Day 2: On the Road to Democracy

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Graduate School of Asia-Pacific Studies
Waseda University, 14 February 2007

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Day 2: On the Road to Democracy

  1. 1. Reinventing Indonesia Day 2 On the Road to Democracy Graduate School of Asia-Pacific Studies Waseda University, 14 February 2007
  2. 2. The Habibie Administration The objectives: as the country was deep in crisis, a continuation of policies, especially in the economy, should be maintained; it had to be rid of the characters whom people saw as the personification of nepotism; it should reflect the spirit of reform, and be broadly representative of Indonesia’s various shades of interests and political aspirations. GSAPS-2007-Day2 www.ginandjar.com 2
  3. 3. The Habibie Administration . . . The agenda: Foremost in the political agenda was the repeal of the th much-reviled political l h il d liti l laws th t were th that the foundation of the New Order political system—the laws on political parties elections and the parties, elections, representative assemblies. On the economy, the priority was to alleviate the impact of the crisis on the populace, especially those who were economically weak, and to get the economy on its feet and moving again. GSAPS-2007-Day2 www.ginandjar.com 3
  4. 4. Inauspicious beginning Habibie started his presidency amidst widespread misgivings. The Th country was in deep political t t i d liti l turmoil. il His claim to presidency was questioned. The Th resignation of Suharto had not halted th i ti f S h t h d t h lt d the demonstrations and protests. Many opponents of the New Order shifted their attacks to target Habibie. GSAPS-2007-Day2 www.ginandjar.com 4
  5. 5. Inauspicious beginning . . . His biographer, Bilveer Singh (2000), acknowledges that Habibie brought with him many negative images of a negative record “including his penchant for ’wasteful record, including wasteful mega-projects’, his poor or lack of understanding about the workings of the economy, his lack of acceptance by g y, p y ABRI (the Indonesian military), of being a front or tool for Islamic fundamentalism, and probably worst of all, of being hi h b i nothing more than a pawn and puppet of S h d f Suharto.”” GSAPS-2007-Day2 www.ginandjar.com 5
  6. 6. The legitimacy dilemma Habibie’s H bibi ’ presidency f id from th b i i was plagued b the beginning l d by doubters of its legitimacy. One argument against Habibie s legitimacy was based Habibie’s on a technicality: the way by which the transfer of the presidency was performed. Other more serious arguments against Habibie taking over the presidency were based on legal and constitutional grounds grounds. GSAPS-2007-Day2 www.ginandjar.com 6
  7. 7. The legitimacy dilemma . . . In line with the message of the constitution the President received his mandate from the MPR, and therefore if he resigned, he had to return the mandate to the same institution—the MPR which would th withdraw th i tit ti th MPR, hi h ld then ithd the mandate and gave it to a new president. Others argued that Suharto and Habibie was a g “package” elected by the MPR—and Habibie was Suharto’s choice for vice president— when Suharto resigned, Habibie s ou d a so go, a d the MPR s ou d es g ed, ab b e should also and e should appoint a new president (and vice president). GSAPS-2007-Day2 www.ginandjar.com 7
  8. 8. The legitimacy dilemma . . . On the other hand Habibies’ suporters argued that the constitution stipulated that should the president die or resign, resign be removed or disabled from executing the duty of the presidency, the Vice President should replace him until the expiry of his term. p y That should mean that Habibie had the constitutional right to hold the presidency until 2003. GSAPS-2007-Day2 www.ginandjar.com 8
  9. 9. The legitimacy dilemma . . . Within the government, among the cabinet ministers, there were also some doubts as to whether the government should continue until the former president’s term ended. They were of the opinion that the present government was only “transitional” and a fresh general election should be undertaken to establish a new mandate from the people. It was based not on the question of constitutional legitimacy because the message of the constitution was very clear, but more on political and moral grounds. GSAPS-2007-Day2 www.ginandjar.com 9
  10. 10. The legitimacy dilemma . . . To T many of his critics it was difficult t separate th f hi iti diffi lt to t the figure of Habibie and Suharto, and the ascension of Habibie to presidency could only happen because of that p y y pp particular relationship. For Habibie to be able to claim political and moral legitimacy, h h d t get th mandate f hi l iti he had to t the d t for himself. lf Many saw the existing MPR as lacking the legitimacy to decide on who should be the next President as it was President, the same MPR that elected Suharto unanimously less then three months before. Therefore, they argued, a new election should be held as early as possible. GSAPS-2007-Day2 www.ginandjar.com 10
  11. 11. The legitimacy dilemma . . . After an intensive behind the screen political behind-the-screen consultation, a consensus within the government emerged that an early general election should be called. The decision to call for an early election however had to overcome a legal hurdle. The MPR had decreed in the March 1998 general session that in accordance with the five-year presidential term, a general election should be held in 2002 to elect a new president in 2003 2003. And only the MPR could revoke and amend an MPR decree. GSAPS-2007-Day2 www.ginandjar.com 11
  12. 12. MPR Session According to the constitution the MPR meets in: constitution, General session Special session During the New Order, MPR met only once in five year in general session to elect the President President. With reform, MPR meets every year in annual session to receive reports from the executive, the parliament, the Supreme Court the Supreme Audit Board and the Court, Board, Supreme Advisory Board. GSAPS-2007-Day2 www.ginandjar.com 12
  13. 13. People’s Consultative MPR is manifestation of the Assembly (MPR) people sovereignty has the authority to: Amend the Constitution. Elect the President and/or Vice President. Parliament Regional Functional Impeach the President (DPR) Representatives Group and/or Vice-President. Determine the State Policy Guidelines. Elected directly Elected by Appointed: by the people Regional Representative of mass Assembly organization and Civil Society GSAPS-2007-Day2 www.ginandjar.com 13
  14. 14. MPR Special Session The MPR convened a special session on November 10-13, 10 13 1998 The MPR issued decrees on: 1. The rescheduling of the elections 2. To revoke the 1983 MPR decree, requiring a national referendum to amend the constitution. 3. Withdrawing the extraordinary powers given to the President, 4. On human rights, on corruption, collusion and nepotism —in which the former President was singled out— out 5. Revoking the guidance for the propagation and implementation of Pancasila or P4. 6. 6 Limiting the Presidential terms of office in the unamended office—in constitution there was no limitation—to a maximum of two terms. GSAPS-2007-Day2 www.ginandjar.com 14
  15. 15. MPR Special Session . . . 7. On the economy, the MPR issued a new guideline on economic democracy. 8. An important decree that would have significant and long- p g g term effect on the country’s governance was a guideline on regional autonomy and decentralization, including fiscal decentralization. 9. On th l f th ilit 9 O the role of the military, to have gradual withdrawal of the t h d l ithd l f th military from politics. The MPR decisions serve as constitutional basis that would constitute the foundation for democratization, improvement of governance, and protection of human rights, i iti t d or enacted b th H bibi government. i ht initiated t d by the Habibie t GSAPS-2007-Day2 www.ginandjar.com 15
  16. 16. Opposition against Habibie The special session of the MPR met amidst a tense political atmosphere, as students, encouraged by die- hard opponents of Habibie among the political elite, were demanding th t H bibi should b b d di that Habibie h ld be brought d ht down. In the days leading to the special session the capital was transformed into a military complex, with security y p , y apparatus manning strategic sections of the city. To support the military efforts the Commander of the Armed Force Wiranto decided to recruit civilians as Force, volunteers (Pamswakarsa). Unavoidably these groups of vigilantes would clash with students in various parts of the city, making th situation t d t i i t f th it ki the it ti even tenser. GSAPS-2007-Day2 www.ginandjar.com 16
  17. 17. Opposition against Habibie . . . On the final day of the MPR session things came to a head. The carnage occurred in the Semanggi area, in front of g gg Atmajaya University, a private Catholic institution, which had been a hotbed of anti-Habibie students. In the confrontations that took place in the afternoon of November 13, shots were fired and at the end of the day 13 had died, among them were four students and one military personnel. personnel Hundreds were injured, many needing hospitalization. GSAPS-2007-Day2 www.ginandjar.com 17
