Current Issues Brief 4 2001-02

Indonesia's New Government: Stability at Last?

Dr Stephen Sherlock
Foreign Affairs, Defence and Trade Group
30 August 2001

Contents

Major Issues

Introduction

Megawati Replaces Wahid

The Task Before Megawati

Megawati's Cabinet

New Policy Directions?

Constitutional Change and the Stability of Government in Indonesia

Australia's Interests

Conclusion

Endnotes

Appendix 1: Cabinet-Republic of Indonesia

Major Issues

President Abdurrahman Wahid's period in office began with huge expectations but he did not make a successful transition from leader of a mass movement to state office. After Wahid alienated many of his own supporters and came into conflict with parliament, a protracted constitutional crisis led to his replacement by his Vice President, Megawati Soekarnoputri, on 23 July 2001.

Megawati's generally quiet and cautious record in the Soeharto era has raised doubts about her capacity to meet demands for political change but reactions to the Cabinet she announced have generally been very positive. The Cabinet represents the major political forces in Indonesia and carefully balances representation from Java and the regions. Megawati has also clearly signalled her determination to uphold the power of the executive branch of government in relation to the legislature which ousted her predecessor. However, the appointments to the positions of Attorney General and Minister of Justice have raised doubts about her commitment to judicial reform.

The policy priorities of the new Megawati administration are still emerging. Megawati appears determined to pursue a safe and orthodox approach in economic matters and the skilled technocrats she nominated for senior economic posts should be well placed to deal with the IMF and to reassure investors. On the issue of decentralisation, Megawati has a reputation of being opposed to devolution of power but it is unlikely that the process underway since 1999 can be reversed without a major backlash from the regions. Megawati may not be as strongly influenced by the military as has been suggested but her attitude towards their role will be tested acutely over her handling of the separatist movements in Irian Jaya and Aceh.

The political crisis which saw the downfall of President Wahid has directed further attention to Indonesia's 1945 Constitution. The Constitution has never functioned in a truly democratic environment and the powers assigned to the legislature and executive are contradictory and can easily lead to conflict and to the paralysis of government decision making.

The downfall of President Soeharto was not just a change of government, it was a change of regime. Although the Indonesian political scene has stabilised for the moment, many argue that without a thorough reworking of the 1945 Constitution, there will be a recurrence of the kind of crisis recently experienced.

The paper concludes by noting the substantial interests Australia has in the evolution of the new administration, interests emphasised by Prime Minister Howard during his visit to Indonesia and discussions with President Megawati and other senior leaders on 12-13 August.

Introduction

Indonesia has a new government. Megawati Soekarnoputri, daughter of the country's independence leader and first President, Soekarno, was voted into office as President of Indonesia on 23 July by the People's Consultative Assembly (MPR). The change of President came after a protracted confrontation between the former President, Abdurrahman Wahid, and the parliament, which effectively paralysed the processes of government in Indonesia and threw continuing doubts on the ability of Indonesia to recover from the economic crisis which began in 1997 and to regain political stability after the overthrow of the authoritarian New Order regime of President Soeharto.

What is the composition of Megawati Soekarnoputri's new government and the main economic and political items on her agenda? What are the chances of Megawati successfully tackling the huge tasks before her, while maintaining the support of the institutions that forced the previous President out of power? This paper attempts to answer these questions in the context of the growing debate within Indonesia about the need to reform the country's Constitution so as to establish a workable relationship amongst the principal branches of government in the new democratic environment of the post-Soeharto era.

Megawati Replaces Wahid

When Abdurrahman Wahid became President of Indonesia in October 1999 there were huge expectations that the new President, elected through a democratic process (albeit indirectly), would be able to begin the task of rebuilding the country's economy, continue the greatly needed political reform and heal the often bitter divisions within Indonesian society that had developed under thirty years of authoritarianism.

Almost from the beginning, however, Wahid appeared incapable of achieving the standard of statecraft necessary to balance the competing interests in Indonesian politics. Despite long experience as a leader of the country's largest Islamic organization, Nahdlatul Ulama, Wahid did not make the transition from mass leader to state office. His off-the-cuff statements sometimes had major political repercussions. Early in his tenure in office, for example, Wahid mused publicly about the possibility of a referendum in the rebellious province of Aceh. He floated the idea without consultation or forewarning of interested parties and seemed surprised when it not only created unrealistic expectations amongst Acehnese separatists but fuelled an angry backlash from the military and from nationalistic political leaders, including his then Vice President, Megawati.

Wahid managed to alienate most of his own supporters by repeatedly sacking members of his national unity Cabinet and publicly denigrating other leaders, including Megawati. He very quickly developed bad relations with members of the parliament, at one stage likening them to 'kindergarten children'. Wahid's one major success was winning a stand-off with the then head of the military, General Wiranto, forcing him to resign from his Cabinet position over allegations of Wiranto's involvement in human rights abuses in East Timor. On economic issues, however, Wahid showed very little understanding of the issues and was unwilling to listen to his advisers. While he took some steps to reform Indonesia's corrupt political and judicial system, including decentralising power to the regions, his efforts were fitful and uncoordinated and became paralysed as his confrontation with the parliament deepened.

