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Indonesia: democracy vs. cronyism

As President Obama plans (and postpones yet again) an historic trip to Indonesia, GlobalPost's Peter Gelling discusses the ongoing battles between reformers and old-school power brokers in Jakarta.


Indonesian students practice a welcome message for President Barack Obama, who attended their school in the 1960s. President Susilo Bambang Yudhoyono reacted with understanding after Obama delayed his long-awaited visit. A presidential spokesman said Yudhoyono had an inkling that the health care debate in Washington would get in the way of the long-awaited trip. (Photo by Romeo Gacad/AFP/Getty Images)


Editor's note: the play button will work after the audio loads. This may take a minute or two. Below is the transcript of the Correspondent Call with Peter Gelling.


Passport: Good afternoon and welcome, it's Thursday, March 18, 2010. I'm David Case, the editor of GlobalPost Passport in our Boston newsroom. Today we're talking about Indonesia. President Barack Obama is scheduled to make his long-awaited trip to Indonesia next week. A homecoming of sorts for the President, who spent part of his youth in Jakarta, the trip comes at a critical moment. President Susilo Bambang Yudhoyono has lately endured political firestorms over a bank bailout and an anti-corruption chief's murder conviction. Meanwhile, in preparation for the Obama visit, Indonesian security forces have launched a major crackdown on radicals, killing or capturing 40 suspected Islamic militants. Among those left dead was Dulmatin, wanted for triggering one of the Bali nightclub bombs in 2002. He had a $10 million U.S. bounty on his head. With us on the line from Jakarta is GlobalPost's Jakarta correspondent, Pete Gelling. Good evening, Pete.

Peter Gelling: Hi David, hi everybody.

Passport: Before we begin, please let me remind you that the call is being recorded and will be posted on Passport's website. As usual, I will lead a Q and A that will last about 20 minutes. As the Q and A proceeds, if you'd like to ask a follow-up question on the topic that we're discussing, please feel free to jump in. Your lines are muted. To unmute yourself, press *6. We ask that you identify yourself and be mindful of the time. We also have five or ten minutes at the end for unrelated questions.

There has been a lot of talk about the strength and growth of Indonesia's economy over the last year. Oh yeah, sorry. I was just briefly interrupted here in the newsroom. I'll start again. Uh, Pete, there's been a lot of talk about the strength and growth of Indonesia's economy over the past year. How strong is the growth?

Gelling: It is strong. Indonesia's economy is among the best performing in the world right now. It weathered the global financial crisis virtually unscathed. And continues to be one of the few in the world to post positive growth. In fact, just this week, Jakarta's composite index reached a two-year high, and the rupiah, as well, is at it's strongest in two years against the dollar. So things are looking pretty good for Indonesia's economy.

Passport: Excellent. And the market is still soaring?

Gelling: Yeah, the markets are still soaring.

Passport: Great. And have recent political scandals, in particular the parliamentary investigation into the bailout of Bank Century threaten that economic growth? Can you give us a little background on the Bank Century?

Gelling: Yeah, the Bank Century what happened was at the height of the economic crisis, the Indonesian government made the decision to bail out Bank Century and sometime later, Parliament decided to investigate that bailout because the amount of funds originally requested by Bank Century were inflated four or five times, I think, and the parliamentary investigation dragged on for months, it became a big, public firestorm and in the end, parliament voted to reccomend a criminal investigation into the bailout. And all of this was a concern for the country's economic growth. There was a concern that because the investigation targeted some of the country's most effective financial reformers, it would spook investors. But, surprisingly, the investigation and the outcome of the investigation had little effect on the economy. I think most investors knew the decision to bailout the bank was the right one, and I think also that there was nothing there. I think investors knew there was nothing there and that Parliament wouldn't find wrongdoing. The markets, in fact, didn't respond at all to the investigation.

Passport: Bank Century is not a major bank? It's more of a mid-level player? And the argument was made that it wasn't really integral to the health of the Indonesian economy, so why are we bailing it out? Is that kind of what happened?

Gelling: Yeah, that was part of it. Also, Bank Century had its own troubles. Its chief was jailed for embezzlement, things like that. So, there was a lot of anger that all this money went to bail out a bank that was considered corrupt.

Passport: So the targets of the probe were primarily Finance Minister Sri Mulyani and the Vice President, Boediono. Why were these two people targeted in particular and are their jobs currently vulnerable, or are they seen as secure at this point?

Gelling: Well they were targeted because Mulyani and Boediono... Boediono had been the central bank chief at the time and now he's Vice President and they were targeted because they were the two seen as making the decision to bail out the bank. And I think that fortunately, although a bit late, Yudhoyono came to their defense with very, very strong language after the parliamentary vote a few weeks ago. At this point, the only way the two could be replaced or be forced to resign is if a criminal investigation by law enforcement officials progressed. But that won't happen without the president's approval. So I think their jobs are definitely secure. You could also say that they were targeted, Mulyani and Boediono, in particular, were targeted because they are considered reformers. And they were targeted by a parliament, a group of people, that is considered the most corrupt in Indonesia.

