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The Financial Times - January 31, 2008 by John Aglionby In the days since Suharto, the former Indonesian dictator, died last Sunday Jakarta has conspicuously become a capital made up of two cities, divided into those people who have heeded President Susilo Bambang Yudhoyono’s call to fly the national flag at half-mast and those who have ignored it. That the retired general who ruled the country with an iron fist for 32 years until toppled in 1998 is still a source of discord speaks volumes, not only about people’s feelings towards the man and his legacy but equally about how south-east Asia’s largest economy has developed in the post-Suharto decade and its future prospects. In some respects Indonesia has made such great strides in moving beyond its four decades of authoritarianism – Suharto’s predecessor, Sukarno, abrogated the constitution in 1959 and true democracy was not introduced until the 1999 election – that it is easy to forget how low the country had sunk when Suharto resigned in May 1998. The economy shrank by more than 13 per cent that year, there were barely any functioning institutions apart from the military and the leadership vacuum was cavernous because Suharto had deliberately groomed no one to succeed him. Three secessionist rebellions were raging – in Aceh, East Timor and Papua. It seemed only a matter of time until the country would Balkanise and Islamic radicalism, suppressed so ruthlessly under Suharto, would take over the world’s most populous Muslim nation. “Back then it wasn’t so clear where Indonesia was headed,” says James Castle, a former chairman of the American Chamber of Commerce in Indonesia and long-time resident. “Now it is and it’s becoming a very good picture.” That “picture” comprises one of the most decentralised countries in the world, with many powers devolved to the almost 500 districts, free and fair elections, directly elected leaders and the military back in its barracks. Although an upsurge in communal violence can never be ruled out, separatism is under control. East Timor is independent, the rebellion in Aceh is history and special autonomy for Papua is showing signs of success. Economic growth is more than 6 per cent, interest rates and inflation are stable, foreign exchange reserves are at an all-time high, the banking system has been rebuilt and the media are largely unfettered. Islamic radicalism has violently reared its head – most starkly in the bombings in Bali in 2002 and 2005 and in Jakarta in the two years in-between – but Indonesia’s famed brand of moderate, tolerant Islam seems to have regained the ascendancy. “On a global scale, when compared to so many other post-authoritarian, post-crisis countries, Indonesia’s progress over the last decade is a major success story and in the flurry of day-to-day dissatisfactions that is often forgotten,” says one western ambassador in Jakarta. Meanwhile, surveys conducted by the World Bank and others show that people’s perception of public services is improving, albeit from a very low base, and for those who live outside Jakarta the capital is barely on their radar screens any more. “When I was on a tour of towns in Java recently, no one ever mentioned Jakarta,” says Doug Ramage, head of the Asia Foundation’s Indonesia programme. “And when you ask they almost laugh. Once they’ve got their block grant they don’t think about Jakarta. I left thinking, how could Indonesia have been governed in any other way? It all came back to local issues. They now know where the buck stops and who is responsible for problems and solutions.” If everything is so rosy, then, why are so many Indonesians so loath to mourn their late president? After all, he reduced inflation from 650 per cent to single digits in a few years, lifted gross domestic product per capita from $50 to $1,000, won awards from the United Nations for his family planning programmes, made the country self-sufficient in rice and unified the peoples of 17,500 islands and 350 ethnic groups. It is because several other, less savoury aspects of Suharto’s rule are so deep-rooted that the country has barely made inroads into tackling them, analysts say. Many Indonesians believe that it is only when the country has seriously tackled corruption, addressed the human rights abuses that saw anywhere between hundreds of thousands and 2m people killed and built properly functioning institutions that the nation can really claim to be developed. In November 2006 the World Bank, in its six-monthly assessment of east Asia, categorised Indonesia as a country threatening to fall into a “middle income trap” of having undertaken a first raft of reforms to pull itself out of the gutter but proving reluctant to address the deeper issues required to reach the growth level (7 per cent) required to absorb all the people entering the job market each year. Fajrul Rahman, an economist and pro-democracy activist who was jailed for several years without trial under Suharto, is among many who say the dictator’s legacy is still holding the country back. “Until we can tear down the pillars of corruption and impunity we are never going to really progress,” he says. “While they still exist we will never have legal certainty and without legal certainty we will not have much foreign investment. And without foreign investment