Nayan Chanda, John McBeth and Dan Murphy, Jakarta – President Abdurrahman Wahid likes a good pun. So when General Electric's vice-president and senior counsel, Michael Gadbaw, led a US business delegation to Jakarta's colonial-era presidential palace the other day, he found Indonesia's leader ready with a corny crack.
"I like the General you represent better than the generals I have to deal with," he told Gadbaw. The businessmen roared with laughter. Not so some of the top brass of the Indonesian armed forces.
Little wonder. Three months into his still-shaky presidency, Wahid is close to confronting his nemesis, Coordinating Minister for Defence and Security Gen. Wiranto. It's a risky gamble that aides appear to be counting on to establish the president's authority, break open the logjam blocking necessary reforms and allow him to concentrate on solving religious and ethnic strife across the country.
In an exclusive interview, Wahid told the Review that if Gen. Wiranto is implicated by Indonesia's National Commission on Human Rights, which is investigating abuses against civilians in East Timor, the general will be asked to resign.
"I will call him and say I heard about this report and the conclusions that you are implicated," he said. "Because of this, it is better to save the institution, the Indonesian Armed Forces, so then you have to resign ... If he refuses, then he will go to the court."
Commission member H.S. Dillon says that when the report is released in the next few days, it will implicate Wiranto, among other generals, in the scorched-earth rampage that followed East Timor's vote for independence last August 30.
"The documents we have demonstrate the army was aware of what was going to happen," he says. "We have created the momentum with our investigation and there is nothing we can backtrack from. For us, it's truth, justice and reconciliation. Someone has to be held accountable."
That's not just a political demand. Lack of accountability is the fundamental flaw in the economy and is at the heart of the new agreement Wahid signed with the International Monetary Fund in mid-January.
Addressing it will be crucial in convincing decision-makers at firms like GE to do more than just exchange pleasantries with the president. Without investments from abroad, the Wahid administration can't hope to restructure corporate Indonesia's $70 billion foreign debt and sell assets controlled by the Indonesian Bank Restructuring Agency, or Ibra. The impression that Wahid doesn't have a firm handle on his government is standing in the way of billions of dollars in potential foreign investment. The removal of Wiranto could help correct this, particularly if, as expected, it convinces some of his political opponents to back off. The key test is over Indonesia's largest car maker, Astra International. The sale of Ibra's 40% stake in Astra to investors such as Newbridge Capital and Gilbert Global Equity Partners of the United States has been blocked by company leaders with military connections. Pushing the sale through will be a key test for Ibra and Wahid.
It could also help improve Indonesia's investment climate, which was tarnished by Standard Chartered's aborted effort to buy the scandal-ridden Bank Bali in December, viewed by potential investors as an example of how entrenched interests continue to undercut deals.
In another instance, the Wahid administration showed its apparent impotence by failing to react when the local government of Sulawesi ignored an appeal by the minister of mining and threatened to close a $200 million gold mine operated by Newmont Mining of the US Observers believe the investment climate could improve with the emergence of a take-charge president.
But commitments made in the new IMF agreement, which paves the way for $5 billion in IMF aid over the next three years, are identical to the commitments made, but never fully carried out, by former Presidents Suharto and Habibie.
Will Wahid demonstrate the political will his predecessors lacked? "On economic policy, the new government didn't have any choices," says Sri Mulyani Indrawati, who heads Wahid's council of economic advisers. "The challenge is taking action – real, tangible action."
But Wahid's showdown with the military has been getting in the way. In the three months since he took office, Wahid has been engaged in what his aides call "psychological war" with the military, whittling away at the generals' grip on the levers of power. Mostly, the battle has been about separating the palace staff from the five other departments that make up the State Secretariat, the 3,000-strong body that handles the executive's administrative chores.
The most important accomplishment may have been the December 1 edict depriving the president's four adjutants of the right to monitor Wahid's visitors and outgoing correspondence. The number of senior military officers in the president's office has been pared down to 15 from 35, with three generals among the 20 officers who got their marching orders. Yet staffers say the pressure from the military, though more subtle, is still there.
Asked to assess the president's performance, a tribal independence leader from Irian Jaya, a leading ethnic-Chinese businessman and a Muslim member of Wahid's circle of economic advisers had the same answer: They can't get him to spare the time to hear their concerns. "Gus Dur [Wahid's nickname] is so concerned about his political survival that it's taking up all of his energy and drawing attention away from economic policy," the economic adviser complains.
Wahid's allies appeal for time after 30 years of corrupt and authoritarian rule. "It's like a dinner. You have to wash the dishes before you can cook the meal," Foreign Minister Alwi Shihab, a presidential confidant, told a delegation of US congressional aides on January 18.
After Gen. Wiranto is dealt with, a bigger clean-up could be in the offing. Wahid looks set to dump a number of ministers, foisted on him as the price of the support that brought him the presidency, exchanging them for a more traditional cabinet of loyalists.