President Wahid's deteriorating relationship with the parliament came to a crisis when the parliament, in early 2001, issued a memorandum to Wahid to account for his actions in two financial scandals. The issuing of such a memorandum is the beginning of the long constitutional process by which the People's Consultative Assembly, the body which elects the President and which is dominated by parliament, can have the President removed from office. The Attorney General subsequently found that there were no grounds for charges to be laid against Wahid over the scandals but the parliament still went ahead and issued a second memorandum to Wahid, on the grounds that he had ignored the first one. Wahid's refusal to answer the second memorandum provided the trigger by which the parliament was able to call the People's Consultative Assembly to convene to consider Wahid's removal. On 23 July, the Assembly convened, rejected Wahid's decree dissolving parliament and voted the President out of office. Megawati Soekarnoputri was then unanimously supported by those present to take the office of President.⁽¹⁾

The Task Before Megawati

What are the tasks facing the Megawati government and what are the interests that she will have to balance in order to stay in office? First of all, there is the question of economic management. Megawati herself has weak economic credentials, but it is usually said that she has competent advisers and that she listens to them. But in many ways, the economy is a relatively straightforward issue where the policy options are clear. An early agreement with the IMF will help stabilise the currency and restore the confidence of foreign investors. This can restart the flow of foreign capital which has been the missing element in the country's recovery. Strong macroeconomic policy settings will not automatically return the country to the average seven per cent growth it experienced under the New Order, but it will provide a framework for the kind of recovery that other countries in the region have undergone.

But what about reformasi, especially an end to what Indonesians call KKN-corruption, collusion and nepotism? Macroeconomic policy was one of the strong points of the Soeharto regime but the people of Indonesia now expect more than this. Despite some disillusionment since the heady days of May 1998, people want real political reform, increased public participation in political life, a judicial system that functions properly and government services that operate efficiently as well as free of corruption. There is also strong demand for the devolution of government away from the previous heavy centralisation of decision making in Jakarta. Megawati will need to make early moves to reach an accommodation with the elements in Aceh and Papua who are pressing for independence or for some form of real autonomy. The violent social conflicts that have arisen in places such as Maluku (Ambon) and Kalimantan also demand urgent attention.

Many observers, however, have raised doubts about Megawati's capacity to push forward the agenda of political change. Megawati is not opposed to reform but her political record is, at best, a quiet and cautious one. For many years she sat quietly in Soeharto's rubber stamp parliament and did not raise her voice to object to any of the New Order's authoritarian practices or its endemic corruption. When Soeharto forced her out of the leadership of the Indonesian Democratic Party in 1996 he made her a centre of opposition almost against her own will.

Similarly, the new Vice President, Hamza Haz, was never a strong opponent of the Soeharto regime. He actually began his political career as a member of Golkar, the official party of the New Order (although this was many years ago) and he was a minister in the unelected Habibie regime. During the elections of 1999 Hamza Haz was opposed to Megawati becoming President because she is a woman.

But the greatest restriction on Megawati's freedom to move against vested interests, to bring the corrupt to trial and to resolve the legacy of human rights abuses, are the very people on whom she now depends for her presidency. The Indonesian military, for example, which had been pushed into the political background in the last few years, was brought back into the spotlight by the recent standoff between President Wahid and the parliament. On the day before Wahid was deposed, the movement of a column of tanks away from the Presidential palace to a position protecting parliament symbolically demonstrated the military's abandonment of the Wahid government and ensured that Megawati would become president. This critical support will come at a price.

Megawati's Cabinet

Megawati was expected to name her Cabinet very soon after taking office. In fact, she took nearly three weeks to make up her mind, sending out a very bad signal about her capacity to make quick and clear decisions. Yet when she did act, reactions to the make-up of her Cabinet were generally very positive (the Cabinet was announced on 9 August-see complete list at Appendix 1). There were three important factors that would have figured in Megawati's calculations when she was deciding who to appoint to the Cabinet.

The first and most pressing was the potential reaction of IMF and the international investor community. The economics team of the Cabinet was hailed as the strongest point of the new Cabinet because it is made up of figures who can be relied upon to be respected in international financial circles. For example, the Coordinating Minister for the Economy, Dorodjatun, was dean of the School of Economy at the elite University of Indonesia and is a former ambassador to the United States. The Finance Minister, Boediono, is a professor of economics from the prestigious Gadjah Mada University.⁽²⁾ These are the sort of people who can deal with the IMF and reassure investors.

The composition of the Cabinet, secondly, reflected Megawati's political debts to various political party leaders and the military. Megawati's Cabinet, like Wahid's, looks like a mini-parliament, with every major party, as well as the military, having a representative. The idea of Government and Opposition has not yet filtered into Indonesian political thinking.