Passport: So the objective being to kind of prevent them from continuing to reform?

Gelling: Right.

Passport: Ok. What kind of economic reform can we expect from SBY's government now that this scandal has largely fizzled?

Gelling: I think what is really impressive about how the administration has come out of this scandal, this controversy, is how quickly it got back on track. It's been a couple weeks since the vote and already Vice President Boediono has announced that he will head a special committee to reform the country's huge and unwieldy bureaucracy. And this is a huge deal. It's seen as absolutely an essential step if Indonesia really wants to join up with BRIC in the future. Also, directly after the vote Wirjawan, who is the new chief of the country's investment board, announced a very detailed strategy for increasing foreign investment. And in this strategy, it included a reform of the country's land acquisition laws, which had been an impediment to completing large infrastructure projects. I think what still needs to be done, where we haven't seen much progress, is of the country's antiquated labor laws, but still, I think after stalling for three months over Bank Century the Yudhoyono administration seems to be back on track.

Passport: Ok. So SBY is seizing the agenda after winning a good mandate last year and then seeming to lose the agenda for a while.

Gelling: Yeah, yeah.

Passport: Ok. And can we expect more opposition from the country's political and business establishment to these reforms?

Gelling: Well, yeah, I think almost certainly. Still there are factions in Parliament who continue to push the Bank Century debate, the Islamic PKF party, which is supposed to be anti-corruption, but is against SBY's free-market policies, has tried to boycott the finance minister's budget proposals, but they were quickly shot down. I think that there will always be this opposition, I think the anti-reform element, or the establishment, like Golkar, to a serious public relations hit during Bank Century. The public was very bored of the whole scandal and wanted to move on. But I think we've seen in the last few weeks, the Golkar party, which was very vocal with the Bank Century scandal haven't been heard of, neither had Aburizal Bakrie, really. They seem to be sort of sinking into the background and I think that sort of indicates that they were defeated.

Passport: The country's march toward membership in the BRIC group, (Brazil, Russia, India and China) largely depends on it's continued fight against corruption. But the chief of it's vaunted anti-corruption agency was recently sentenced to 15 years in prison for apparently murdering his golf buddy. Can you tell us a little about this scandal and how it has affected the country's battle to counter corruption?

Gelling: The anti-corruption chief, his name is Antasari, he was arrested and accused by the police of murdering a businessman who also he also happened to play golf with. The motive, they said, was that Antasari was having an affair with this golf caddy and he was being blackmailed and to prevent the blackmail, he murdered this businessman, or he had this businessman murdered. And it was a huge deal, obviously. The head of the anti-corruption agency, the KPK, which had revered, really, for the last few years for its fight against corruption. And now, suddenly, their chief is being sentenced to murder. But actually, I don't think the overall corruption fight has been affected that much. Certainly the KPK, although it took a hit to its credibility, it was only temporary. It has managed to rebuild and get back to work. And before the Antasari scandal, two KPK deputy commissioners had been arrested and accused of taking bribes. That was later found to be a concoction by the police and the Attorney General to discredit the KPK. All of this led to a huge pubic outcry and created doubt around the Antasari conviction. In the end, all these controversies sparked a huge public backlash and put judicial form at the top of Yudhoyono's agenda. And I think it could be a good thing.

Passport: Seems like an on-going battle between the reformers and the last vestiges of the entrenched crony capitalists in both of these stories in Indonesia.

Gelling: That's right. I think that's the overarching theme of the story of Indonesia at this point in time.

Passport: Any guess who's going to win?

Gelling: I would not venture to make a guess. But I think I am optimistic that President Yudhoyono and his administration, that they are winning, despite all these scandals.

Passport: Great. Let's talk a bit about the Obama trip. Assuming it goes forward next week, what strategic interests do the Americans hope to promote during their time in Indonesia?

Gelling: I think that the United States is really looking to reassert itself in Southeast Asia, especially considering China's growing influence in the region. Indonesia is the most politically stable and the most economically healthy country in Southeast Asia, so it makes it a good place to start. President Obama's personal connection as well will help things along. I think a sense of urgency on the part of the Americans to cooperate more with Indonesia, to formalize relations with Indonesia, increase their economic partnership with Indonesia in the face of China's rise. China, in fact, just surpassed the United States as Indonesia's second-largest trading partner after Japan. So the two countries, Indonesia and the United States have said they will sign comprehensive partnership agreements. They haven't really released many details yet, they've only said that they will cover a wide-range of things: education, the economy, health, security, the environment, but they haven't been too specific. I think, also, for the Americans, the White House has indicated the President will use the opportunity to give another speech to the Muslim world, so I think this will also help to, again, work towards building this bridge toward the West and Islam.

