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Speech of Indonesia minister about



Subject: Speech of Indonesia minister about globalisation 

>From Authoritarianism to Democracy in the Era of Globalization
	
The Indonesian Experience

Laksamana Sukardi
Minister for Investment and State-Owned Corporations
Republic of Indonesia

18 December 1999
Bangkok, Thailand


Good afternoon distinguished guests, ladies and gentlemen. I am pleased to
have this opportunity to address this international audience on the
important and timely topic of this conference, Transitions and Globalization.

During this conference you have heard a variety of perspectives on
transitions. Given that Indonesia has just experienced a major change of
government, I hope you will indulge me to focus most of my comments on the
case ii know best.

It is not possible to discuss Indonesia's present and future without
mentioning a bit of history. After all, what are "transitions" if they are
not the experience of trying to create a new present and future while still
deeply constrained by the enduring legacies of the past?

That past for Indonesia, which ended formally only 60 days ago, was a long
dictatorship during which our political institutions were shut down) the
development of our civil society was retarded or even reversed, our most
fundamental trust of government and of each other as Indonesians was badly
damaged, and the welfare of our people -- especially those at the bottom of
society and particularly women, who have suffered disproportionately -- was
neglected for years and then shattered by the onset of the crisis of 1997.

It is interesting that foreign investment, both private and official
capital, flourished during the Suharto regime. Indonesia was a mixture of
open economy and closed society. For example, we made the rupiah fully
convertible long before many of our neighbors did, and maintained that open
currency regime almost without interruption for three decades.

We were cooperative with the IMF arid World Bank and even became a
"showcase" state for the World Bank by the late 1980s. Indonesia was a
place where foreign investors could do very profitable business as long as
they knew how the game was played.

The key, of course, was playing the game according to Soeharto's rules. And
building a new set of rules and practices -- based on laws, precedent, and
nondiscrimination instead of power, connections, and intimidation -- is the
challenge facing Indonesia as it pursues this transition. Just because a
government has many new names and faces does not mean that the legacies of
cronyism disappear overnight and are replaced by rule of law.

Soeharto built a corrupt system with deep roots and a lot of resources
available to tempt and coopt people. The Soeharto family and the cronies
were the master "franchise holders." if you wanted to do business in
Indonesia, whether domestic or foreign investor, you had few choices but to
become a "franchisee."

Meanwhile, repression and human rights violations were the method for
guaranteeing the country's stability. intimidation of the people was a
crucial component of the crony game.

Soeharto himself became the only functioning government institution, The
parliament was useless, the economic institutions like the Central Bank and
our Securities and Exchange Commission were Soeharto's instruments, The
legal apparatus -- our police and court system -- responded to power and
money, not right and wrong.

We are living with the results now on multiple levels. We face a gross
misallocation of resources, a deep crisis of legitimacy of the Indonesian
government, a fragile arid hollow developmental boom that was set back two
decades in two years, and a setback to our national pride and identity as
Indonesians -- something our founding fathers worked so hard to build
during the first six decades of this century.

Political and economic transitions can be deceiving because they tend to be
identified with moments like the fall of the ancient regime. But it will
come as no surprise to the distinguished audience in this room that
transitions are not a moment , but rather a movement -- a process made up
of several components.

The period after the old order falls is the least glamorous, but it is
probably also the most difficult and most important for determining whether
any meaningful change will come from the blood and suffering of those who
struggled -- some of whom gave their lives so that we would carry on toward
something worth dying for.

Stripped to its most basic form, the struggle in a transition, both
economic and political, is to establish & lock in new rules of the game. It
is a struggle for laws, policy by policy, case by case.

A transition generates a tremendous amount of promise and hope. But at a
certain point, talk must be backed up by concrete action. If not, then all
the pathologies of the previous system remain in place. They only get
repackaged or go underground. But they continue to undermine the political
and economic health of the nation.

I want to talk for a few minutes about some of the problems Indonesia has
inherited. This is not to complain or to sound overly pessimistic, but
rather to be quite frank about the daunting challenges that still lie ahead
for a people that has already endured so much. But I promise I will finish
on an optimistic note -- which is the only proper way to close a conference
that brings together so many who have played a role in the trenches and on
the front lines of struggles for changes.