  18. 18. Opposition against Habibie . . . The incident, which came to be known as the Semanggi incident tragedy, left another scar on the national psyche alongside the Trisaksti tragedy. Elsewhere a number of members of Pamswakrsa were lynched by angry mobs, many in a gruesome manner. After the MPR session ended the opposition against Habibie had redirected its focus to the election the following year. The unseating of Habibie had become the agenda of many politicians from various political spectra. GSAPS-2007-Day2 www.ginandjar.com 18
  19. 19. Habibie’s Political Pillars Habibie s Habibie relied on the support of three political forces: the military, Golkar, and political Islam. The ili Th military under Gen. Wiranto ( f d G Wi (a former ADC to President Suharto) was supportive of Habibie. Both of them being very close to the former president them, president, needed and supported each other in the ensuing political game. At the onset of his presidency Habibie had vetoed the opposition from his advisers and senior military figures to having Wiranto continued in the top military position position. GSAPS-2007-Day2 www.ginandjar.com 19
  20. 20. Habibie’s Political Pillars . . . Habibie s Political Islam was basically sympathetic to Habibie, regarded as a person who had been able to turn the tide of long time prejudice against Islam in Indonesian long-time politics. His position as the Chairman of ICMI had helped improve the stature of many professionals and politicians with Islamic credentials. As ICMI gathered Muslim intellectuals from various backgrounds, Habibie’s support among political Islam had become more widespread. GSAPS-2007-Day2 www.ginandjar.com 20
  21. 21. Habibie’s Political Pillars . . . Habibie s The opposition to Habibie mounted by students based in the campus of a Christian university also had driven many Muslim students to support Habibie, or at least Habibie choose not participate in the movement directed against Habibie. Unlike the united front against Suharto shown by the students in May 1998, the students were no longer as united with regard to Habibie Habibie. GSAPS-2007-Day2 www.ginandjar.com 21
  22. 22. Communal Strife In the meantime the security apparatus had to deal with meantime, communal strife in several regions of the country: In East Java (Banyuwangi), Maluku ( ( y g) (Ambon), South Sulawesi, ) and West Kalimantan. GSAPS-2007-Day2 www.ginandjar.com 22
  23. 23. Aceh Another trouble A th t bl spot fl d up i A h th westernmost t flared in Aceh, the t t province of Indonesia. Aceh had been long simmering in conflicts between separatist elements of the population and the government forces. During the New Order the separatist movement was harshly dealt with through military action. At the end of the New Order the situation had been put Order, under control and the rebel movement had become more or less dormant, although there were still remnants of g rebels under the name of Free Aceh Movement (Gerakan Aceh Merdeka or GAM). GSAPS-2007-Day2 www.ginandjar.com 23
  24. 24. Aceh . . Aceh. In early 1999 however the situation began to heat up 1999, however, again. The immediate cause of the upsurge of hostilities was a p g series of kidnappings and killings of soldiers, some of whom were on leave. The military mounted an operation to respond to the attacks and the situation further escalated. In the process many civilians became victims of the ensuing violence, provoking outcries of brutality and violence human rights abuses by the military. GSAPS-2007-Day2 www.ginandjar.com 24
  25. 25. Aceh . . Aceh. In September a law was passed that gave Aceh a special status (Law No 44/1999). The new law on fiscal decentralization (Law No 25/1999) provided the province with a certain degree of authority over, and substantial returns from, their natural wealth, particularly from the gas fields in Arun. GSAPS-2007-Day2 www.ginandjar.com 25
  26. 26. Aceh . . Aceh. Thus two of the main grievances, the demand for syariah law and equitable distribution of resources, had been basically addressed addressed. However the relaxation of the security situation was exploited by GAM as a way to expand their control of the territory and population. At the time Habibie left o ce in Oc obe 1999, the e e ab b e e office October 999, e conflict in Aceh had been not resolved. (The Aceh conflict would only be resolved after the Government was ready to negotiate and reach an agreement with GAM; The Helsinki agreement signed on August 15, 2005 in Helsinki, Finland) GSAPS-2007-Day2 www.ginandjar.com 26
  27. 27. Papua Irian Jaya (Papua) was another hot spot. The province had been plagued by separatist movements demanding independence for y years. As in Aceh, this separatist movement was triggered by feelings of injustice suffered by the people of West Irian (Papuans), which, though was one of the naturally richest provinces of Indonesia, remained th most b k i d the t backward i th whole nation. d in the h l ti A Law was later passed to allow for a special status for the Province of Papua, including economic privileges (Law No. 21/2001). On J l 17 2006 Pap a was divided into 2 pro inces Pap a and July 17, Papua as di ided provinces: Papua Western Irian Jaya. GSAPS-2007-Day2 www.ginandjar.com 27
  28. 28. The economic quagmire The economic situation at the time Habibie came to power had grown much worse less than a year after the financial crisis hit the economy. Due to the upheavals in May, the distribution networks had been seriously damaged. Basic supplies were disrupted Rice cooking oil sugar disrupted. Rice, oil, and other essential items became scarce and prices were rising. Rice imports had to be increased because of the prolonged drought. Due to the sudden surge of imports—amounting to 4.1 g p g million tons for fiscal year 1998/99—prices in the international markets soared. GSAPS-2007-Day2 www.ginandjar.com 28
  29. 29. The economic quagmire . . . The increased cost for import meant more pressure on the country’s depleted foreign exchange reserve. To make matters worse, overseas banks continued to refuse to honor Indonesia’s letters of credit, meaning that all imports had to be paid for by cash. Public transportation was also disrupted because of the lack of spare parts, a substantial number of which had to be imported. As a result exportation of manufactured goods was result, disrupted at the time when Indonesia’s exports should have actually enjoyed an advantage because of the huge d h depreciation of th currency. i ti f the GSAPS-2007-Day2 www.ginandjar.com 29
  30. 30. The economic quagmire . . . The heat generated from political tension did not help the economy. F i i t t Foreign investors stayed away, and i t d of i d d instead f incoming i capital, rampant capital flight took place. By the time Habibie s government took office the Habibie’s economy was out of foreign currency. GSAPS-2007-Day2 www.ginandjar.com 30
  31. 31. The economic quagmire . . . Domestic companies were struggling for survival Many survival. had simply stopped paying their debt, domestic as well foreign. The default made the condition of the already battered banking sector even worse as the volume of their non- p performing loans suddenly j p g y jumped. The Indonesian banking and corporate sectors were both in a downward tailspin, each pulling the other further down down. The amount of foreign debt owed by Indonesian companies was staggering. By March 1998 the total amount of private foreign debt had reached $84 billion, around $30 billion due in 1998. GSAPS-2007-Day2 www.ginandjar.com 31
  32. 32. The economic quagmire . . . Without a way out of the debt burden Indonesian domestic companies would remain paralysed. With the steep depreciation of the rupiah, the rise in food, p p p fuel and other commodities, inflation surged. Between January and May 1998 inflation had reached 40%. During the same period the year before it had been less than 3%. By the end of August inflation had reached 70%. Because of the collapse of many i d B f h ll f industries and i d businesses, unemployment increased, and with the high level of inflation, the number of poor families also p increased substantially. GSAPS-2007-Day2 www.ginandjar.com 32
  33. 33. The economic quagmire . . . The progressive reduction of poverty one of the most poverty, significant achievements of the New Order, had been set back. Poverty levels went from 11% in 1996 poverty to 24.2% of the population or 49.5 million by the end of 1998. In year 1997-1998 the number of wage earners decline 1997 1998 by 5.1%, while at the same time real wages declined sharply by 35%. Illustrating the resulting re migration from the city back to re-migration the rural areas is the drop in the employment of the manufacturing sector by 9.8%, while in the agricultural sector, employment actually i t l t t ll increased b 13 3% d by 13.3%. GSAPS-2007-Day2 www.ginandjar.com 33
  34. 34. The economic quagmire . . . Indicating the I di ti th pressure exerted on th meager economy t d the in the rural areas as urban employment was shrinking. The impact on social and health sectors was devastating devastating. There were medicines shortages because of the difficulty of importing the raw materials. Those medications that p g were available had gone up in price. Infant mortality was rising. According to a report of the Minister of Health, in March 1999, two million children Health 1999 under five years old suffered from severe malnutrition. There were reports from various regions that children were dying from malnutrition. GSAPS-2007-Day2 www.ginandjar.com 34
