Indonesia: New dawn slowed by speed limits

JAKARTA: In December 1967, the prominent US magazine The Atlantic made a foray into the Pacific, to look at Indonesia.

Written by John Hughes, who won a Pulitzer Prize that year for his Indonesia reportage, the piece examined the aftermath of the Year of Living Dangerously, when the independence hero Sukarno was ousted by a military led by the young general Suharto.

”Indonesia’s basic problem now is to correct the massive mismanagement of two decades,” Hughes wrote, describing how the civil service is being transformed, though not necessarily for the better, by ”army officers … personally loyal to General Suharto but whose expertise in the matter for debate is limited”. Of Suharto’s economic credentials: ”He is not an expert but listens to the bright young economists, many of them American-trained, whom he has grouped around him.” Money was ”so tight at home, that this is curbing production and vital exports”. Hughes also writes of Indonesia’s impatient people, who ”keep returning to the embarrassingly live issues of corruption and inefficiency in government”.

As for Suharto himself, Hughes says he is ”considered incorruptible”.

Fast forward 43 years – 30 of them under Suharto – one is struck by just how much of the 1967 article could be written about today’s Indonesia under the President, Susilo Bambang Yudhoyono, with just the names – but not all of them – changed.

Like the young Suharto, the avuncular Yudhoyono is widely praised as a cleanskin leader. Elected in 2004 after decades of kleptocracy and a few years of wobbly democracy, his essential task is to normalise Indonesia, to clean the lingering stains from that once-hopeful Suharto era. Indonesians like him and think he’s getting enough of that monumental job done to re-elect him this year.

Six years into an increasingly regal reign, Yudhoyono confronts no shortage of monuments to bad government and squandered investment opportunities in a country whose 240 million population, third only to China and India in Asia, suggests it should be a regional champion.

There’s the bane of any business visitor to Indonesia, the tollway that’s liable to disappear under a high tide between Jakarta and an embarrassing international airport. There’s the two- to three-hour bottleneck at arrivals because immigration officials can’t decide – or is it can’t use? – which passport-processing system to deploy, that is if airport scheduling isn’t plunged into chaotic darkness from a power failure – all this after the hour waiting to pay the $25 ”visa on arrival”, whose accumulated millions have tended to go missing. Then there’s the hours of traffic gridlock to get in and around town.

Flying is a gamble; Indonesia has one of aviation’s worst safety records, its aircraft only recently allowed to re-enter Europe’s safety-conscious skies (though Australia’s aviation nabobs, perhaps with one eye on diplomacy, don’t seem to worry about such niceties).

Indonesia has too often been a poster child for venality, greed and lawlessness. Take the recent United Nations-backed deal Jakarta struck with Norway to save the precious rainforests of Borneo from plunder by powerful timber and palm oil merchants. Under the terms, Indonesia would receive $1 billion not to chop down trees. But after champagne glasses clinked in Oslo, Jakarta and New York, it was revealed that one of Indonesia’s top negotiators of that deal is under investigation from the national anti-corruption authority for bribe-taking and continues in his post.

Yudhoyono has made some progress cleansing the civil service, but investors still complain of paying the notorious ”special commissions” to get deals done and paperwork shuffled, the price of doing business in this market.

“Tea money” accesses government powerbrokers, or sometimes just one’s own goods. When my wife bought some items from a foreign website, a man brazenly showed up in her office purporting to be from Customs to tell her they had arrived. The fixed duty on her goods was $1000, he said, but he would charge only $700 if she paid him unreceipted cash. She refused and asked for the goods to be returned to sender. A few weeks later, the website got ”the most disgusting package they had ever received”, prompting a hazardous material alert in the office. The Indonesian customs official had emptied his rancid rubbish bin – food scraps, cigarette butts et al – into a box and sent it back sans items, presumably sold on. It was Customs that Indonesia’s sainted former finance minister Sri Mulyani Indrawati – now a senior World Bank executive in Washington – was purported to have cleaned up.

Like Suharto, Yudhoyono has grouped around him a team of US-educated palace insiders. But economically, he is criticised for not going far and fast enough.  ING Bank’s chief economist for Asia, Tim Condon, describes Indonesia as an “underperformer”. South-east Asia’s biggest economy plods along at 5.5 per cent to 6.5 per cent growth, which is the level the government needs to sustain jobs.

”It is like they have imposed a speed limit on growth,” Condon says. Indonesia has much of the same stuff China demands by the tankerload from Australia. But Australia gets it extracted and to the port with greater efficiency than Indonesia. Duly, developed Australia has boomed from China’s billions, whereas developing Indonesia has just tootled along.

“I don’t see any reason why Indonesia can’t bump up growth to 8-9 per cent, spend some money in infrastructure, really emphasise the non-manufacturing side of the economy,” Condon says.

Indonesians like Gita Wirjawan argue that after a mostly positive year for their country, ”bad Indonesia” is fast becoming a thing of the past as the nation moves to secure viable institutions, international investor confidence and, more important, investment-grade ratings that could usher in a wave of serious foreign investment. He maps out a $500 billion infrastructure plan for his country.

A former JPMorgan country manager in Indonesia, Wirjawan, 45, is now part of Yudhoyono’s government, the cabinet-level chairman of Indonesia’s Investment Co-ordinating Board, known by its Bahasa acronym BKPM. Wirjawan’s department highlights a new corporate style that he wants to extend through the bureaucracy. There are fewer batik shirts and the safari suits that to Indonesians too often suggest civil service graft. Lifts work, phone calls and emails get returned. At Wirjawan’s BPKM, the feel is less bureaucracy and more investment house. “We are getting great traction internationally now, and this is very exciting,” says the US-educated Wirjawan.

”I fully understand the concerns that investors have here. I know, I was once one of them and it was often a struggle, but I genuinely feel we have turned a corner.”

But has Indonesia turned a corner? This is what The Atlantic said in 1967 of an earlier time of hope:

”From the beginning he [Suharto] has been careful to make clear he is no miracle worker. Clearly the situation is not going to be transformed overnight. Nobody knows when Indonesia will have the patience to plod through this painful and frustrating period of rebuilding without the lid blowing off the country again.”