The regime that came before us left a legacy that no sane government
leaders would want to inherit. First, the territorial integrity of the
country is being challenged by regional demands in Aceh, West Irian, and
Ambon -- to mention only the most prominent cases. The only positive thing
that can be said about these movements is that, perhaps with the exception
of Ambon, the regional autonomy movements do not have the inter-group
hatreds that were manipulated so effectively in the Yugoslavia case,

The regional movements are angry with the central government, not with
their Indonesian brothers and sisters. This gives us some reason for hope
that we can still negotiate a solution to these problems that will still
keep the country together.

For years, the people in areas like Aceh were the victims of repression,
torture, rape, and killings. This has produced the hatred of the central
government. The people in these regions were also treated unfairly in other
ways, as seen in the huge gap in prosperity between the center and the
regions. The economic resources of the provinces were extorted by the
franchise and franchisee system I just spoke of.

The result is undeniable -- Indonesia now faces very strong pressures for
decentralization, regional autonomy, and even independence.

A second problem concerns contractual integrity, which is most obvious in
the mining, infrastructure, and utilities contracts. On the one hand,
Indonesia must maintain a reputation of upholding contracts to the
international community. Who will bear the risks of investment if there is
no certainty and integrity in contracts?

On the other hand, there is a widespread perception in the Indonesian
public that many contracts were the result of collusion and corruption --
that they were unsolicited and handled without transparency. The average
Indonesian feels strongly that many contracts in key sectors do not benefit
the people, but instead were made at the expense of the people. and only
for the benefit of the colluding par-ties.

It is an enormous challenge to balance international credibility against
these powerful domestic political sentiments demanding that contracts be
fair, transparent, and untainted by corruption.

A third issue we face is the complex task of corporate restructuring. We
have mass bankruptcies across our economy, with the banking system at the
vortex, And yet our legal infrastructure for handling settlements is weak
and widely viewed as lacking legitimacy. Indeed, we do not have an
independent judiciary. This means that the process of restructuring and
work outs has been bogged down in delays for nearly two years.

A final problem I'd like to highlight in Indonesia's transition process is
our deeply rooted culture of corruption. These corrupt practices have been
cultivated for decades, and the grip of corruption on Indonesian society
remains strong. Elites and bureaucrats have been on the payrolls of cronies
for a long time, and we still see and feel the effects today.

It should be mentioned that the cronies and the franchisees played a very
interesting role in our democracy movement. The movement was driven by
People Power while also led and encouraged by elite reformers. But except
for Golkar, which had a huge war chest going into the elections, most of
the other parties desperately needed money.

It turns out that business people who had been working with the status quo
spent a lot of money on the opposition. Some of this money was offered as a
genuine expression of a desire for change. But a lot of it was an effort to
buy favor and to be able to call in debts if the status quo government
indeed fell.

This arrangement has severely constrained the will of the reform parties
now in the coalition government to take actions against corrupt supporters
from only a few months before.

A key question is how to address systemic corruption. There is what we
might call the "forward-looking" approach. This is the view that when
corruption is so systemic, the best solution is to establish new practices
from now on, because if you go after the corruptors of the past, the whole
society will get dragged into a long and painful process.

Others argue that one cannot make a fresh start on corruption for the
future without dealing with corruption from the past. It's partly a matter
of credibility and accountability. But it's also the fact that many of the
effects of corruption from the past hang over today as burdens on the
society who must pay the costs of cleaning up the mess.

The answer on how to proceed, I think, is a blend of both approaches. As a
first principle, we cannot ignore cases of corruption that involve a shift
of financial burdens and losses to the public -- whether state-owned banks
or the massive new debts the Indonesian public has been forced to take on
for banking and corporate restructuring through IBRA.

But we must also be forward looking because we do not want to destroy our
entire economy as we deal with the crimes of the past. When corruption is
deeply rooted, pulling out the roots can also damage the soil.

The entire effort is severely compromised by the fact that more so in
Indonesia than in other countries that have had transitions, the entire
government is still run by bureaucrats who in spirit and practice still
want to serve the top people of the previous regime. This makes it very
hard to get immediate responsiveness from the government apparatus for change.