Passport: And how enthusiastic is the public about Obama's visit? Is he still being seen as a breath of fresh air after the Bush years? Or are people becoming disillusioned with him in Indonesia as well?

Gelling: I think that the euphoria over Obama's election and his speech in Cairo last year have largely died down here. I think Barack Obama will always be popular here because he lived here for four years. But I think there is a growing dissatisfaction with him. Many people have heard about the statue of young Obama that was in a public park that led to public protests and eventually the government moved the statue to the school where Obama attended. But I think more significantly, the U.S.-Indonesian relationship over the past year, despite great optimism, has not really brought any concrete benefits to the public at large, or if they have, the government has done a poor job selling it to the Indonesian public. So if some real, visible programs come out of this visit, maybe the public will begin to come around again, but likewise, if nothing concrete comes out of this visit, Obama's popularity here will continue to dwindle.

Passport: And what about President Yudhoyono? What does he hope to get out of the Americans?

Gelling: On the Indonesian side, first of all, the Yudhoyono administration could really use a big success, a big triumph, and a foreign policy triumph would work because his approval rating has plummeted over the last few months, especially given all these political crises. Indonesia will also be looking for investment, certainly, and education initiatives from the Americans. Maybe most importantly for the Indonesians, they hope to reestablish a full relationship with the U.S. military. This has been an on-going process over time, but the full cooperation has not yet happened and it would mean lifting a U.S. ban on Indonesia's special forces, which are known as Kopassus. Kopassus is accused of human rights abuses in East Timor, which resulted in the ban. So I think for the Indonesians that they hope the Americans will again begin training Kopassus troops.

Passport: These human rights abuses they were accused of committing were from about a decade ago at this point, or more. Is Kopassus connected to any current human rights abuses? And how far has reform among the Indonesian military in general progressed?

Gelling: Well, current human rights abuses for Kopassus, it's difficult to say because it's inherently a very secretive group. But there are accusations. Human Rights Watch heard, for instance, that there are elements of Kopassus that have been involved in kidnappings and other such things. But, on the other side, in past years, Kopassus has gained a strong reputation for working well with the country's counterterrorism forces. I think that is something that will likely appeal to President Obama as he decides whether or not he wants to begin training these troops or not.

Passport: Let's talk about the crackdown on Islamic radicals. That's been going on for about a month now. What sparked these raids?

Gelling: The raids were sparked after the Indonesian police found several dozen or more Islamic fundamentalists conducting military-style training exercises in Aceh at the end of February. This discovery, which came as a surprise, really, because Aceh had never before been used as a base for Islamic radicals. So this discovery, and the subsequent arrests of these Aceh Islamic radicals led police to related radical cells all over the country, including on the outskirts of Jakarta, where Dulmatin was killed. I think also, the counterterrorism forces in Indonesia were anxious to secure Obama's visit, I don't think they were taking any chances.

Passport: Are these radicals related in any way to Aceh or the Free Aceh Movement or anything like that? Or were they just using Aceh as a location for their training?

Gelling: There was an initial concern that a very, very small, fringe element of the Free Aceh Movement were associated with this group, but it was later found out not the be true. Almost all of them came from outside of Aceh. I think the reason the reason they used Aceh for their camp was because since the tsunami, the province has really opened up and travel there is really pretty easy and I think the fact that Aceh has Sharia law appeals to some of these fundamentalists. Plus, I think also, they hoped, like they had in the southern Philippines, they had hoped to latch onto a separatist movement, but I think they found the Free Aceh Movement has never been sympathetic to their views. And anyway, at this point, the Free Aceh Movement is interested in peace.

Passport: And the death of Dulmatin - I just want to ask one last question and then we'll open up the floor to questions - was that death related to the discovery of the cell in Aceh, or was that just a coincidence? And what is the impact of that? And just to remind listeners, he was accused of triggering one of the bombs in the Bali bombing in 2002. Correct?

Gelling: Yeah. The raids in Aceh were directly related to the discovery of Dulmatin outside of Jakarta. Police had said that it was Dulmatin who organized the group and sent them to Aceh for training. The death of Dulmatin is pretty significant. It's a huge victory for counterterrorism forces here. He was considered one of the most wanted terrorists in the region and he had a $10 million bounty on his head from the U.S. and you know, he was beginning to rival Noordin Top, who was killed last year, for his ability to outrun, or escape from security forces. He was a master bombmaker, he had the ability to teach others that skill, so this was a big victory. That said, Dulmatin has been in the southern Philippines since 2003, and so sometime in the past six months to a year, he managed to slip back into Indonesia undetected. That is worrying. And what is even more worrying is, who else has slipped back in recently?

