[The following are excerpts pertaining to Indonesia by Deputy Secretary Of Defense Paul Wolfowitz to the Defense Forum Foundation meeting about the war on terrorism on October 18, 2002.]

Question: In light of the heinous bombings in Bali this past weekend, I'd like to ask you a question about Indonesia, a country you know very well.

The thesis underlying it is that in decades past, overbearing and unaccountable Indonesian security forces have contributed in significant part to the radicalization of some segments of Indonesia society by making it, perhaps, more hospitable to terrorist organizations.

How do we balance in the short term our obvious [desire] in seeing Indonesia take a more proactive role in counterterrorism activities with a longer-term interest in not retarding democratization, professionalization and civilian control of Indonesian armed forces?

(crosstalk)

Wolfowitz: It's a great question, but I think you tried to bring it in by talking about terrorism. Let me first reject the premise of the question, but then answer what I think is a very serious question.

I just think there's no substance to the notion that the terrorists are in Indonesia because of the enormous and admittedly enormous past abuses of the Indonesian security forces.

Wolfowitz: If anything, unfortunately, one could make the argument that the reason the terrorists are successful in Indonesia is because the Suharto regime fell and the methods that were used to suppress them are gone. And the reason they are succeeding is because of outside money and outside influence.

We're talking about a tiny little sliver of Indonesian society. I mean, 200 million Indonesians were abused by the Indonesian military. Two hundred million Indonesians did not become terrorists, I guarantee you.

In fact, one of the heartwarming things to me was in reading the otherwise appalling poll taken, I think USA Today," published it in the fall of last year, about how many people in Muslim countries seem to think the World Trade Center attack was justified. Almost statistically insignificant, 4 percent of Indonesians thought so. I mean, this is a population that is just profoundly modern and tolerant in its outlook.

But the security force is a real problem, OK. Let's come to that. And it's no secret, at least to you, obviously, and maybe others in this room, that I have been pushing hard to restore US relations with the Indonesian military. I don't do so because I am under illusions about what their past record is, and I don't do so in the belief that all we need to do is just kind of get back in bed with the Indonesian military and everything will be fine.

I think there are real problems there, but I don't think those problems are solved by isolating them. And in fact, we've been isolating them for the last 10 years. One could hardly say that isolation has worked.

What I think isolation has helped to produce is a rogue military, a rogue military that does a lot of things that are bad and that does not come to the support of a democratic government that now needs it.

And I think for Indonesian democracy to succeed – and in the long run this is connected to terrorism, because I believe fighting terrorists in Indonesia requires the success of Indonesian democratic institutions – they need a military that is disciplined and where abuses are punished, but they also need a military and police that can be effective in dealing with some quite serious ethnic conflict.

Major source that the terrorists go after, they clearly are stimulating the Christian-Muslim conflict in Sulawesi and Maluku. And one of the reasons it goes on is when they send security forces to deal with the problem, they have about 20 percent of what they need to live off of. So they are adopted by one village or another. If they are adopted by a Christian village, they quickly become advocates of one side, or Muslim village the other.

In order to have effective peacekeeping forces, police or military in that situation, you've got to reform them, but you've also got to support them adequately.

So, we're trying – short answer – we're trying to develop a prudent course of developing relations with the Indonesian military based on reform, not based on opening the door to everything, but based also on the notion that isolating them is harmful to democracy in Indonesia and harmful to dealing with terrorists in Indonesia. And I think we've gotten support from the Congress on that. And for that I also thank you.

Question: Your comments on the string of bombings in Indonesia and the Philippines?

Wolfowitz: Just to say that, well, first of all, I mean, they're just horrible. And stop and think for a moment, as a proportion of its population, I believe Australia lost as many people in Bali as we lost on September 11.

It's a country that's not much more than what, a 20th or a 15th the size of ours. So do your multiplication. And so many young people in the prime of life. It's just horrible.

It's also horrible to think about what this means for Indonesia. And it's pretty striking, too, that this was done in the one province in Indonesia that is almost roughly 98 percent Hindu, non-Muslim. It's an incredible blow to Indonesia as a country. Their economy is struggling.

We talked about military reform.

Wolfowitz: That economy, if democracy is going to succeed in Indonesia, that economy has to succeed. And whoever planned that attack obviously dealt a body blow to the Indonesian economy and therefore, I think, also to Indonesian democracy.

And the Indonesians are going to have to decide what conclusions to draw from it, but I believe from what I'm reading in the newspapers that they are drawing the conclusion that as much distaste that they have for the bad practices of the Suharto era, they're going to have to find a democratic way to get tougher on terrorists, and I hope they will.

Question: I was just wondering what your comments would be on the meeting that you had with our prime minister a few months ago and the cooperation between the New Zealand government and the US government on the war on terror.

Wolfowitz: Well, it was a good meeting. We've had good cooperation. And I think the thing I'd most like to say is you have some very brave and capable soldiers who've been in difficult situations with us, and also who have taken on some difficult tasks in East Timor, where one of your people was killed.

In fact, we did discuss precisely the case of the New Zealander who was killed in East Timor and the relative success of your government in getting the Indonesians to deal properly with the perpetrators of that crime. I think you did better so far than we did. So we're trying to figure out how to copy your success.