominantly Muslim Indonesia. They are also Melanesians, and the overt racism they suffer at the hands of other Indonesians may also have its effect. But many of the province’s 2m people live in scattered hill communities, far apart and separated by forbidding mountains. Given this fragmentation, it is hard to measure the support for independence.

It certainly has plenty of supporters in Jayapura, the capital, and in a handful of other towns. Much of its strength comes from the tough-minded vigour of Theys Eluay, the unelected leader of West Papua’s independence movement. A week before a long-awaited congress to rally support for independence, Mr Eluay was sitting in a hotel room in Jayapura, going over the passenger list of that day’s Garuda flight to Jakarta. Mr Eluay had heard that some of his people, bribed by the army, were heading for Jakarta to lobby against the congress. Although Garuda is Indonesia’s state airline, few people in Jayapura can resist Mr Eluay. He was able not only to lay his hands on the passenger list, but also to send a bunch of his security men to prevent more than a dozen people from boarding the flight. The same thing happened the next day.

President Wahid, who had planned to address the congress, changed his mind at the last moment. He also said that a specific declaration of independence would not be tolerated. However, he made a small donation to the congress, on the ground that people should be free to discuss politics. His ambiguity left an opening. The congress ended on June 4th by endorsing a vague commendation of independence, but said that its main goal was to “clarify the history” of West Papua.

The most beloved date in that history is December 1st 1961. On that day, though they were still under Dutch rule, the West Papuans raised a new flag and declared their independence. Among those watching, runs the dreamy local story, was a young man from Ghana called Kofi Annan. Unfortunately for the Papuan patriots, the world paid no attention. In 1963 the Dutch agreed to hand over control of their colony to Indonesia. The handover officially took place in 1969, after a promised referendum was fixed by the Indonesians in their own favour. Three decades later, West Papua is still part of Indonesia—and Kofi Annan is secretary-general of the United Nations. A lot of West Papuans would love him to drop in, for real this time, to watch their flag go up.
 

Devolve, but do it right
Jul 6th 2000
From The Economist print edition

The middle way between forced unity and total disintegration is filled with potholes

ACEH and West Papua, which are growling for independence, and East Timor, which has already broken away, have felt the Indonesian army’s boot more than most other parts of the country. But the two remaining growlers are different in another way, too. They are among a small group of Indonesian provinces which put far more money into the central government’s pocket than they get back from it. Many other provinces break roughly even. Some, such as East and West Nusa Tenggara, would be even poorer than they are without the help they get from the centre. These economic differences have to be added to all the other sorts of diversity that criss-cross the map of Indonesia.

There is an urgent political lesson to be drawn from this. A country like Indonesia, which consists of thousands of islands spread over an area almost the size of the United States, and whose people are a religious, ethnic and economic jumble, cannot possibly be governed as a single entity. If it does not devolve, it will not work. It is no good for Indonesian politicians to argue that the place ought to be considered a single entity because it was born out of the old Dutch East Indies. A country assembled by imperial force will have to go on being held together by dictatorial force unless its different regions are given something to persuade them that it is worth staying together. Like many other parts of the post-cold-war world, Indonesia must look to the concept of autonomy—of devolving power to its constituent areas—if the cracking noise is not to grow even louder.

Even under the Suharto dictatorship, a certain degree of flexibility was accepted as necessary. But, dictatorships being dictatorships, the flexibility became an instrument of corruption. Development money, for instance, was distributed through a process which theoretically gave local areas more responsibility but then in practice denied it to them. Each area submitted its proposed list of projects, but the amount of money each received depended on how many of its projects won approval in Jakarta. Mr Suharto’s friends duly made sure the Jakarta decisions served their interests, and local officials duly shaped their proposals to fit in with the system.

The post-Suharto government, hearing the regions’ clamour for more of everything, is trying to sort matters out. Before last year’s election the outgoing parliament passed a couple of decentralisation laws, one giving local governments more financial autonomy, the other giving them authority to provide services which had previously been outside their sway. Originally, the two laws were due to take effect in 2001, but President Wahid has speeded things up; the handover should now take place by the end of this year.

The trouble is that the bodies to which the laws devolve these powers are not Indonesia’s 27 provinces but its 350 or so kabupaten, or districts. The outgoing Suharto parliament presumably feared that giving the power to potentially serious political units like the provinces might start Indonesia down the road to becoming a federal state, thereby diminishing the power of Jakarta. Giving it to those pipsqueaks would be much safer.