It is important to keep in mind that this is a process that is assessed day
by day, week by week, case by case. It is a mistake to set a threshold of
how far you can or should go in advance. No one knows what the realm of the
possible is until now reach the actual limits. Setting the boundaries too
conservatively in advance can rob the people of much more change and
accountability than they could have achieved.	

Indonesia is in the middle of a very fragile transition. We must and will
deal with the independence movements. We are filly aware of the territorial
challenges we face and are taking concrete steps to handle them.

One aspect of granting greater regional autonomy that rarely gets mentioned
is that the outer regions themselves are not prepared institutionally for
autonomous rule . If the central government grants regional autonomy
without proper preparation in the regions, we could face a dangerous
situation such as in Russia where regional warlords spring up. This could
potentially produce for us hundreds of derivative Soehartos on a petty
scale running their own local corrupt regimes. This is obviously something
that should be avoided even if it means the process of granting regional
autonomy must be slowed down to make sure it is done prudently.

We are undertaking our transition in an era of much greater transparency
and scrutiny than Indonesia has ever known. Our press is free and the role
of the internet at every stage of this movement, especially for the student
activist networks, has been vitally important. The international pressure
on Indonesia has also been significant, especially through financial
institutions and the media.

What does Indonesia need to maintain stability during this transition?

We need a credible and professional government and leadership based upon
democratic elections, We are now in the process of convincing the people
that this is what we have put in place since October 20th of this year.

We also need to move forward with a prudent and timely regional autonomy
process.

Judicial reform is another priority, and a key element to solving our
restructuring challenges.

Establishing a clean government is also crucial -- otherwise we will enter
into a vicious downward cycle of corruption and delegitimation.

Institution-building in the areas of law, economy, and democracy is another
high priority for us if we are to keep the momentum of our transition going.

In the end, what Indonesia needs more than anything is not a strong
government, but rather a strong civil society -- the creation of an open
society. We have a good stand, and despite all the challenges facing
President Gus Dur and Vice President Megawati, we are optimistic we can
face the obstacles that we inherited from the previous authoritarian regime.

Our democratic elections have given this government a great deal of good
will from the Indonesian people and the international community.

And yet the global community poses as many threats as it does comforts, The
trend toward a more open trade and investment regime means that Indonesia
cannot stand still contemplating its problems. We face highly productive
and competitive global companies, and that means our own firms must become
as efficient and competitive.

But we cannot only focus on being competitive. There must be accountability
for corporations also. Indonesia was the victim of a corrupt authoritarian
regime that was enthusiastically supported by global business and
multilateral financial institutions.

We Indonesians are confronting and digesting the domestic lessons from our
experience over the past three decades. But at the international level
there are also important lessons to he learned. We need universal laws and
practices on good corporate behavior, and as a part of that, a functioning
and enforced international standard modelled on the U.S. Foreign Corrupt
Practices Act.

I like to fulfill promises, whether political promises of my own party to
take the rule of law seriously or my personal promise a few minutes ago to
end on an upbeat note. So let me conclude with a word of optimism.

First, Indonesia will survive the challenges we face today. Of this I am
confident. The key is how we will move forward not if we will move forward.
And we will do so in tandem with our friends and allies in the ASEA.N
region and beyond, who are also facing both challenges and opportunities in
the months and years ahead.

But whatever challenges we face, it is important to recognize that we are
living in an era of transitions that many of us did not think we would see
in our lifetimes. Democracies even if they are imperfect democracies -- arc
growing in number, while military and one party states are retreating
around the globe.

We are riot making our transitions all at the same time or with the same
success. But the global trend is clear and it gives us good reason for
optimism. A conference like this is important partly for the lessons we can
learn from each other,

But a conference like this is even more important as a reminder to all of'
us that although we struggle for a different future in our own countries,
in our own ways -- we do so in parallel and in tandem with others
struggling for the same thing. Even if we never meet face to face again, we
can take comfort in knowing we are part of a world-historic movement toward
greater freedom, more participation, more justice. This is good news indeed.

Thank you very sincerely for this opportunity to share my thoughts with you
this afternoon.