  35. 35. The economic quagmire . . . There were talks about a lost generation as a result of millions of children growing up undernourished, thus retarding their mental and physical development for years t come. to Many school children had to leave school because their families could not afford the cost. Many were forced to find work or other ways to help their families, including fleeing to the cities to become street urchins. urchins The increasing unemployment and poverty caused a steep rise in crime. GSAPS-2007-Day2 www.ginandjar.com 35
  36. 36. The economic quagmire . . . Especially disturbing—not least from the environmental protection point of view—was illegal logging, including in protected forests forests. The crisis had by now become countywide. This created an environmental and health hazard that added another dimension to the problems already faced by the cou y e country. GSAPS-2007-Day2 www.ginandjar.com 36
  37. 37. Laying the g y g groundwork for economic recovery Undaunted by the surrounding political controversy the controversy, new government’s economic team immediately embarked on a series of measures to halt the deterioration and restart the recovery of the economy. GSAPS-2007-Day2 www.ginandjar.com 37
  38. 38. Laying the groundwork for economic recovery . . . The economic recovery agenda consisted of five main programs: 1) restoring macroeconomic stability; 2) restructuring of the banking system; 3) resolution of corporate debt; l ti f t d bt 4) continuing with structural reform; 5) stimulating demand and reducing the impact of the crisis on the poor through the social safety net. GSAPS-2007-Day2 www.ginandjar.com 38
  39. 39. Laying the groundwork for economic recovery . . . International cooperation supporting Indonesia’s efforts at recovery was channeled through multilateral venues: IMF, CGI, and the Paris Club. The first IMF LOI under the Habibie’s government was agreed on June 24, 1998. Due to the severity of the crisis the agreement was crisis, reviewed almost every month during 1998, resulting in renewed LOI. GSAPS-2007-Day2 www.ginandjar.com 39
  40. 40. Laying the groundwork for economic recovery . . . The Th CGI meeting was co-hosted b th I d ti h t d by the Indonesian i government and the World Bank. During Habibie's presidency the consortium met twice in Habibie s Paris, on 29-30 July 1998 and 27-28 July1999. Members of the CGI were Indonesia’s donor countries and international organizations such as the World Bank, the Asian Development Bank, the Islamic Development and the European Union Union. Two of the biggest donors were Japan and the World Bank. Japan usually provided one third of the pledge coming out of the CGI meeting. GSAPS-2007-Day2 www.ginandjar.com 40
  41. 41. Laying the groundwork for economic recovery . . . Another meeting also held in Paris was to reschedule Indonesia’s sovereign debt under the aegis of the “Paris Club.” The rescheduling of debts was essential in view of the fiscal burden that Indonesia was facing. There is but one caveat for a Paris Club debt rescheduling: The country concerned needs to be under an IMF program. On September 23, Indonesia successfully negotiated the 23 rescheduling of its debt due to fall in the 1998-99 and 1999-2000 to the amount of $4.2 billion. It was a much-needed relief to the severe fiscal situation. GSAPS-2007-Day2 www.ginandjar.com 41
  42. 42. Restructuring of the banking sector The economic team recognized that implementing a comprehensive solution for the banking system should be given a high priority. It was an essential condition for the recovery of the corporate sector and to get the economy moving again. The objective was to resolve the financial difficulties of the weakened banks and establish a sound functioning banking system as quickly as possible. Key elements in the strategy involved: a. measures to strengthen relatively sound banks, b b. with regard to weak banks to s t y recapitalize, merge o t ega d ea ba s swiftly ecap ta e, e ge or effectively close them, while at the same time c. maintaining the commitment to safeguard the interest of depositors and creditors. GSAPS-2007-Day2 www.ginandjar.com 42
  43. 43. Restructuring of the banking sector . . . The Th economic team established th t decisions regarding i t t bli h d that d i i di individual banks had to be based on uniform, transparent and publicly known criteria, drawing from the results of p y , g portfolio reviews done by international accounting firms. The remaining 211 banks were subjected to audit, of which all th 67 b k th t were li hi h ll the banks that licensed t conduct d to d t foreign exchange trading were audited by the “big six” international aud g firms, a d the rest were aud ed by e a o a auditing s, and e es e e audited Bank Indonesia. GSAPS-2007-Day2 www.ginandjar.com 43
  44. 44. Restructuring of the banking sector . . . Owners and management of the bank also had to go through a certain fit and proper test. In March 1999 the government announced that seventy- g y three banks, comprising 5% of banking sector assets, were strong enough to continue without government support. pp Nine banks comprising 10% of banking sector assets were eligible for joint recapitalization scheme with the government. government GSAPS-2007-Day2 www.ginandjar.com 44
  45. 45. Restructuring of the banking sector . . . Seven banks comprising 3% of banking sector assets had failed the criteria for joint recapitalization, but due to their size —having more than 80.000 depositors —they were t k over by IBRA and taken b IBRA; d Thirty eight banks comprising 5% of the banking sector with below the minimum capital adequacy ratio ( p q y (CAR),), were closed. GSAPS-2007-Day2 www.ginandjar.com 45
  46. 46. Restructuring of the banking sector . . . The efforts to establish a healthy banking system was not only limited to bank restructuring. A strong foundation was needed to p g prevent similar crisis in the future and to provide for sound governance in the banking sector. GSAPS-2007-Day2 www.ginandjar.com 46
  47. 47. Restructuring of the banking sector . . . Strengthening regulatory and prudential framework for a sound banking system constituted another important element of the strategy to reform the banking sector. In October 1998, the parliament passed the amendment to the banking la allo ing for major impro ements in law, allowing improvements areas of bank licensing and ownership, openness to foreign direct investment, bank secrecy and empowerment of IBRA. t f IBRA The most far reaching was the new law on Central Bank p providing for independence of Bank Indonesia p g p passed in May 1999. GSAPS-2007-Day2 www.ginandjar.com 47
  48. 48. Restructuring of the banking sector . . . The new law on the Central Bank was intended to reduce the danger of moral hazard and prohibit government interference in the banking and monetary policies. li i Accompanying the law on the independence of the Central Bank another law was passed to augment the p g authority of the Central bank to monitor the traffic of foreign currency and corporate external debt. GSAPS-2007-Day2 www.ginandjar.com 48
  49. 49. Restructuring of the corporate sector The financial restructuring of the private sector was crucial to the economy, and an essential counterpart to the banking system restructuring, as a sound corporate sector is necessary f a sound banking system and vice t i for d b ki t d i versa. The economic team pressed ahead with a p comprehensive program of measures to address the pervasive debt problems of the private sector. The private external debt team supported by the team, government had collected data from corporations on their external obligations, and had taken the initiatives to hold talks with representatives of the creditors creditors. One of the major policy measures was to empower of Indonesian Banking Restructuring Agency (IBRA). GSAPS-2007-Day2 www.ginandjar.com 49
  50. 50. Restructuring of the corporate sector . . . The law on IBRA gives the authority to the agency to clear the corporate debts that had become public debts due to the blanket guarantee provided the banking system in th early efforts to overcome the financial t i the l ff t t th fi i l crisis. The objectives was to revitalize the p j private sector to g get the real sector moving again. GSAPS-2007-Day2 www.ginandjar.com 50
  51. 51. Restructuring of the corporate sector . . . One important aspect of the scheme was to resolve the problem in the provision of trade financing which had been severely disrupted. Another essential part of the corporate debt restructuring strategy was to the establishment of an effective bankruptcy system (exit mechanism) mechanism). The existing law on bankruptcy was century old having been inherited from the colonial era, and could no longer cope with the complexity of modern commerce. In July the parliament ratified the revised bankruptcy law. GSAPS-2007-Day2 www.ginandjar.com 51
  52. 52. Restructuring of the corporate sector . . . In f th I further efforts to improve governance, in early 1999 ff t t i i l the parliament passed the law on the prohibition of monopoly p p y practices and unfair competition. p The law provides legal guidelines for the prevention of corrupt practices through the granting of licenses, special t t i l treatment and monopolies t certain group of t d li to t i f people. A law on consumer protection was also promulgated promulgated. The role of civil society in consumer protection was constituted in the law. GSAPS-2007-Day2 www.ginandjar.com 52