we will never grow fast enough to really eradicate unemployment and poverty.” Corruption is the more fundamental issue, Mr Fajrul believes, because as long as corruption continues the legal impunity of senior officials is likely to persist, while corruption could flourish even if such unaccountability were eliminated. Indonesia is widely regarded as one of the world’s most corrupt nations. In a 2004 survey, Transparency International, a governance monitor, listed Suharto as the greatest ever kleptocrat, alleged to have stolen between $15bn and $35bn while in office. Many Suharto sympathisers have said the malaise began only in the latter years of his rule, when his six children had grown up and were looking to leverage his patronage. But newly declassified American government documents show just how rapacious Suharto was virtually from the moment he seized power in 1966. A secret memorandum from the American embassy to Washington in September 1973 typifies the situation Indonesians endured for decades. In the cable, a diplomat describes the experience of International Paper Company, a US company that was hoping to secure a timber concession. “IPC went through complex negotiations, thought the deal was nearly wrapped up, and then reportedly learnt that Suharto and his people were taking over the entire concession for their own profit,” the memo said. “[Our documents] further seem to show that Suharto and his colleagues in this enterprise are totally uninterested in proper timber management or development of a wood-processing industry and are intending only to rape the concession for maximum short-term profit.” In fairness, some progress to reduce graft is being made. A five-year-old anti-corruption commission has secured the convictions of scores of state officials, leaving some government ministries in near-paralysis because civil servants seek to avoid taking responsibility for anything out of fear of being prosecuted. But only a tiny handful of these cases have addressed Suharto-era malfeasance. Bob Hasan, the timber tycoon and Suharto golfing buddy, and Suharto’s half-brother Probosutedjo are the only high-profile cronies to have been convicted of corruption. The vast majority of the country’s political and economic elite rose to prominence under Suharto – Mr Yudhoyono was a lieutenant-general in 1998 – and anti-corruption campaigners say it is clearly in the elite’s interests to advocate a policy of moving forward rather than raking up the past. The consequence, though, is that legal impunity is still widespread. The lack of meaningful institutions is another impediment. The quality of the laws passed by parliament, which under Suharto was little more than a rubber stamp, varies from the barely adequate to the woeful, analysts say. This will only change when direct elections replace the current system of multi-member constituencies, Mr Castle argues. “National parliamentarians’ only responsibility is to the party leadership,” he says. “Until that changes you’ll continue to get a bunch of low-grade party hacks.” The legal system is just as bad, according to Jimly Asshiddiqie, head of the new constitutional court – one of the only institutions upheld as an example of integrity. “Before 1998 Suharto was the law. Now the legal system is run by a judicial mafia,” he says. “The whole bureaucracy needs to be reformed and then there might be some hope of developing legal certainty.” Foreign investors certainly seem to think that the legal system is often a lottery. While business is booming in certain sectors, such as commodities, key areas such as infrastructure – the government’s priority for this year to both stimulate growth and reduce the stubbornly high poverty rate – are struggling to attract capital. “Foreigners got badly burnt in power generation and other infrastructure areas,” says Sofyan Wanandi, a prominent businessman. “So they’re not going to return until they know where they stand.” Many Indonesians think it will take another five to 10 years to build proper institutions. “We really should aim to do it in five rather than 10,” says Mr Asshiddiqie. “But the vested interests are so entrenched I am not optimistic.” While his sins were clearly many and varied, it would be too easy, however, to lay all Indonesia’s current woes at Suharto’s grave. Mr Yudhoyono has garnered a reputation for indecisiveness and several of his ministers, notably those in charge of education, agriculture and health, have been less reform-minded than their counterparts in the finance and trade ministries. A teacher absenteeism rate of almost 20 per cent says much about the state of the school system while street protests this month against the rising cost of soyabeans – triggered in part by Jakarta’s failure to maintain production levels – highlighted the lack of long-term planning that pervades much of government. But there is a deeper problem, says Mr Fajrul. “Last year the government ordered that tens of thousands of schoolbooks be burnt because they dared to suggest that the official version of events surrounding Suharto’s rise to power in 1965 [that he defeated a communist-led coup] should at least be questioned,” he says. “Any nation that is still burning school textbooks in 2007 still has a long way to go before it can call itself civilised.”

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