The reason is clear. Cabinet ministers have fought pitched battles over key appointments. One glaring example: the continuing struggle for control of the state banking system between Finance Minister Bambang Sudibyo, who is close to Muslim politicians, and State Enterprises Minister Laksamana Sukardi, an adviser to Vice-President Megawati Sukarnoputri. At the moment, there is much confusion over which minister Wahid favours.
Wahid's dismissal of Gen. Wiranto would at least symbolize the political end of Suharto's New Order regime – something that wasn't accomplished when the long-time leader was brought down in May 1998 after three decades in power. In a January 14 warning that shocked the military and illustrated what is at stake, US Ambassador to the United Nations Richard Holbrooke declared Washington's sympathy for Indonesia's reform efforts, "because what we are watching is a great drama, a struggle between the forces of democracy and reform and the forces of backward-looking corruption and militarism."
With Muslim interests tugging on one flank and the military on the other, Wahid has come to seem indispensable in international eyes. When the World Bank, the US, Japan and other major donors meet in early February to coordinate aid to Indonesia, diplomats say it's almost certain they will pledge the $4.5 billion Jakarta is counting on to fill its Year 2000 budget deficit. An IMF official says $2 billion more of existing debt is likely to be rescheduled this year. The president's new agreement with the IMF was seen as a victory, as was a positive market reaction to his austere and realistic budget.
Meanwhile, the country's economically vital, predominantly Christian ethnic-Chinese business community, historically a target of mob violence in Indonesia, is also rallying around the president. The Chinese are alarmed by the high-stakes romance between legislative assembly chairman Amien Rais and a politically active Muslim coalition aligned against Wahid, while they see Megawati as a lightning rod for Muslim concerns. Wahid is seen as the only hope of striking a peaceful balance.
"If Wahid doesn't hang on, I'll be on the first plane out of the country," says a prominent ethnic-Chinese businessman who has begun to move some of his family's assets back onshore following anti-Chinese riots two years ago.
Meanwhile, a belief has grown among officials and observers that much of the violence in the country – from North Maluku, Ambon and Lombok in the east to tiny Bintan Island and Aceh in the west – is either partly or wholly due to manipulation and incitement by elements of the Suharto-era military machine, loosely linked Islamic militants and vested business interests, all aimed at sowing doubts about Wahid's ability to rule. The military has strongly denied the allegations. Privately, palace officials say an end to the separatist bloodshed in Aceh and the Muslim- Christian violence in the eastern Moluccan islands – the two thorniest tasks facing the new government – is vital to Indonesia's economic recovery.
"You can't do much about the economy until the problem with the military is solved," says a senior Western diplomat. But the removal of Gen. Wiranto carries the risk of a backlash from an entrenched military worried about losing its place in the sun. That's why Wahid says he can only move gradually. But in doing so, he has suffered the embarrassment of seeing the military take weeks to follow his orders to sack spokesman Maj.-Gen. Sudradjat, a Wiranto ally who, among other things, openly challenged the president's right to intervene in military affairs.
President Wahid's strategy of chipping away at Gen. Wiranto's position has been backed by an impressive array of foreign friends, from United Nations Secretary-General Kofi Annan and President Bill Clinton to the European Union and international financial institutions. "He's lost momentum," says a retired economics minister. "But he does hold some aces – legitimacy and international support."
There is also acute awareness that too much foreign interference could be used to stoke ever-present nationalism. Ambassador Holbrooke told the Review his warning to the military that its efforts to obstruct the domestic investigation into the army's role in the East Timor violence would take international pressure to a "higher point" was first cleared with Indonesian officials. "Holbrooke is trying to help Gus Dur to cut the army down to size," says a senior Asean diplomat who watches Indonesia. Still, while there is little chance of a coup, he and other analysts warn that Wahid should be careful not to push the army. "The president still needs them," the Asean diplomat says. "The army is a major political force no matter how discredited it may now be in Indonesia." That's a view shared even by Indonesia's Muslims. Says Nasir Tamara, spokesman of the United Development Party: "If the armed forces doesn't function, then we'll have a mafia running the country."
Western military analysts say that in removing Gen. Wiranto, Wahid may also need to weed out at least three of Wiranto's allies. But they believe a backlash can be avoided.
"A vast majority of the officers are careerists, interested only in pay and promotion," says a Western officer with long experience in Indonesia. "Most would change their beliefs in order to achieve these sort of things." That could prove decisive – if Wahid chooses to act.
While Wahid's Islamic opponents are small in number and the president enjoys the support of the country's influential newspapers, his frail health and hands-off style of governance has led many people to see him as another transitional leader. For all its risks, decisive action now would help dispel that notion and make Wahid someone to be reckoned with.