  53. 53. Restructuring of the corporate sector . . . The parliament also passed a new law on environment protection providing for a stronger role of the community and civil society on matters related to environment environment. The 1967 law on forestry was revised establishing the principles of environmental protection equity justice and protection, equity, transparency in the forestry management and exploitation. GSAPS-2007-Day2 www.ginandjar.com 53
  54. 54. Restructuring of the public corporation The economic team gave particular attention to public enterprises that still played an important role in the economy. To improve their efficiency and governance international auditors subjected key public companies to special audit. International auditing companies were assigned to audit the financial account of Pertamina (state oil company), PLN (the state electricity company), Bulog (the logistics agency) and the Reforestation FundFund. GSAPS-2007-Day2 www.ginandjar.com 54
  55. 55. Restructuring of the public corporation . . . The second round of special audit included the principal national airline, the port corporations, the domestic telecommunication company, and the toll road operators. A master plan on the reform of state enterprises had been devised including the restructuring and privatization of state enterprises to improve efficiency, p p p y, profitability, y, and service-delivery and therefore lay the foundation for future growth. GSAPS-2007-Day2 www.ginandjar.com 55
  56. 56. Improving governance To T provide f a stronger legal b i t d fi and id for t l l basis to define d criminalize corrupt practices, in May 1999, the p parliament ppassed the law on Clean Government. This law includes provisions requiring fair and equal treatment from government officials for all people, as well as th right of th public t seek i f ll the i ht f the bli to k information about ti b t policy-related matters and to express views on those issues in a responsible manner. ssues espo s b e a e Another provision of this law requires that public officials —elected as well appointed— should report their wealth before and after taking office, subject t investigation b b f d ft t ki ffi bj t to i ti ti by a special commission to ensure that government officials do not enrich themselves improperly. GSAPS-2007-Day2 www.ginandjar.com 56
  57. 57. Improving governance . . . It was followed by another law on the Eradication of Corrupt Practices. This law provides stronger g p g guidelines on investigation g and prosecution of corrupt practices. The new law also provides for the establishment of an independent committee to eradicate corruption corruption. GSAPS-2007-Day2 www.ginandjar.com 57
  58. 58. Helping the poor High priority was given on measures to protect the poor from the worst impact of the crisis. The strategy consisted of two elements: a) general economic policies that would have impact on the poor, and b) targeted policies for the benefit of the poor. Foremost in the first prong of the strategy was restoring macroeconomic stability. Improvement of the value of the currency and arresting inflation would substantially improve the economic condition of the poor, directly and indirectly as the economy began to recover recover. Adequate supply of food and other basic necessities would reduce the cost of those items. GSAPS-2007-Day2 www.ginandjar.com 58
  59. 59. Helping the poor . . . To th it d T the severity and complexity of the crisis th general l it f th i i the l economic policies alone were not enough to protect the p poor from the worst impact of the crisis without a p specifically targeted policy for the poor. The targeted policies for the poor, or the social safety net encompassed three broad areas of actionaction: 1. maintaining the availability and affordability of key co commodities important to the poo ; od es po a o e poor; 2. generating employment and maintaining incomes; 3. preserving key social services. GSAPS-2007-Day2 www.ginandjar.com 59
  60. 60. Helping the poor . . . The Th most important basic commodity was rice. ti t tb i dit i A program was initiated in July 1998 to provide 10 kg (later increased to 20) of rice at about one-half of the market price to low-income families, covering 17 million poor families. GSAPS-2007-Day2 www.ginandjar.com 60
  61. 61. Helping the poor . . . To improve purchasing power in rural and urban areas, the government had set up public works projects throughout the country to boost incomes of the poor the poor, unemployed and the underemployed. To supplement these efforts food-for-work programs are efforts, food for work being implemented in drought-stricken areas of the country. GSAPS-2007-Day2 www.ginandjar.com 61
  62. 62. Helping the poor . . . Preserving access to critical social services for the poor constituted an important aspect of the social safety net. In what was considered by the World Bank as the most y successful intervention, among the social safety nets had been the scholarship and grant program designed to maintain enrolments and quality of schooling at p q y g pre-crisis level. The program extended to the poorest 6% of students enrolled in primary schools 17% in junior secondary and schools, 10% in senior secondary schools. It also provided grants to the 60% of the poorest in each category (see World Bank, 1999) t ( W ld B k 1999). The program had reached 4 million students. GSAPS-2007-Day2 www.ginandjar.com 62
  63. 63. Helping the poor . . . In health services, the priority was given to the poor to have access to basic health services and essential medicines, and prevented malnutrition and micronutrient deficiencies. The government made available supplementary food for young children through the school system and pregnant and lactating women in poor villages villages. This program had reached 8.1 million pupils in 52.5 thousand schools nationwide. GSAPS-2007-Day2 www.ginandjar.com 63
  64. 64. On the cusp of recovery By the end of Habibie’s presidency, Indonesia was emerging from the crisis. Th exchange rate, i fl ti and i t The h t inflation d interest rate h d t t had responded well to the governments economic recovery policies. policies The gradual return of market and investor confidence, revitalizing the s oc market a d restarted e po s e a g e stock a e and es a ed exports. GSAPS-2007-Day2 www.ginandjar.com 64
  65. 65. On the cusp of recovery . . recovery. Special attention was given to empower the small business. The b in Th numbers i poverty h d also stopped rising. t had l t d i i The progress toward recovery had reached the stage where in fiscal policy the government had shifted its focus from fiscal stimulus to fiscal sustainability. GSAPS-2007-Day2 www.ginandjar.com 65
  66. 66. Monthly Rate of Inflation y (in percent) Month Year 1 2 3 4 5 6 7 8 9 10 11 12 1998 7.2 12.7 5.3 4.7 5.2 4.6 8.6 6.3 3.8 -0.3 0.1 1.4 1999 3 1.3 -0.2 -0.7 -0.3 -0.3 -1.1 -0.9 -0.7 0.2 0.7 0.3 0.3 1.1 0.9 0.7 Source: President’s Accountability Speech to the People’s Consultative Assembly of the Republic of Indonesia in October 1999. GSAPS-2007-Day2 www.ginandjar.com 66
  67. 67. Inflation has been smothered . . . (12 month percentage change in consumer & food price index) GSAPS-2007-Day2 www.ginandjar.com 67
  68. 68. …and the Rupiah has been relatively stable in recent months despite political ups and downs (Rupiah per US$, spot rate daily) GSAPS-2007-Day2 www.ginandjar.com 68
  69. 69. Interest rates have declined . . . ( (one month Bank I d i th B k Indonesia certificates and Rupiah deposit of tifi t dR i hd it f domestic bank rate) GSAPS-2007-Day2 www.ginandjar.com 69
  70. 70. ...as has the risk premium on the Indonesia ...as Yankee bond (Spread of Indonesia Yankee bond, in relation to the 10 year US Treasury Bill) GSAPS-2007-Day2 www.ginandjar.com 70
  71. 71. GDP has stabilized and is starting to recover... g (Index of GDP; 1995 Q1 – 100) GSAPS-2007-Day2 www.ginandjar.com 71
  72. 72. …helped, in part, by industrial output p , p , y p (production index in selected real sectors) GSAPS-2007-Day2 www.ginandjar.com 72
  73. 73. Poverty Rate Trends (February 1996-February 2001) (F b 1996-F b GSAPS-2007-Day2 www.ginandjar.com 73
  74. 74. Laying the foundation for democracy The recognition of the basic principle of the separation of powers of the executive, legislative and judicial branches of government. g Revoking the much hated New Order political laws, and establish new law on multiparty political system, and free general elections elections. Freeing the press from government control and censorship. GSAPS-2007-Day2 www.ginandjar.com 74
  75. 75. Laying the foundation for democracy . . democracy. The dual function of the military was revoked. The police were separated from the military. Basic human rights were given strong legal protection protection. “Political prisoners” were released from detention. East Timorese were granted a referendum to determine g their own destiny. GSAPS-2007-Day2 www.ginandjar.com 75
  76. 76. Laying the foundation for democracy . . . In J l I July 1999 a multiparty election was h ld Th election lti t l ti held. The l ti was supervised by an electoral committee of the p participating p p g political pparties and watched by thousands y of foreign observers. It was universally agreed that the election was open, fair d l The lt fl t d th and clean. Th result reflected the will of th people and ill f the l d thus heralded the re-birth of democracy in Indonesia. GSAPS-2007-Day2 www.ginandjar.com 76
  77. 77. Political Parties and General Election 1999 o No a t es Parties Seats Vote (%) ote 1 PDIP 153 34 2 GOLKAR 120 22 3 PPP 58 13 4 PKB 51 11 5 PAN 34 7 6 PBB 13 2 7 PK 7 1 8 Others 26 10 9 ABRI 38 Total 462 Note: From 48 political parties participating 21 parties represented participating, GSAPS-2007-Day2 www.ginandjar.com 77