In fact, it creates two large dangers. One is that the little districts will not have enough competent people to use their new powers efficiently. The non-governmental organisations (NGOs) that have come from abroad to help Indonesia say they will try to provide the necessary training, but the task is huge and time is short. Or some of the civil servants working in the district might be transferred from central to local control; the local planning agencies, or bappedas, usually have a couple of people who know what’s what. But it is the district governments that will have to decide this, and local patronage and local resentments could get in the way.

The second danger is that the districts’ mayors and assemblies will try to extract a lot of new taxes from people whose votes they don’t need: meaning people from outside their districts, who just happen to be passing through. Gary Goodpaster, the head of the Partnership for Economic Growth, which supervises several American aid operations, gives the example of a five-hour drive across the South Sulawesi peninsula in the course of which lorry-drivers were required to stop no fewer than 20 times to pay taxes to various authorities. The Jakarta parliament has passed a measure trying to prevent such distortions, but the rules remain unclear and many local governments plan to test their limits.

The Wahid government, recognising these dangers, has attempted to limit the damage. The new laws cannot take effect without “implementing orders”. Mr Wahid’s minister for regional autonomy, Ryaas Rasyid, says the president has asked him to use these orders as a way of handing some powers over from the districts to the provinces of which they are part. The notion is sensible. But there are limits to what Mr Ryaas can do in this way. The risk remains of leaving too much power in tiny hands.The Minahasa squeezeAs an example of what could happen, look at the trouble a subsidiary of an American mining company, Newmont, has had with the Minahasa district in North Sulawesi. Taking advantage of a clause in Newmont’s contract which said that it must pay tax on anything of value, Minahasa tried to tax the company for the “overburden”—soil, stones and other debris—it removed in the course of digging for ore. In fact, most of the overburden was waste. The rest was used by Newmont for building roads as part of a voluntary community-development scheme. At first Newmont refused, and matters got worse when a local court then ordered the mine to be shut down. Newmont eventually settled the dispute by agreeing to pay about $500,000 in taxes for the overburden it had used for the roads.

Richard Ness, the head of Newmont’s operations in Indonesia, says that, although the dispute took up a lot of his time and energy, it did have some encouraging aspects. The central government followed things closely, and offered to lend a hand. (Mr Ness asked it to keep out because he wanted to remain on good terms with the local government, and because he wished to carry out the full legal process so as to limit the danger of future attempts to twist Newmont’s contract.) And, when the local court issued its order to close the mine, the Supreme Court immediately squashed it.

But the Minahasa business suggests that, in many places, there are not enough local means of keeping troublemaking politicians under control. In Jakarta, the politicians have to face a newly pugnacious press and television and some tough NGOs. Out in the sticks, there are fewer constraints.

One local NGO that has followed the Newmont case is Wanuata Waya (“The earth belongs to us”), run by Andry Umboh and Meidy Sumerah, an environmental scientist and a mechanical engineer in their early 30s who teach local people things such as better fishing techniques. Having followed the Newmont dispute closely, the two men reckon the company can have a clear conscience.

They have examined the studies of its handling of the environment, and are satisfied that it is currently obeying international norms. They also agree with studies which show that small-scale local miners do far more damage to the environment (just as, in some parts of Indonesia, coral reefs are blasted with dynamite by local fishermen, or carved up for building materials).

Still, Mr Umboh and Mr Sumerah are depressed about the bigger NGOs in the area, which in their opinion “don’t care about the benefits Newmont brings to the local community”. They are glad that the local government failed in its bid to get its hands on Newmont’s community-development fund. They are not convinced that Newmont always knows what it is doing with the money; but they trust it far more than they trust the local authorities. The two young men are right to be wary. If devolution is going to work properly in Indonesia, it will have to be done in a less slapdash way than this.
 
 
 

Gus Dur’s second chance
Jul 6th 2000
From The Economist print edition

A good thing if he gets one

INDONESIA is the world’s biggest Muslim country: of its 210m people, about 170m believe with varying degrees of conviction the ideas that came into Muhammad’s mind in the Arabian desert 1,400-odd years ago. That is why a more confident Indonesia can be a powerful shaping force in the international politics of Islam. It is also why, if they could work together, Indonesia’s Muslims might be a prime shaper of their own country’s future.

