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Rough sailing ahead for Indonesia

Wall Street Journal - June 12, 1997

Andrew Macintyre – Uncertainty hangs over Indonesia's political future. After roughly two decades of relatively smooth sailing, there are now some doubts about the stability and direction of the national political leadership. Last month's rocky parliamentary election, which saw unusually high levels of campaign violence and claims of electoral manipulation, is only the most recent in a string of events that have unsettled national politics.

Just when things began to change is hard to determine, but the emergence of serious questions about the health of 76-year-old President Suharto early last year is one possible turning point. This was followed by the eruption of large-scale rioting in Jakarta in the wake of a clumsy move to oust Megawati Sukarnoputri, the popular leader of the small Indonesian Democratic Party. In the meantime, economic policy became increasingly erratic as one after another big investment project controlled by individuals surrounding the president seemed to capture stunning preferential treatment. Around the country churches were burned by angry Muslim mobs and there were outbursts of violence in the runup to the turbulent election on May 29.

What is the root of all this instability? The most frequently heard explanation is that there is widespread anger at high-level corruption and a widening gap between the rich and poor. While the income gap between the very richest and very poorest Indonesians is indeed widening, overall income distribution has either remained stable or improved slightly from what we can tell from studies. Certainly the absolute incidence of serious poverty is shrinking significantly. But soothing statistics of this sort count for little with those Indonesians struggling to make ends meet. They see for themselves the gaudy displays of the fabulously wealthy and they hear tales of unrestrained cronyism among the elite. This presents a striking contrast with the romanticized vision of life under former President Sukarno which his daughter, Ms. Megawati, now seems to symbolize.

There are also deeper structural factors at work. In a very real sense, Mr. Suharto's government is becoming the victim of its own economic success. In Indonesia more than elsewhere in Asia, the education system has expanded so rapidly that the supply of graduates is outstripping the capacity of the economy to generate new well-paying jobs, as Australian economist Chris Manning has shown. Indonesia's economy has grown very rapidly, but educational output has grown even faster. The costs of completing high school or university and acquiring the skills for a well-paid job are considerable. This adds to resentment among the growing pool of graduates who see the best jobs in the public and private sector go to the offspring of the well-connected and to Chinese Indonesians, while they are left to settle for low-skill jobs.

Overarching all of this is the sense that Mr. Suharto is now in the twilight of his very long rule. Inevitably, this is fueling speculation about the imminence of change and encouraging the disaffected to vent their frustration. Any regular visitor to Indonesia will know from even casual observation that political disillusionment is now very widespread. But it would be a serious mistake to conclude from this that Mr. Suharto and the system of government he has constructed are on the brink of collapse.

Those Indonesians who believe strongly that the country requires major political and economic change are not in a good position to bring it about. Serious opposition figures, such as labor leader Mochtar Pakpahan, are either in prison or at risk of going to prison. Notwithstanding the upsurge of unrest, Indonesia's security forces are a very credible deterrent to any who would consider mounting an organized opposition campaign.

On the other hand, those who are in a position to bring about major change do not appear to want it. While some of Indonesia's political and economic elite think it's time for a leadership turnover, there seems to be remarkably little demand for more than modest changes to the basic pattern of government.

The problem for those who would preserve the system but seek a fresh leader is that the incumbent shows no signs of being willing to retire. Mr. Suharto has demonstrated over many years that he is an unusually skilled political leader. He has been generous in spreading patronage benefits to those in positions of importance–especially the armed forces–thereby giving them a direct economic interest in his political survival.

This judicious blend of carrots and sticks means that no one from within the military leadership has been willing to attempt to ease him out since 1978. It would require sustained turbulence or a major blow to economic confidence for military officers to calculate that the risks of confronting Mr. Suharto exceeded the dangers of inaction.

The situation today is far from precarious. However, the events of the last year or so have loosened the government's grip on political life. The government's move to force Ms. Megawati out of the Democratic Party and off the political stage was successful in reducing threats to the ruling party in the short term, but as the dust of the election settles, it is emerging as an extremely costly maneuver. The most obvious cost has been the damage to government legitimacy by the louder than usual outcry over electoral interference.

Ms. Megawati's ouster may create other problems too. While the Democratic Party was eliminated as a political irritant, many of Ms. Megawati's supporters simply shifted over to the Muslim-based United Development Party to register their anti-government sentiments. The prospect of a suddenly enlarged Islamic party that also embraces the disaffected secular youth may well prove an even greater potential worry for the government than Ms. Megawati and the Democratic Party would have been if left to their own devices.

Moreover, by triggering such a complete rout of the Democratic Party, the government has come very close to rupturing the three-party parliamentary framework that it so carefully constructed in the early 1970s. The government now finds itself in the extraordinary position of having to boost the Democratic Party in order to stave off the possibility that it will fall beneath the threshold needed to operate effectively in the parliament. A de facto two-party system would concentrate the protest vote and thereby alter both the actual and rhetorical dynamics of Indonesian political life.

Last month's election gave the ruling party the victory it sought, but the price was high in terms of government credibility and national stability. When the Peoples' Consultative Assembly meets early next year to select a president, it is likely to vote unanimously for Mr. Suharto for a seventh time. However, if the instability we have seen over the last year does not abate or if investors become truly nervous, it is not inconceivable that some within the military will seek to ease the president into retirement regardless of carrots or sticks.