  78. 78. Laying the foundation for democracy . . . During Habibie’s presidency the government worked together with parliament to produce 6 laws that 67 formed the legal foundation for the establishment of the strong p g political and economic institutions that are essential to the development of a democratic nation with a market economy. Of the 67 laws 16 are on the economy, 32 are political economy laws and 19 concern human rights. Five of the laws originated from the parliament, in itself a significant departure from political practices under the New Order, when the parliament played second fiddle and was regarded as mere rubber-stamp to the government. government It showed that the parliament has begun to establish itself as the legislative authority in the country. g y y GSAPS-2007-Day2 www.ginandjar.com 78
  79. 79. Some of the important p p political laws Law No 2/1999 on political parties Law No 3/1999 on general election Law No 4/1999 on the composition and status of the People’s C P l ’ Consultative A lt ti Assembly MPR bl MPR, the parliament DPR, and the regional representative councils Law No 5/1998 the convention against torture and cruelty Law No 9/1999 the right to freely speak, demonstrate or st e strike Law No 22/1999 on the decentralization of government down to the district level GSAPS-2007-Day2 www.ginandjar.com 79
  80. 80. Some of the important political laws . . . Law No 25/1999 on fiscal decentralization Law No 26/1999 to revoke the 1963 anti-subversive activities law Law No 28/1999 on Clean Government Law No 29/1999 the convention on abolition of all forms of racial discriminations Law No 35/1999 put the administration of the whole legal system under the Supreme Court Law No 39/1998 on Human Rights Law No 40/1999 freedom of the press GSAPS-2007-Day2 www.ginandjar.com 80
  81. 81. Laying the foundation for democracy . . . It was apparent and increasingly acknowledged that it was during Habibie’s era that the country had rapidly ’ moved towards democracy. Such a rapid burst of liberalization would have been highly unlikely were there was no crisis and Suharto still was president. These reforms have come from the top, which is not to top say that there has been no yearning from the bottom. Yet many would agree that Indonesians civil society engaged i d d in democracy and hd human rights activism h i ht ti i have only very recently become sufficiently organized enough to have significant influence at the level of policy. GSAPS-2007-Day2 www.ginandjar.com 81
  82. 82. Laying the foundation for democracy . . . It was during Habibie’s administration th t most of th d i H bibi ’ d i i t ti that t f the initiatives that significantly accelerated Indonesia’s democratization were initiated. The process of democratization had been in conjunction with the process of economic recovery, one reinforcing the th th other on the way up, in contrast with the situation th i t t ith th it ti when the confluence of economic and political crises had brought the cou y do ad b oug e country down deepe into the abyss deeper o e abyss. GSAPS-2007-Day2 www.ginandjar.com 82
  83. 83. Ironically Ironically… Habibie, who initiated most of the basic economic and political reforms, failed to get reelected in the presidential election GSAPS-2007-Day2 www.ginandjar.com 83
  84. 84. The pitfalls The East Timor issue. The Bank Bali affair. The IMF decided that further review of its program should only be done after the presidential election. GSAPS-2007-Day2 www.ginandjar.com 84
  85. 85. The end of the beginning October 1, 1999 the democratically elected MPR started its session. B th ti the By the time th MPR b t t began it fi t session th contest its first i the for presidency was between Habibie and Megawati, who represented the two parties with the biggest electoral vote. Habibie had bee nominated by Go a to be its ab b e ad been o a ed Golkar o s presidential candidate. However, as the election time drew closer, a different political configuration emerged. GSAPS-2007-Day2 www.ginandjar.com 85
  86. 86. The end of the beginning . . . For ti l d F some time leaders f from various M li i Muslim organizations had been waging campaigns against Megawati and her p y g party. But the campaign against Megawati herself was particularly fierce. It focused on the fact that she was a woman, and i th i view I l d in their i Islam did not allow a woman t t ll to lead a nation. GSAPS-2007-Day2 www.ginandjar.com 86
  87. 87. The end of the beginning . . . Another issue was her religiosity. Pictures were distributed showing her “praying” in a Hindu temple. Some of Megawati’s early supporters d S fM ti’ l t deserted h most t d her, t notably Abdurrahman Wahid, the head of the powerful Muslim organization Nahdathul Ulama (NU) and founder of the party PKB, who saw an opportunity become a candidate himself. Amidst the controversy surrounding Megawati and the widespread opposition to Habibie among the populace as well as among the original reform movement, leaders of the Muslim parties joined forces in an Islamic coalition. GSAPS-2007-Day2 www.ginandjar.com 87
  88. 88. The end of the beginning . . . The Th coalition was called P liti ll d Poros T Tengah or C t l A i h Central Axis. Their main objective was preventing Megawati from becoming president as at that time most of the leaders president, of the Central Axis were sympathetic to Habibie. However they also considered the p y possibility of a third y Alternative. GSAPS-2007-Day2 www.ginandjar.com 88
  89. 89. The end of the beginning . . . On 14 October Habibie delivered his accountability speech. He reported on the challenges that he had to face when he took over the government and the progress that the country had made during his stewardship. p He also reported his decision to allow a referendum in East Timor and its results, and recommended that the MPR revoke the 1968 decision on the integration of East Timor and Indonesia. GSAPS-2007-Day2 www.ginandjar.com 89
  90. 90. The end of the beginning . . . He l H also reported th t th i t d that the investigations of f ti ti f former President Suharto by the attorney general about alleged abuses of power did not find any indication of criminal p y wrong doing, and hence were stopped. On the 19th the MPR voted on Habibie’s accountability report. t With a vote of 355, more than half of the members of MPR, Habibie’s MPR Habibie s accountability report was rejected (against 322 who accepted it). Habibie effectively was excluded from the presidential y p race. GSAPS-2007-Day2 www.ginandjar.com 90
  91. 91. The end of the beginning . . . O the 20th th MPR t k th vote f president On th the took the t for id t between two candidates: Megawati and Abdurrahman Wahid. The result of the vote: Wahid received 373 votes against Megawati’s 313 votes. Although many doubted Wahid’s ability to lead the country because of his physical condition, the vote was a reflection of a number of factors factors. GSAPS-2007-Day2 www.ginandjar.com 91
  92. 92. The end of the beginning . . . The joined forces of the Islamic parties and the Islamic factions within Golkar and the supporters of Habibie had defeated the nationalist coalition of PDI P and nationalist PDI-P faction within Golkar. The reaction among PDI-P rank and file to the defeat of PDI P Megawati was ferocious. Riots broke out in various strongholds of PDI-P, especially in Jakarta, Solo, Bali and Batam. The worst riots were in Bali and Solo. GSAPS-2007-Day2 www.ginandjar.com 92
  93. 93. The end of the beginning . . . After the presidential election the MPR was to decided who would be the vice president. Because of her disappointment at result of the pp presidential election, Megawati at first declined to be nominated as vice president. She was furious about her defeat and suspected that the same coalition would defeat her again, as by the morning of the day of the vice presidential election the Central Axis had come out with their candidate Hamzah candidate, Haz from PPP. After intensive persuasion Megawati finally agreed to run. M ti th l ti Megawati won the election, garnering 396 votes against i t i t Hamzah Haz’s 284 votes. GSAPS-2007-Day2 www.ginandjar.com 93
  94. 94. The end of the beginning . . . When the MPR sessions ended the country new leaders had been elected democratically. The first time in Indonesia s history Indonesia’s history. Democracy had taken its hold hold. The next challenge was to consolidate the gain, to make it endure and bring tangible benefit to the lives of the people. GSAPS-2007-Day2 www.ginandjar.com 94
  95. 95. Reinventing Indonesia Democratic Reversal
  96. 96. Introduction The l ti Th election of Abdurrahman W hid t th presidency f Abd h Wahid to the id itself created another legitimacy problem because of his p y party’s lack of support shown in the number of electoral pp votes won and the fragility of the coalition that put him in the presidency. Th coalition was not b The liti d t based on a ““positive” consensus of iti ” f having launched the best candidate for the job, but on a “negative” co ega e common p a o to s op Megawati from o platform o stop ega a o becoming president. Different elements of the coalition acted this way for different reasons. It was a fragile coalition that could diff t f il liti th t ld easily break when the common interest was no longer maintained. GSAPS-2007-Day2 www.ginandjar.com 96