Because Islam drifted into South-East Asia over the centuries in many different ways, it is a much more variegated religion here than it is in the western part of the Muslim world. That has produced, among other things, an encouraging amount of tolerance. Indonesia’s constitution protects the religious beliefs of non-Muslims. The two biggest political parties—Golkar, the ruling party of Suharto’s time, and Miss Megawati’s Democratic Party of Struggle—both proclaim their support for that principle. Before he was president, Mr Wahid spent nearly two decades as leader of the 30m-strong Nahdlatul Ulama, the world’s biggest Muslim organisation, arguing for the separation of mosque and state and for dialogue between different faiths. Alwi Shihab, his foreign minister, says the message the new Indonesia brings to the world is: This is Islam.

It is certainly the sort of Islam that most non-Muslims would warmly welcome. But, among themselves, Indonesia’s Muslims have yet to prove that they can continue even the modest degree of co-operation they have achieved in the past year.

In broad terms, Indonesia’s Muslims fall into two main groups. There are the traditionalists, most of whom live in rural areas and on the whole obediently follow the Islamic scholars in their communities. And there are the modernists, more urban and usually better educated; they include many engineers, doctors and lawyers. Most of the traditionalists belong to the Nahdlatul Ulama, which was founded by Mr Wahid’s grandfather and later run by his father (every big city in Indonesia has a street named after each man). The modernists are rather more divided, in both organisation and ideas; but many of them belong to Indonesia’s other giant religious body, the 23m-strong Muhammadiyah. Both organisations run huge networks of mosques, schools, hospitals and orphanages.

When the country eventually got a free parliamentary election in June last year, and new political parties began popping up all over the place, these two giant religious organisations became the bases of two new parties, the National Awakening Party, led by Mr Wahid, and the National Mandate Party, led by Amien Rais, a former head of the Muhammadiyah. The two did well enough to end up among the five most successful groups in the June election (see chart 3). But it was by no means a triumph. The top three places went to the three parties which had existed in the Suharto era and so already had strong local organisations. Mr Wahid’s party came fourth and Mr Rais’s fifth, with less than 8% of the vote.
 

Mr Rais, a man to be reckoned with, caught the point. He is ambitious, devious and a subtle negotiator; his oratory can sometimes slam like a hurricane into the political landscape; in many ways, he behaves like an Islamic version of a western politician. After the parliamentary election he decided to take his party into an alliance with some other Muslim parties in a group known as the Poros Tengah, the “Central Axis”, and then join hands with Mr Wahid. The Central Axis chose to support Mr Wahid’s bid for the presidency.

One of Mr Rais’s aims was to prevent Megawati Sukarnoputri, the leader of Democratic Struggle, from becoming president. Miss Megawati’s party had come top in the parliamentary election partly because her father—Indonesia’s first president, Sukarno, who was overthrown by Mr Suharto—is still remembered with respect by many Indonesians, especially in Java, but also because Miss Megawati herself was one of the few politicians who dared to stand up to Mr Suharto. The fact that Mr Suharto eventually bullied her out of her leading role in the officially tolerated “opposition” only increased her popularity and cemented her reputation as a democrat. For the more conservative sort of Muslim, though, a woman who drew part of her support from Christian and Chinese voters was an unacceptable choice as president: so Mr Rais decided to turn his eye elsewhere.

Mr Wahid looked a better choice: the leader of another Muslim party, even if one of a somewhat different flavour, and a man of widely accepted moral authority. Because of her old enmity with Mr Suharto, Miss Megawati could not link hands with Golkar, which had come second in the election, to keep Mr Wahid out. So Gus Dur got the presidency, and the alliance of Muslim parties which had helped to bring this about seemed to be a powerful force in the development of the new Indonesia.

Gus Dur made Miss Megawati his vice-president, and most Muslims accepted this. He gave some other party leaders good jobs in his cabinet. But it was the respect that most Indonesians have long felt for Mr Wahid himself, combined with Miss Megawati’s popularity as a democrat, which made it possible to present his government as, at last, a bold and blessed break from the Suharto era.Dancing towards AugustLess than nine months later, things no longer look so clear-cut. Mr Wahid’s authority has lost some of its gleam after the confusion shown by his economic ministers, the scandals that have skittered around the edges of his government, and his own assorted bumblings. He has no guaranteed term of office: parliament, which chose him, can also remove him. Miss Megawati, who has been stomping on dissidents in her own party, no longer seems quite as democratic as she once did. And the Central Axis may no longer be the political pivot it set out to be. Hence the importance of the meeting in early August of the People’s Consultative Assembly, Indonesia’s top legislative body, of which Mr Rais is the speaker. The assembly has the power not only to remove the president but also, if it wishes, to amend the country’s constitution: one possibility it is expected to discuss next month is a shift to direct election of the president.

