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Indonesia: Confronting Political & Economic Crises

Stanley O. Roth Assistant Secretary for East Asian and Pacific Affairs U.S. Department of State Testimony before the House International Relations Committee, Subcommittee on Asia and the Pacific Washington, DC, February 16, 2000

"Indonesia: Confronting the Political and Economic Crises"

Mr. Chairman, last week I testified before you and Senator Thomas to review the dramatic developments that have occurred regarding East Timor over the past year. At the same time, Indonesia was going through an equally remarkable transformation of great significance to the United States' interests in peace and stability in the region.

I need not tell this committee how Indonesia's strategic location and size make its future important to the United States. The success of its current efforts to establish a secure, democratic and prosperous nation will have a direct impact on stability and security in the entire region. This afternoon, I would like to review for you what Indonesia has accomplished, what remains to be done, and what the Indonesian people and their government, the United States and other interested parties are doing to meet the challenges ahead.

Progress To Date

The past twelve months have witnessed a decisive turning point in Indonesia's transition from an authoritarian regime toward a pluralistic, representative democracy. Successful parliamentary elections in June and the selection of President Abdurrahman Wahid in October were the two watershed events that enabled Indonesia's first democratic government to take office since the 1950s.

Under new election and party laws, Indonesia held, in June, its first free, fair, pluralistic, and competitive parliamentary campaigns and elections in forty-four years, elections judged credible and legitimate by international monitors. The government, to its credit, encouraged international assistance and monitoring of the election and permitted free assembly and association during the campaign period.

A new Parliament (DPR) and a new People's Consultative Assembly (MPR) were installed on October 1. The MPR subsequently elected a new president, Abdurrahman Wahid, and vice president, Megawati Soekarnoputri, on October 20 and 21. The new government came into office with the broad-based legitimacy necessary to begin to confront Indonesia's daunting economic and political difficulties.

This is a remarkable accomplishment, one of which the Indonesian people and their leaders can be justly proud. Nonetheless, the challenges still facing the Indonesian people are as great as the challenges they have already overcome. No one ever expected that President Wahid or his new government would be able to resolve all of Indonesia's problems in the first 100 days, or even 1000 days.

To note just a few of the most salient of these challenges and the promising start the Government has made in responding:

President Wahid asserted civilian control of the military. He placed the armed forces under a civilian defense minister for the first time in 40 years and appointed an admiral rather than an army general as the commander of the armed forces.

President Wahid released the full report on the Bank Bali scandal. That was a positive signal that will hopefully mean he will work to break through the web of influence and corruption, which threatened to undermine Indonesia's economic recovery, and it cleared the way for resuming programs with the IMF and the World Bank.

President Wahid's government signed a new memorandum of agreement with the IMF on January 20, 2000, leading to IMF Board approval of the program, the release of a new tranche of IMF funding, and coinciding with renewed disbursements from the World Bank.

The Parliament, no longer a rubber stamp, has begun to act as a co-equal partner in a government of checks and balances.

President Wahid freed virtually all the remaining political prisoners from the Soeharto era by December 1999, a total of 196 prisoners.

In Aceh, the government undertook a complex negotiating process with some of the many different factions demanding a new political arrangement for that troubled province.

Significant Challenges Remain Ahead

Economic Reform. There is no more critical requirement for the stability of Indonesia in the medium and long term than economic and financial reform. Since the East Asian financial crisis, Indonesia has been far less successful than other countries, such as Thailand and South Korea, in resolving the weaknesses that helped drive them into the crisis.

Previous governments in Indonesia were unwilling to make the structural reforms necessary to ensure recovery. Now that Indonesia has a democratic government, it needs to make and implement the tough choices to build a viable sustained recovery. My colleague from Treasury will review these for you in a moment.

Civilian Control of the Military. One of the greatest challenges facing this government is the need to institutionalize civilian supremacy over the military and to remove the pervasive influence of the military throughout government and society, which characterized the Soeharto years. As I have already mentioned, President Wahid used the appointment process at the creation of his new government to put those committed to reform in key jobs. First, he appointed the first civilian Minister of Defense, Juwono Sudarsono. Second, he appointed Navy Admiral Widodo to be the chief of the Indonesian Military (TNI), the first chief of TNI, denying the dominant service, the Army, the role of chief of TNI for the first time in history. Last month, President Wahid announced that active-duty military officers serving in the cabinet, including General Wiranto, would be required to retire from the military effective March 31.