Passport: Right. Let's open up the floor to questions. If you do have a question, press *6, which will unmute your phone and we'll just take it first come, first serve.

Caller 1: Hi this is James from Legal Research.

Caller 2: Yeah, I wonder if...

Passport: Go ahead James and then the other gentleman who spoke up, we'll take your question next.

Caller 1: So basically my question has to do with, you hear a lot here about GDP numbers and Indonesia is a growing economy and I follow it quite closely. I was wondering, since you're on the ground, how do you see this manifest in peoples' lives in the last five years? Have you seen change, fundamentally, from one the ground, how consumers act, how they interact with the market, etc?

Gelling: From my observations of living in Jakarta over the last five years, I've seen quite a big difference in the numbers of shoppers in the malls, higher-class stores, all that is very evident. And the construction, of course, of commercial buildings, is frenetic. That said, this is a poor country. Just on my street here, its no different from five years ago where the super-rich live across from the super-poor. That hasn't changed at all. But I think that there is a growing middle class here and you can see it on the ground.

Passport: So the rich are getting richer, the middle class is growing, and the poor are making progress?

Gelling: Um, yeah, I'm not sure I would say that the poor are making progress, but maybe a little.

Passport: Any particular consumer trends that you've noticed?

Gelling: For example?

Passport: What's hip? Smartphones? What are people buying now that they have more income?

Gelling: Some evidence is the amount of the technology. Indonesia's obsession with technology is growing. Computers are getting cheaper and a lot, a lot of Indonesians have computers now and phones are all the rage and the Internet! More and more Indonesians are on the Internet. I think Facebook is in Indonesia now.

Passport: Is the Internet still painfully slow? Or is it getting better? When i lived in Aceh, I had a better connection in Aceh as a result of the tsunami, than you could get in Jakarta.

Gelling: Yeah, it's speed is getting better, but it's reliability isn't getting better. It goes off and on all the time. I have to go to McDonald's if I really, really desperately need a fast Internet.

Passport: Uh-huh, they have WiFi there. And the other gentleman, can you ask your question now, please?

Caller 2: Yeah, this is Don Emerson, Stanford University. Peter, I wonder if we could project ourselves, let's say, two or three weeks ahead, maybe even a month ahead, after the visit and ask, what is the likelihood that we'll look back on it and say that it was successful? Now, I know that the comprehensive partnership will have all kinds of details that we're not aware of yet, but I'm really more concerned with the atmospherics. And I wonder if you could make an assessment of the downside? You know, I confess that perhaps the emphasis of journalists, including yourself on things that are surprising, perhaps even disturbing, and anything that sort of connotes violence, you know, if it bleeds, it leads. But we get an emphasis, for example, on the throwing of shoes by Muslim activists at a picture of Obama. But there are a whole range of things, you know, how disappointed were the Indonesians at the second postponement and the decision not to bring the family? To what extent has the accusation of General (inaudible) that American is violating Indonesian security regulations by bringing its own security, overriding Indonesian law. This is a criticism that was leveled of course at George Bush, when he went to Indonesia. And I could go on. Are these minor blips that should be ignored? Do we have a chance that this is going to be a positive kind of experience? Or is the disillusionment such that things could go wrong, even on the PR front, quite apart from what the comprehensive partnership actually ends up containing?

Gelling: I think that the things you mention are minor. These protests that have cropped up, they're from a small fringe element of society. And this controversy over the security, I think its so minor, and I think the vast majority of Indonesians are not following it. So I think that there is a lot of optimism surrounding his visit. And I think that Indonesians in general are (inaudible) house, or talked to some of the old neighbors, I think at this point that some of those things might not happen, I think they're pretty understanding of the situation. I see nothing in the local media, for instance, decrying Obama or the Americans for the itinerary or the delays of this trip. I think two weeks, three weeks, a month from now, I think its very possible that the trip will be seen as very positive. And the only way I could see it not playing over well here is if really nothing concrete comes out of it, with the military cooperation, or education programs or whatever. If nothing comes out of it, then yeah, that would be a problem.

Caller 2: Ok, thank you.

Passport: I think we have time for one last question, if anyone wants to jump in? James, Don, any follow-ups?

Caller 2: No, thank you, I'm more than satisfied.

Passport: Great. Ok. In that case, thank you very much for joining us today, we hope you enjoyed the call. Thanks, Pete.

Caller 2: Thank you.

Gelling: Thank you.

Passport: And good luck with your coverage of the Obama visit.

Gelling: Right, thanks so much Dave.

Passport: We'll talk to you soon. Bye bye.