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Paris, Monday, October 25, 1999

Instinct for Compromise Can Serve Indonesia's Leadership Well

By Philip Bowring International Herald Tribune.
SINGAPORE - The formal process of political transition in Indonesia is almost complete. But politics - not economic formulas - remains the key to resolving the formidable problems facing the nation.

 Thus far the political process has gone better than anyone would have dared expect. Though a disappointment to the supporters of Megawati Sukarnoputri, the election of Abdurrahman Wahid is more likely to result in the political stability that is Indonesia's premier requirement.

 Mr. Wahid is a vastly more skillful politician and less divisive figure than Mrs. Megawati, and will be more able to keep both Muslims and the military from reacting negatively to her secularist and reformist agenda. 

Neither Mr. Wahid nor Mrs. Megawati makes any claim to administrative skills, but even that could be a plus if they give political weight to decisions made by competent ministers.

 On the surface, Mr. Wahid has followed a rather erratic political path in recent years. But he has an instinct for balance and compromise that has coexisted with a desire for more representative government.

 His election with the support of the former ruling party, Golkar, suggests that compromise with the past, rather than thoroughgoing reform and prosecution of crooks and human rights violators, will be one hallmark of his administration. That is not necessarily a bad thing, however. Reform is important, stability even more so.

 As Corazon Aquino showed in the post-Marcos Philippines, the president's reputation for integrity is more important than administrative competence in rebuilding institutions. While morally justifiable, pursuit of cronies and military troublemakers can be politically counterproductive. 

Reducing the military's role would give meaning to increased provincial and district autonomy. Yet, however tainted by allegations of rights abuses in East Timor and Aceh, the military remains the most powerful single institution in the nation, and retains its self-image as defender of national integrity. 

Hopefully, presidential esteem, civilian control of the military and devolution of power will reverse the growth of separatist movements in Aceh Province and elsewhere, just as in the Philippines, Mrs. Aquino's emphasis on democracy and human rights reversed the Communist insurgency.

 Greater provincial control over resources such as oil and gas should contain separatism, but will place a burden on central government finances. Jakarta will be deprived of a large chunk of revenue just when it needs to service the huge debt - at least 50 percent of gross domestic product - it has accrued from bank bailouts. 

This leads to the next problem: keeping a balance between allowing the businessmen who defaulted on loans to survive and trying to avoid discouraging the return of flight capital. 

As with human rights issues, the new government will have to strike a delicate balance between prosecuting past criminality, reducing government debt and restoring economic growth. 

It will need to keep the IMF and World Bank content by ensuring that untainted people run key institutions, such as the Indonesian Bank Restructuring Agency. Yet the shortage of qualified personnel and the requirements of domestic politics mean that there cannot be root and branch cleansing of the bureaucracy.

 A government that has huge liabilities and vast assets acquired from loan defaults also faces tricky political questions. Should the assets be sold as quickly as possible, most likely to foreigners or local Chinese? Or should they be held in trust for the nation as a whole?

 Will democratic forces within and outside Parliament demand a more nationalistic economic agenda or a pro-indigenous bias similar to that in Malaysia? If so, will this stifle the return of capital? Can local Chinese be brought into the political system without some concessions to the indigenous desire for a greater share of corporate wealth?

 The issues are complex and interwoven. Recent weeks have shown that Indonesia retains an instinct for compromise, embodied by Mr. Wahid, that has kept religious, party and ethnic disputes from getting out of hand. But the problems of reviving the economy and creating effective political institutions are immense. 

Meanwhile, national pride has been wounded by East Timor in a way that could yet make Indonesia sour and prickly toward an outside world to which it is heavily indebted. 

For the good of regional stability as well as Indonesian recovery, Mr. Wahid and Mrs. Megawati deserve help, not least the write-down of a large part of the $80 billion in private sector loans that were greedily granted by Western and Japanese banks in the latter Suharto years.