Shortly after taking office, President Wahid faced down an overt challenge to civilian authority when the military spokesman, Major General Sudrajat repeatedly rejected government policy as stated by the President. First, Sudrajat called for martial law to be imposed in Aceh even though the President had made it clear that the Government had decided against such a step. Later, he asserted the Government did not have the authority to interfere in military affairs. As a result, in December, President Wahid dismissed the military spokesman.

All this set the stage for the dramatic developments of the past two weeks. On January 31, the National Human Rights Commission released the report of its Commission of Inquiry on Human Rights Violations in East Timor (KPP). This report detailed many of the brutal acts that occurred in East Timor over the past year. In addition, it identified 33 specific individuals, including General Wiranto and other senior TNI officers, whom it recommended the Attorney General investigate further.

While still overseas, President Wahid announced that, in the wake of the report's findings, General Wiranto should resign from the cabinet. As you know, Wiranto refused to resign, insisting that he must meet with the President upon his return to Jakarta this past Sunday, February 13.

You all know the outcome of this dramatic test of wills, that General Wiranto was suspended from the cabinet, and a replacement, Suryadi Sudirdja, was sworn in. Though the sequence of events through which this occurred was unsettling, it is important to note that there was never any evidence of an organized threat by the military to the regime, no evidence of any coup planning. The Indonesian public overwhelmingly supported the decision by the President, as did a number of key generals in the Indonesian military.

The U.S. position has been absolutely clear. We support the right of the president to change his cabinet and, even more importantly, the principle of civilian control of the military. UN Ambassador Holbrooke stated this position emphatically in a press conference with Indonesian media. Other senior U.S. officials have done the same.

Aceh. The new government got off to an uncertain start in responding to instability in Aceh. While President Wahid's decision to become personally involved in resolving the issue was welcome, his initial call for a referendum raised expectations that there would be an opportunity to vote on independence. In the face of overwhelming opposition to independence for Aceh by the Parliament, the military and a range of non-governmental figures across Indonesia, Wahid subsequently indicated that this would not be an option. He indicated that a referendum, if there were one, would be limited to the question of whether to place Aceh under Islamic law. The U.S. and other key countries, including ASEAN, made clear our support for Indonesia's territorial integrity.

Since then, President Wahid has made considerable progress in moving the future of Aceh away from the arena of armed struggle into the arena of a political settlement. It opened a dialogue with a range of groups in Aceh -- students, religious leaders, businessmen, and even proponents of armed struggle -- through two negotiating tracks.

The first track was opened by President Wahid's Minister of State for Human Rights, Hasballah Saad, himself an Acehnese who had previously led an Acehnese NGO. Saad has been working with a number of groups to pull together an All Aceh Congress in order to resolve one of the fundamental problems facing the Government in Jakarta -- whom do you negotiate with? President Wahid expressed his frustration to me personally, asking "What's the address?" Thus far, it remains unclear whether this effort will succeed or whether more than one congress will emerge with a claim to represent Aceh.

The second track has been opened through an NGO in Geneva, the Henri Dunant Center, which has been facilitating discussions between the Government of Indonesia and representatives of different factions of the Free Aceh Movement (Aceh Merdeka or GAM). In a potentially significant breakthrough, Indonesia's Permanent Representative to the UN in Geneva has met with two major GAM factions seeking to reach agreement on a cease fire and conditions for providing humanitarian assistance to the people of Aceh. Although no final agreement was reached, the very fact of these meetings is a significant step forward. Both sides have agreed to meet again later this month, and it remains to be seen if a cease fire agreement can be reached. While not a direct party to either of these tracks, the USG has been deeply engaged with the GOI on the Aceh question. We have strongly supported Wahid's efforts to focus on a political rather than a military solution and provided technical assistance on "lessons learned" from other cases in which autonomy problems have been handled successfully.