  97. 97. Introduction . . . Megawati’s election t th vice presidency partially M ti’ l ti to the i id ti ll solved the problem of legitimacy. Having Megawati whose party had the largest vote in Megawati, the parliament, as his vice president provided Abdurrahman Wahid’s presidency with the needed political l iti liti l legitimacy. From the very beginning it was clear that Wahid owed and would depend a lot on Megawati’s support to be Megawati s able to effectively rule in a democratic political setting. GSAPS-2007-Day2 www.ginandjar.com 97
  98. 98. On democratic transition and consolidation The end of the Habibie government and the election of the new government by democratic means completed the transition to democracy. During his presidency the process of dismantling the authoritarian system and the establishment of rules and procedures for the installation of a democratic government was completed. It met with Linz and Stepan’s standard definition of when a democratic transition is complete. GSAPS-2007-Day2 www.ginandjar.com 98
  99. 99. On democratic transition and consolidation consolidation… Democracy is consolidated if it becomes the only game in towns Linz and Stepan believe that for a democracy to be consolidated there are five interconnected and mutually reinforcing conditions (“arenas”) that must exist or be crafted; that 1) allow and support the development of a free and lively civil society, 2) an autonomous and valued political society, t d l d liti l i t 3) a rule of law, 4) an effective state bureaucracy, and 5) an institutionalized economic society. GSAPS-2007-Day2 www.ginandjar.com 99
  100. 100. On democratic transition and consolidation consolidation… In earlier writing Dahl advances the idea that “the that, consolidation of democracy requires a strong democratic culture that provides adequate emotional and cognitive support for adhering t democratic procedures.” tf dh i to d ti d ” The implication is that a democratizing country without a democratic culture rooted in its polity is fragile and could p y g whither or even collapse in the face of severe crisis such as economic downturns, regional or communal conflicts o political crises or po ca c ses caused by inept o co up o fractious ep or corrupt or ac ous leaders. GSAPS-2007-Day2 www.ginandjar.com 100
  101. 101. On democratic transition and consolidation consolidation… Huntington: Democratic culture means that the polity understands that democracy is not a panacea. Hence, d H democracies b i become consolidated when people lid t d h l learn that democracy is a solution to the problem of tyranny but not necessarily to anything else else. GSAPS-2007-Day2 www.ginandjar.com 101
  102. 102. On democratic transition and consolidation consolidation… Systemic problems would most probably be confronted by the new democracy as it became more consolidated and achieved a certain stability, and might include political stalemate, inability t reach d i i liti l t l t i bilit to h decisions, susceptibility to demagoguery and domination of vested interests. GSAPS-2007-Day2 www.ginandjar.com 102
  103. 103. On democratic transition and consolidation… The years after the first democratic government has come to power are usually characterized by the fragmentation of the democratic coalition that had produced th t d d the transition, th d li i th effectiveness iti the decline in the ff ti of the initial leaders of the democratic governments and the realizations that democracy in itself would not and ld t ff l ti t could not offer solutions to major social and economic j i l d i problems facing the country. The c a e ge to de oc a c co so da o is how to e challenge o democratic consolidation s o o overcome and not to be subdued by those problems. GSAPS-2007-Day2 www.ginandjar.com 103
  104. 104. The Euphoria The emergence of the Wahid Megawati government was Wahid-Megawati well received domestically as well as internationally. Even those who at the outset were opposed to pp Abdurrahman Wahid’s election accepted the result of the election as the best as it could be under the circumstances. The country came back to normal, demonstrations stopped, students returned to schools, the warring factions lay down their arms arms. There was high hope for democracy and confidence in the course that the country was taking. In contrast to Habibie, Wahid H bibi W hid was endowed with significant political d d ith i ifi t liti l capital at the onset of his presidency. GSAPS-2007-Day2 www.ginandjar.com 104
  105. 105. The Euphoria Euphoria… Abdurrahman Wahid had marginal political support in parliament and with the polity as the election results showed. He needed the support of the larger parties that had larger political constituents than he had. This recognition was reflected in the way he formed his first cabinet. Some commentators were critical of the cabinet composition, composition claiming that it didn’t reflect professional didn t competence. GSAPS-2007-Day2 www.ginandjar.com 105
  106. 106. The Euphoria Euphoria… Although he himself had been the chairman of the NUNU, the largest Muslim organization, his support was particularly strong among secular and non-Islamic civil society that had long been his political habitat habitat. He was also revered by international NGOs for his unorthodox political views, such as his moderate (for some hi pro) view on I his ) i Israel. l GSAPS-2007-Day2 www.ginandjar.com 106
  107. 107. The Euphoria Euphoria… His effort to put the military under civilian control also won him accolades, especially among international observers. He appointed a civilian to become the minister of defense, the first after so many years. It was also a first when he appointed th N l fi t h h i t d the Navy Chi f as Chief the Commander of the Armed Forces, the top military p post that traditionally had been reserved for the army. y y GSAPS-2007-Day2 www.ginandjar.com 107
  108. 108. The Euphoria Euphoria… His idea for a solution to the Aceh problem was to agree to the referendum that was demanded by the GAM (Independent Aceh Movement). Although it was not followed up by actual measures due to strong opposition from the military and most of Indonesia’s public as well many Acehnese themselves, p y , his statement on the referendum strengthened his image, especially among the international media and observers. GSAPS-2007-Day2 www.ginandjar.com 108
  109. 109. The Euphoria Euphoria… He also made a statement allowing the raising of the rebel’s flag on the anniversary of the founding of GAM on 4 December as part of the freedom of expression. Furthermore he initiated th negotiation with GAM F th h i iti t d the ti ti ith brokered by an international NGO with a base in Geneva. He had shown lenience toward the independence movement in Irian Jaya by agreeing to the use of name Papua instead of Irian Jaya and, as in Aceh, allowing the flying f the Papuan fl th Bi t fl i of th P flag the Bintang K jKejora (th M i (the Morning Star). GSAPS-2007-Day2 www.ginandjar.com 109
  110. 110. The Euphoria Euphoria… Wahid also allowed the ethnic Chinese to celebrate their holidays openly, as part of the country’s holidays. In a daring move he stated that the ban on the g Communist Party and communist teachings should be lifted. This endeared him even more to his admirers especially admirers, among western observers and NGO’s. GSAPS-2007-Day2 www.ginandjar.com 110
  111. 111. The Euphoria Euphoria… Although he was the head of the largest Muslim organization and was an established and knowledgeable Muslim scholar, he set an example of tolerance in religious practice and b h i i l di th b i ones li i ti d behavior, including the basic such as the five-time daily praying and fidelity, and religious syncretism. GSAPS-2007-Day2 www.ginandjar.com 111
  112. 112. Political limbo However good his intentions, Wahid’s unorthodox approach to governance would bring him and the country a lot of trouble. trouble His daring departure from accepted political norms endeared him to some elites and foreign admirers but it admirers, also eroded his political support, which, without Megawati, was on thin ice any way. GSAPS-2007-Day2 www.ginandjar.com 112
  113. 113. Political limbo . . . One of the first public rows was over the issue of opening trade and cultural relations with Israel. Although the rationale g g given was appeasing the Jewish pp g lobby that was dominant in Wall Street to get them to help the Indonesian economy, it encountered strong reaction from among pg political Islam and the Muslim community in general. Students from various organizations staged demonstration all over the country country. They were joined by ulama and political leaders from the Central Axis who were his allies in the presidential election. l ti There were other issues concerning his conduct that had damaged his credibility among many Muslims. g y g y GSAPS-2007-Day2 www.ginandjar.com 113
  114. 114. Political limbo . . . If the above issues had disillusioned the political Islam and the Muslim community outside his own close circle, his statements on the referendum in Aceh, and allowing Aceh the raising of the rebel flag had eroded his credibility among the nationalists. g His views in regard to similar issues in Irian Jaya had further distanced him from the mainstream nationalists who regarded keeping the country together as the utmost priority. GSAPS-2007-Day2 www.ginandjar.com 114
