Grainne McCarthy, Jakarta – The President's masseur embezzles money from the country's key food agency; the President's talk of capital controls spooks the international community; the President's showdown with the central bank governor sends investors fleeing. You'd think that for Indonesia things couldn't get much worse. Well, you'd be wrong.
President Abdurrahman Wahid – who left the country last night for another round-the-world tour, this time taking in eight countries – doesn't seem overly concerned about the disarray that's crippling his seven-month old government. But everybody else seems to have realized that decision-making in Indonesia is in limbo, and Wahid urgently needs to do something about it.
Concerns about Wahid's erratic style are fueling fears that Indonesia's new leadership isn't that different from the autocratic rule of former President Suharto. The criticisms of Wahid – about allegations of corruption in his inner circle, his weak economic team, his unexplained sacking of cabinet ministers, his moves to place key allies in top positions in state enterprises and institutions, including Bank Indonesia – echo many of the charges critics made against the former dictator.
But it's also becoming clear that Wahid and his team of economic ministers aren't prepared to take strong and united action to deal with the wide range of serious economic problems the country faces.
The government is way behind on reforming the sprawling state banks. And, in a move that triggered alarm bells, Wahid recently sacked the respected Robby Djohan from the helm of the country's largest bank, replacing him with the president of struggling petrochemical plant Chandra Asri – a company that's defaulted on loans to state banks.
It's also behind on cracking down on recalcitrant debtors – if necessary prosecuting some and throwing them in jail – in appointing new, clean, judges to the courts, and in speeding loan and asset recovery by the Indonesian Bank Restructuring Agency.
Jeopardizing support from IMF, others
The sluggishness is jeopardizing continued support from the International Monetary Fund, which continues to threaten to delay loans if more deadlines for key reforms are missed. Slow reforms and corruption concerns also puts key international support for the 2000 and 2001 budget from the World Bank and other lenders at risk.
The biggest danger is that Wahid's fumbling with the economy will weigh further on the rupiah, put pressure on inflation, and – as has happened in Indonesia so many times before – send angry people onto the streets for more rioting and violence.
To be sure, a fragile, consumer spending-led recovery has started here, despite the problems. The economy grew 3.2% in the first quarter and the government expects it to grow 4% over the year as a whole.
But given that the economy only grew 0.2% last year and contracted 14% in 1998, 4% growth isn't much, and certainly isn't enough to really push the country out of the deep hole it has fallen into during the past few years.
Wahid himself isn't the only problem, although his unpredictable leadership style and the sense that he's running the country as a one-man show isn't helping. Coordinating economics minister Kwik Kian Gie is also a major weak link in the economic team's chain.
As coordinating minister, Kwik is charged with implementing the economic program and leading a team of ministers in tackling the country's deep economic woes. But Kwik has made crystal clear in recent weeks that he doesn't believe in the program, or even have confidence in Wahid's leadership.
A long-time critic of government policy before becoming a minister last October, Kwik argues that IMF-mandated policies weren't necessarily the medicine Indonesia needed as it struggled with the world's worst banking crisis in modern times.
But instead of biting his tongue and getting on with the job, Kwik has done exactly the opposite. On a trip to Washington last week, during which he met World Bank Managing Director Sven Sandstrom, IMF First Deputy Managing Director Stanley Fischer and US Treasury Secretary Lawrence Summers, Kwik spoke consistently of the government in the third person, as if he wasn't part of it. "Disastrous," is how one finance official in Jakarta described Kwik's performance in Washington.
No secret Kwik wants to resign
It's no secret that Kwik would like to resign from his post. But so far he's been prevented from doing so by Wahid and Vice-President Megawati Sukarnoputri – chairman of Kwik's PDI-P party – who say he can't. The result: Kwik's already mentally stepped down, something which is weighing on international observers' nerves.
"You have an erratic president and a weak coordinating minister," said the finance official. "It's a deadly combination." Indonesians increasingly recognize the crucial crossroads at which the country stands. A group of leading economic and political commentators are set to gather in Bali at the end of June to come up with "urgent priorities" given "the critical state of national affairs." It's not all negative. Wahid has made an excellent stab at reforming the military and cementing civilian leadership of Indonesia. He's respected as a leading democracy advocate and firmly opposes mixing mosque and state, an important view in the world's largest Muslim country. While he could well be attacked at a major meeting of the country's highest legislative body on August 12, Wahid is a consummate political operator and a brilliant puppet-master in the true Indonesian sense. He will most likely survive his August test.
But his main challenge remains the economy. If Wahid wants to seriously tackle its problems, he needs to replace Kwik with someone more committed to leading the economic reform program. He should also sack other ministers that aren't performing, and thus end speculation that he's always on the verge of reshuffling his cabinet. He should then come clean about his own business interests and those of his close associates to silence speculation about corruption.
Most people would agree that Indonesia currently has no alternative to Wahid and most generally believe he is still the best person to lead Indonesia.
But the most prevailing view in Jakarta now is that Wahid and his ministers are suffering from a disease called complacency, an opinion perhaps reinforced by the president's rambling trip abroad. If he wants to build a lasting legacy, Wahid needs to firmly convince the international community – and more importantly millions of impatient Indonesians – that he can carry through in dragging the country out of its stagnation.