Sectarian Violence in Ambon and Lombok. The violence in Ambon and Lombok is a humanitarian tragedy and one which poses very significant challenges to President Wahid's government. First, the inability to control sectarian violence has caused some to question the competence of the central government. Second, the awful imagery of this violence, seen on TV screens across the globe, has certainly undermined the government's efforts to promote investor confidence (both foreign and domestic). Third, this sectarian violence has provided an unfortunate propaganda bonanza to some of the Islamic parties in Indonesia, which have sought to increase their power base through inflammatory charges of massacres of Muslims by Christians. The January 7 rally in Jakarta, at which the Speaker of the Constituent Assembly, Amien Rais, participated, and which featured numerous speakers who called for a "jihad", was the most chilling manifestation of this phenomenon.

The origins of this conflict go back to the misguided policies of previous governments. Once a model of Christian-Muslim harmony, transmigration policies changed the balance between these two communities and laid the ground for the present tragedy.

Unfortunately, there is no simple solution to the problem of sectarian violence. Clearly the government needs to do a better job in protecting its own citizens and preserving order. The government has recognized this fact and moved, at least in part, to address this problem by replacing officials (police and military) who were ineffective at containing the violence. But, at the same time, the government has been understandably reluctant to "unleash" the police and military to engage in the kind of repressive practices that led to the human rights abuses of the past. Furthermore, the Indonesian police, severely undermanned and poorly trained, are ill equipped to respond effectively to random violence, which can arise suddenly at far flung points in the Indonesian archipelago. There is no simple short-term fix to this difficult problem, which will have to be addressed on multiple fronts.

Managing the End Game in East Timor. Since I addressed the issue of East Timor at some length during our hearing last week, I will not discuss this issue at any length today. Nonetheless, the issue of East Timor has been of such consequence for our relationship with Indonesia that it is appropriate to offer a few observations today.

First, in East Timor itself, security has largely been reestablished. 135,000 of the refugees who fled or were forced to West Timor have returned. The question now is reconstruction, the development of democratic institutions and preparation for independence. This is not to minimize in any way the scale of the challenge facing East Timor and the international community effort there or the need for substantial aid to support that effort.

Second, over 100,000 refugees remain in West Timor, and it is unclear what portion of those wish to return to East Timor. The Government of Indonesia must eliminate militia intimidation in the camps, enable those wishing to return to East Timor to do so without fear of intimidation, and assist the remaining refugees to resettle elsewhere in Indonesia. So long as refugees do remain in the camps, we need to ensure that basic humanitarian relief continues to get to them in West Timor.

Third, while East Timor will increasingly become an issue to be considered in its own right, separate from Indonesia, the issue of accountability for past atrocities means that we will not be able to fully separate the two for some time. U.S. military-to- military relations with Indonesia were suspended by the President; and the provision of certain types of military assistance was conditioned by the Leahy conditions contained in section 589 of the Foreign Operations Appropriation for FY 2000, as you know. Until these conditions can be met, and it is my judgment that they cannot yet be fully met, there will remain significant constraints on our ability to have a full normal relationship with Indonesia.

The Role of the United States

The U.S. has a profound interest in seeing a successful democratic transition in Indonesia -- a fact reflected in the Secretary having identified Indonesia as one of the world's four priority emerging democracies. Nor is our commitment merely rhetoric. The President welcomed President Wahid to the Oval Office shortly after he assumed the Presidency. UN Ambassador Holbrooke and Secretary of Treasury Summers have both visited Indonesia since President Wahid took office.

In response to the urgency and importance of the need, U.S. bilateral assistance to Indonesia is being increased to $125 million for FY 2000. The bulk of this assistance will likely be used to help strengthen Indonesia's nascent democratic institutions. We are awaiting the recommendations of an inter- agency team that visited Indonesia in January to gauge how this U.S. investment can most effectively accomplish this and other goals. Helping the Indonesians build an effective and just judicial system, promote civil society, spur continued economic reform, and professionalize national and local parliaments will be among our priority concerns.

A Concluding Comment

Mr. Chairman, in your February 2 speech on U.S. Security Policy in Asia you observed that President Wahid has "exceeded most reasonable and informed international expectations," but "continuing levels of violence underscore how fragile and volatile the situation is in Indonesia." I completely concur. With those challenges in mind, the United States must in our own interest do what we can to help the current transition succeed.

ENDS


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