  115. 115. Political limbo . . . But h he disclosed th t h wanted t lift th b on B t when h di l d that he t d to the ban the communist party and the propagation of communist teaching he made enemies out of both Muslims and g nationalists. His relationship with the military had also been deteriorating. Hi public stance on A h and I i J d t i ti His bli t Aceh d Irian Jaya had hurt his standing with the military. His constant accusations of impending coups of coups, generals conspiring to bring his government down and his habit of blaming the military for the disturbances that happened d i hi presidency h d di t h d during his id had distanced hi f d him from the armed forces. GSAPS-2007-Day2 www.ginandjar.com 115
  116. 116. Political limbo . . . His hands-off attitude on matters of importance to the state exasperated many people. The l k f l d hi had left the Th lack of leadership h d l ft th government and th t d the political situation in limbo. GSAPS-2007-Day2 www.ginandjar.com 116
  117. 117. Political limbo . . . There was a widespread feeling that he was thrilled by the trappings of the presidency, and seemed to be more interested in enjoying it than in discharging the responsibility th t came with it ibilit that ith it. Wahid was seen by many as more concerned about his image abroad than about addressing the p g g problems at home. His penchant for conspiracy theory and creating scapegoats based on heresy and the absence of sufficient proof created confusion not only in the public but also among his ministers. GSAPS-2007-Day2 www.ginandjar.com 117
  118. 118. Political limbo . . . He H accused hi ministers of corruption without giving any d his i i t f ti ith t i i proof. He eventually fired them from his cabinet but did not cabinet, follow it up with prosecution, as he should have if indeed he had proof of their corruption. He also spoke derogatorily of his vice president. He completely ignored Megawati in her capacity as his vice president and disregarded her suggestions suggestions. GSAPS-2007-Day2 www.ginandjar.com 118
  119. 119. Political limbo . . . His treatment toward people who were supposed to work with him and support him —his vice president, his ministers, ministers his political allies and the military— would military soon throw his government into disarray. Cracks in the government soon appeared appeared. GSAPS-2007-Day2 www.ginandjar.com 119
  120. 120. Political limbo . . . The random firing of ministers without clear explanation explanation, many of them political leaders, antagonized the polity. It triggered a summons from p gg parliament, which asked the president to explain his actions. The parliament did not question his right to change his cabinet. cabinet What they demanded the president answer for was why he publicly said that they were involved in corruption. The parliament demanded proof of this accusation accusation. GSAPS-2007-Day2 www.ginandjar.com 120
  121. 121. Political limbo . . . As expected, Wahid could not substantiate his accusation against them. Alth h the li t t take ti i t Although th parliament did not t k any action against him on this matter, by the end of December the relationship between Wahid and the parliament suffered because of it. GSAPS-2007-Day2 www.ginandjar.com 121
  122. 122. Political limbo . . . It became worse when he made a comment that would be taken as an insult to the intellectual integrity of the members of parliament, comparing them to parliament “kindergarten.” The government was accused of disunity of being disunity, riddled with internal strife, and according to some observers, “of having too many unprofessional ministers who were incapable of performing their tasks properly and who lacked leadership”. GSAPS-2007-Day2 www.ginandjar.com 122
  123. 123. Political limbo . . . The confusion, uncertainty and inconsistency were confusion notable not only because of the lack or absence of decisions when decisions had to be made, but also because th were coupled with retractions and b they l d ith t ti d revocations of decisions when they were made. By the end of December 2000, barely six months into his y , y presidency, Wahid was losing political ground. There were voices in the public demanding that the next MPR annual session should decide on the president’s president s political future. GSAPS-2007-Day2 www.ginandjar.com 123
  124. 124. Political limbo . . . The Th MPR met annually in the month of August and the t ll i th th f A t d th 2000 session was scheduled to meet on 7 August. Prior to the session the PDI-P Golkar and the parties PDI-P, belonging to the Central Axis were maneuvering to have Wahid replaced by Megawati. By this time, the opposition from the Islamic parties to Megawati as a presidential candidate had subsided. However Megawati was reluctant to take the final step step, agreeing instead on a compromise solution that would allow Wahid to continue to be president but for the day- p y to-day affairs of the government to be handed over to the vice president. GSAPS-2007-Day2 www.ginandjar.com 124
  125. 125. Political limbo . . . Understanding that it was the only way from being ousted by the MPR, Wahid in his statement indicated his acceptance of the compromise. compromise GSAPS-2007-Day2 www.ginandjar.com 125
  126. 126. Dishonoring the deal However, within d H ithi days W hid i di t d th t h h d no Wahid indicated that he had intention of carrying out his part of the deal. He announced that he would give Megawati additional tasks and not additional power. He did give the vice p g president some minor tasks with limited freedom of action. He dismissed PDI-P, Golkar and Central Axis ministers, some of whom held important portfolios and replaced portfolios, them with people of questionable competence and background except for the fact that they had close g p y personal relationships with Abdurrahman. GSAPS-2007-Day2 www.ginandjar.com 126
  127. 127. Economic slippage It was expected that the economy would further improve under Wahid government. According to a World Bank report instead of improving the economy was deteriorating. Early slippages in reforms and an increasingly uncertain political climate raised risk premiums and contributed to renewed downward pressure on the rupiah (World Bank Bank, November, 2001). The rupiah continued to weaken passing the 10,000 line to d ll t a dollar. Conflicting statements from the president and his ministers had created confusion and uncertainty, mirroring the economic limbo during the last months of Suharto's government. GSAPS-2007-Day2 www.ginandjar.com 127
  128. 128. Economic slippage . . . Wahid’s forays into economic policies were ill advised ill-advised and irresponsible. They were not based on careful consideration and y consultation with the experts, but were intended mainly to advance his political popularity at the cost of the economy. y His statement that the government would increase substantially the salary of civil servants, admittedly necessary was not supported by the financial capacity necessary, of the government at the time. His encouragement for people living around the plantation-estates to just take 40% of the land scared l t ti t t t j tt k f th l d d investors away, as the respect for law and of property had been violated. GSAPS-2007-Day2 www.ginandjar.com 128
  129. 129. Deja vu? The political and economic limbo took a toll on the everyday life of the people. The economic, political and security conditions were p y deteriorating. There were demonstrations against Wahid everywhere. He responded by mobilizing his supporters and his supporters, followers attacked a newspaper office in Surabaya, when it criticized him. To h T show their anger at W hid' opponents hi f ll h i Wahid's his followers in East Java had cut trees all over East Java, bringing a comment from Wahid that it was better to cut threes than heads. GSAPS-2007-Day2 www.ginandjar.com 129
  130. 130. Deja vu? . . . Wahid had also shown a preponderance toward nepotism. As discussed above he had dismissed ministers who were not readily willing to accept his wishes or represented parties that were critical to him, replacing them with sycophant ministers some previously involved ministers, in scandals or questionable activities. Wahid also had his brother appointed to a top position in IBRA/BPPPN although he had no background in finance or banking. A pattern of nepotism re emerged causing many to be re-emerged, reminded of the nepotism charges against Suharto. GSAPS-2007-Day2 www.ginandjar.com 130
  131. 131. Deja vu? . . . The feeling of deja vu was not only confined to the political confusion and the resulting stagnation of the economy. Rumors flew about corruption in high places, some finding way into the media. Abuse of power for personal gains re-emerged into the re emerged spotlight: appointment to high position in government was reportedly traded for money. In particular the high level jobs in the public enterprises particular, were subject to negotiation. GSAPS-2007-Day2 www.ginandjar.com 131
  132. 132. Deja vu? . . . A lucrative business had developed in dealing with businessmen who had to account to the authorities their bad loans and other past business misconduct misconduct. Kwik Kian Gie, after his dismissal as the Coordinating Minister for the Economy revealed that during a cabinet Economy, meeting Wahid, insisted that certain “black conglomerates” should be allowed to continue undisturbed as entrepreneurs. GSAPS-2007-Day2 www.ginandjar.com 132
  133. 133. Deja vu? . . . The final blow to the credibility of the Abdurrahman Wahid government and its avowed agenda to fight corruption were two scandals involving the president himself known as Buloggate and Bruneigate. GSAPS-2007-Day2 www.ginandjar.com 133