In mid-2000, Indonesia’s politics resembles one of those old-fashioned dances in which the dancers are revolving slowly in a circle, arms around each other’s shoulders, waiting for the moment when the circle breaks and each of them will reach out for the partner of his or her choice. Sooner or later the present “national-unity” cabinet will have to come to an end, and a new team will take over the government. Who the new partners will be depends on the answers to two questions.

One question is whether the two main secular parties, Golkar and Miss Megawati’s Democratic Struggle, can get together. Between them, after all, they hold more than half the seats in the lower house of parliament. And in theory, since both call themselves secular, they stand on the same side of one of Islam’s great political arguments (though in tolerant Indonesia that argument is less divisive than it is in, say, fiercer Turkey).

On the face of it, the two parties will not find it easy to strike a deal. One of them consists largely of people who ran the country in the Suharto era; the other is the instrument of one of Mr Suharto’s most stubborn critics. But the passing of time, the arrival of new faces and, above all, a shared desire for a bigger ration of power may help them to forget the past.

Much depends on the tactical skills of Akbar Tandjung, who is both the chairman of Golkar and speaker of the lower house of parliament. Not a charismatic man, Mr Tandjung found it hard to lead the party convincingly while Mr Habibie, who also belongs to Golkar, was president in the period immediately after Mr Suharto’s removal. Now free of that encumbrance, Mr Tandjung has shown that he can get along with a surprisingly wide range of other politicians. The fact that he comes from Sumatra, not Java, is in many ways an advantage. His other big advantage is that his party contains most of the people with any experience of government. That makes it a valuable complement to Miss Megawati’s ex-opposition lot, especially if her heavy-handed ways drive off such talent as her party does possess.

The other question is whether the Muslim alliance will survive. Mr Rais, like other politicians, finds Mr Wahid exasperating. The president has proved much clumsier, and much less easy to work with, than Mr Rais had expected. He uses outside advisers to bypass the cabinet. He often ignores both the cabinet and the advisers. Mr Rais, who had hoped for much more in return for the backing he gave Mr Wahid last year, is naturally irritated. More to the point, though, if Mr Tandjung and Miss Megawati do get together, the result may separate Mr Wahid from Mr Rais in a way the president will like but Mr Rais will not.

A couple of months ago, there was speculation that Mr Tandjung and Miss Megawati were thinking of joining with Mr Rais to take the presidency away from Mr Wahid. If so, they have had second thoughts. To remove Mr Wahid from the job to which he was elected only last October could have a shattering effect, both inside Indonesia and abroad. At home, many of the voters who wanted a return to principled morality after the brutal cynicism of the Suharto years might feel betrayed. Abroad, the investors Indonesia so badly needs might be even more reluctant to risk their money. And all the politicians in Jakarta who have an eye on the presidency would wonder what this precedent meant for their own ambitions. A combination of patriotism and self-interest may have saved Gus Dur, at any rate for the time being.

It now looks as if a different deal has been struck. Mr Tandjung says he would like the president to choose the cabinet he wants, without having to worry too much about party labels. Miss Megawati seems to agree. The calculation is shrewd. If Mr Wahid’s new cabinet works more efficiently than the old one did, the leaders of the two big secular parties will get much of the credit. If it doesn’t, Mr Wahid will get the blame. The reorganisation of the cabinet might take place before next month’s meeting of the Consultative Assembly, under the watchful eyes of Miss Megawati and Mr Tandjung, or—better for the president—afterwards, when he would have a freer hand. Mr Rais, whose Central Axis will probably not be part of the new team, seems to have swallowed his likely defeat; but he could prove a lively leader of the opposition.Despite the handicapsWhen Gus Dur addresses the assembly, he can offer a reasonably good argument in defence of what he has achieved so far. He has largely tamed the army’s generals. He is trying to get to grips with the corruption of the courts. He seems to recognise the difference between the right sort of devolution and the wrong sort. The economy may start to look rosier, especially if the Bank Restructuring Agency can sell enough of its accumulated assets pretty swiftly, and so bring in more healthy investment. All these things can be presented as solid early accomplishments in the face of scheming rivals.

They may just be enough to win him a reprieve. When he was elected, this stroke-battered, almost blind Muslim intellectual looked as frail as his country. Despite this, many devout Indonesians plainly believed that his selection came from on high. Perhaps Mr Wahid is stronger than he looks. Perhaps the hidden hand was right, after all. Indonesia is too big a country, and potentially too important in the world, not to have the right man in the top job.