  134. 134. Democratic reversal The indirectly related scandals created such public furor that the parliament was drawn to act. The parliament created a special commission to p p investigate both cases. On 28 January 2001, the special commission reported its findings to the plenary session of the parliament parliament. On Buloggate, the commission found that there was strong indication that President Abdurrahman Wahid “had a role in the release and the use of funds belonging had to the welfare foundation of Bulog employees.” GSAPS-2007-Day2 www.ginandjar.com 134
  135. 135. Democratic reversal . . . On the contribution from the Sultan of Brunei the Brunei, commission found, “there was inconsistency in President Abdurrahman Wahid statement pertaining to the ti f th t ib ti question of the contribution of the Sultan of Brunei f th S lt fB i indicating that the president has given false statement to the publicquot;. GSAPS-2007-Day2 www.ginandjar.com 135
  136. 136. Democratic reversal . . . The conclusion of the special commission was a serious matter, matter because if the parliament adopted it the it, parliament could issue a memorandum to the president warning him and asking him to answer to the findings of the th special commission. i l i i If the president did not provide satisfactory answers to the memorandum after three months, the parliament , p could issue a second memorandum. If the president again failed to respond to the second memorandum, memorandum than the parliament could propose to the MPR to convene a special session to ask the president to account for his conduct. If the MPR could not accept the accountability, in accountability accordance with the constitution, the MPR could impeach the president. GSAPS-2007-Day2 www.ginandjar.com 136
  137. 137. Democratic reversal . . . Instead of following the constitutional procedure to defend his presidency, Wahid chose to be belligerent. One day after the special commission submitted its report to the plenary session of the parliament parliament, Abdurrahman made a statement in a meeting with Indonesia's Islamic university presidents threatening to issue a presidential decree to declare a state of emergency and dissolve the parliament if parliament persisted with the memoranda process. Since th constitution h d clearly stipulated th t th Si the tit ti had l l ti l t d that the president could not dissolve the parliament in any situation and for any reason, it was seen as an y unconstitutional and dictatorial response to a democratic process. GSAPS-2007-Day2 www.ginandjar.com 137
  138. 138. Democratic reversal . . . On 20 May, Wahid summoned the military leadership May and served them an ultimatum: If they still did not support the decree by the end (midnight) of the day, they would b replaced. ld be l d The military brass refused to accede to Wahid's demand to support the decree. pp They also rejected any change in the military leadership for the moment. Those who had been offered the job of Commander of the Armed Forces and chief of the military services by Wahid refused the offer of promotion. GSAPS-2007-Day2 www.ginandjar.com 138
  139. 139. Democratic reversal . . . With the military solidly refusing to give in to his demand demand, Wahid turned to the police. As the chief of police had also made clear his p p position opposing the decree, Abdurrahman maneuvered to replace him with somebody who would support him in his p plan to dissolve the pparliament. GSAPS-2007-Day2 www.ginandjar.com 139
  140. 140. Democratic reversal . . . As in the case of the army the majority of high ranking army, high-ranking police officers jointly issued a statement supporting the chief of police and urging him not to resign. They insisted that the police was a state institution and should not be politicized. All former chiefs of police also made statements supporting the position of the serving officers. GSAPS-2007-Day2 www.ginandjar.com 140
  141. 141. Democratic reversal . . . To prevent further deterioration of the political and security situation, on that same day, 20 July 2000, the leadership of MPR decided to accelerate the special session that was scheduled to begin on 1 August 2001 to deliberate on the memorandum sent by the parliament y p to 21 July. GSAPS-2007-Day2 www.ginandjar.com 141
  142. 142. Democratic reversal . . . Wahid W hid was summoned t appear i f t of th MPR on d to in front f the 23 July to answer to the charges of the parliament against him. g At 01:10, Monday 23 July 2001 with Wahid at his side, a President’s spokesman appeared in front of a televised press conference to read a presidential d f t d id ti l decree i which in hi h the president decreed the dissolution of the MPR, the pa a e , and e Golkar party and called o e parliament, a d the Go a pa y a d ca ed for the holding of a new election within one year. It was the ultimate of the reverse-democratization process th t had b that h d been going on f th past year. i for the t GSAPS-2007-Day2 www.ginandjar.com 142
  143. 143. Democratic reversal . . . From the theoretical perspective, as Diamond (1999) h F th th ti l ti Di d has argued, defending the constitution entails more than defense against blatant overthrow; it means defending g ; g constitutional norms, limits and procedures against subversion or encroachment. D ti l t l lid ti involves not only agreement Democratic consolidation i t on the rules for competing for power but also fundamental a d se e o c g restraints o the e e c se u da e a and self-enforcing es a s on e exercise of power. For democracy to be consolidated there most be a broad normative and b h i l consensus on th l iti ti d behavioral the legitimacy of f the constitutional system, however poor or unsatisfying its performance may be at any point of time. GSAPS-2007-Day2 www.ginandjar.com 143
  144. 144. Impeachment On th O the same day after conferring with the leadership of d ft f i ith th l d hi f the MPR, the Speaker of the Parliament sent a letter to the Chief Justice of the Supreme Court asking for a legal p g g guidance on the constitutionality of the president’s decree. The Th supreme court gave its opinion that the presidential t it i i th t th id ti l decree was unconstitutional; that the constitution e p c y stipulated a e president could o dissolve explicitly s pu a ed that the p es de cou d not d sso e the parliament; and that according to the constitution the president was elected by and accountable to the MPR. As for h ldi A f holding a new election, th next round of election l ti the t d f l ti had already been decided by the MPR and only the MPR could change its decision. GSAPS-2007-Day2 www.ginandjar.com 144
  145. 145. Impeachment . . . On the question of the Golkar Party, according to the new political law, only the Supreme Court had the authority to dissolve a political party and only if it was found guilty to be violating the electoral law. Thus, the supreme court opined, the p p p , president had no authority to y dissolve a political party. After hearing the opinion of the supreme court, the vote was taken, and the MPR unanimously rejected the decree and declared it as illegal. GSAPS-2007-Day2 www.ginandjar.com 145
  146. 146. Impeachment . . . The next agenda was the presidential accountability report scheduled for that day. Since Wahid was not present at the p p pre-determined time, a vote was taken to decide: 1) that the president had violated the state guideline by his absence and refusal to give an accountability report in the special session of the MPR as determined by the constitution, and 2) to remove Abdurrahman Wahid as president. ) p To be sure that there would not be a vacuum in government, at the same time the MPR also decided that Vi P id t Megawati b th t Vice President M ti become th president the id t succeeding Abdurrahman Wahid. GSAPS-2007-Day2 www.ginandjar.com 146
  147. 147. Impeachment . . . The next order of business was to elect the vice president. The election for vice president was held on 25 August. There were five declared candidates who were running in the first ballot. Hamzah Haz the chairman of a Moslem Party (PPP) Haz, (PPP), who was supported by the coalition of the Central Axis and PDIP, after a third ballot won the election. The proceeding was widely covered by both domestic and foreign media. GSAPS-2007-Day2 www.ginandjar.com 147
  148. 148. Impeachment . . . The nation once again watched democracy in function as their national leaders were chosen by democratic means. The young democracy had p y g y passed a severe test and proven its resilience by protecting the interest of the country and the people from a floundering and incompetent leader. p GSAPS-2007-Day2 www.ginandjar.com 148
  149. 149. Impeachment . . . The Abd Th Abdurrahman Wahid episode i I d h W hid i d in Indonesia’s political i ’ liti l history had demonstrated Huntington’s foresight that new leaders of democracy might emerge as, “arrogant, y g g , g , incompetent, or corrupt, or some combination of all three.” In th t I that sense they would come t be viewed as no th ld to b i d different than their authoritarian predecessors, and may e e even be co s de ed as worse, as they have not considered o se, ey a e o produced tangible performance in comparison with authoritarian regimes whose legitimacy were based on performance, performance on successes in producing political stability or economic benefit or both. GSAPS-2007-Day2 www.ginandjar.com 149

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