The Cabinet has a sprinkling of her own party supporters, such as businessman Laksamana Sukardi as Minister for State Enterprises and Kwik Gian Kie as Head of the National Planning Agency. But there is also a number of representatives from the Islamic-based grouping of parties known as the Central Axis, which were at the forefront of the push to remove Wahid from office. The military's stand during the recent crisis, first neutral and later anti-Wahid, has been handsomely rewarded with three positions in Cabinet, including the powerful Home Ministry. The Defence Ministry has gone to a civilian, but one with good links with the military. Golkar, the party of the Soeharto regime, is also present, although its leaders are unhappy that their numbers are not proportionate to their parliamentary representation. The Cabinet is a delicate balance of the different regions of Indonesia, with about 60 per cent of the seats going to Java and the rest to other islands, a proportion which roughly matches the distribution of population in the country.

But Megawati has not allowed herself to be a captive of the political parties. She has clearly asserted herself in the third factor in her calculations-her relations with the parliament. Former President Wahid was overthrown by the parliament, using the indirect instrument of the People's Consultative Assembly. For many months Megawati was reluctant to join this parliamentary campaign against Wahid because she feared that she too could be ousted by parliament if she upset the big power brokers. Her appointment of technocrats and other non-party figures to more than half the Cabinet positions is a clear signal that she intends to uphold the power of executive government against the legislature and the People's Consultative Assembly.

The main disappointment in Megawati's Cabinet is in the crucial area of the legal and judicial system. Indonesia's judicial system is riddled with corruption and almost completely dysfunctional, and its reform is important both as a means of enhancing equity and democratisation and as a way to improve the environment for foreign and domestic business activity. But Megawati's appointment of an Attorney General who is an undistinguished career functionary from the Attorney General's Office has been widely criticised as showing a lack of commitment to legal reform and as a concession to the military. The new Attorney, Muhammad Abdurrahman, played a key role in the weak investigation of the military's human rights abuses in East Timor and is seen as part of the vested interests in the judicial system who are resistant to change.⁽³⁾ The new Justice Minister, Yusril Mahendra, held the same portfolio under the Wahid administration (for about half a year, before he was sacked by Wahid), but showed little willingness or capacity to tackle corruption and incompetence in the judicial system. His main credential appears to be his membership of a Central Axis party to which Megawati has a debt to repay.

Most international and domestic observers were surprised at the adroitness demonstrated by Megawati's skilful shuffling of the various interests clambering for representation in her Cabinet. But it remains to be seen whether such a disparate coalition can function as an effective government and not be subject to the same instability and membership turnover that characterised Wahid's administration. The political and constitutional realities of Indonesia dictated that the Cabinet had to have representatives of every major party and the military, but maintaining unity and policy coherence will be a difficult task for a politically untested President.

New Policy Directions?

It is still far too early to draw conclusions about the policies to be pursued by the Megawati government, particularly since policy issues did not figure at all during the Assembly's discussion of her suitability for the presidency. But inferences about the way Megawati may act can be drawn from her political history and there are some broad indications of Megawati's priorities from early statements she has made. When announcing her Cabinet, Megawati set out a six point program of issues for priority. These were to maintain national unity, to continue political reform, to normalise economic life, to uphold legal enforcement and end corruption, to restore Indonesia's international standing and to prepare for free elections in 2004. In her Independence Day address on 17 August 2001, Megawati spoke of the need to reform Indonesia's 1945 Constitution, decentralisation of government away from Jakarta to the regions, the eradication of corruption, the reduction in the role of the military, the reform of the banking system, the meaning of a 'people's economy', the necessity of gradualness in political reform and the maintenance of Indonesia's territorial integrity.⁽⁴⁾

All the indications are that Megawati Soekarnoputri intends to maintain a safe and orthodox approach in economic matters, with immediate priority to improving relations with international financial institutions and regaining the confidence of international investors. The continuing discussion about a 'people's economy' is a sign that economic policy remains a point of contention between economic nationalist elements and those who argue for a more open economy, as well as an indication of the strongly populist bent of many of the leaders of Megawati's party, the Indonesian Democratic Party of Struggle (PDI-P).

In the coming months a lot of attention will be focused on Megawati's policy on decentralisation. She has a reputation for being opposed to the devolution of government functions away from Jakarta to the regions, a position which is usually ascribed to the influence of her strongly centralist father. The fact that Megawati changed the name of the Ministry of Home Affairs and Regional Autonomy to just Home Affairs and appointed a military officer as Minister is being seen as a sign that there may be some effort to slow or modify the development of regional government. Although the complex process of decentralisation, initiated under the Habibie administration, has taken place in a messy and inefficient way, it is unlikely that it could be reversed without a major backlash from regional interests.

Megawati is often seen as being strongly influenced by the military but this is sometimes exaggerated. Given the continuing role of the military in Indonesia's political life, no politician can be seen to have hostile relations with the generals and Megawati is not alone in her efforts to build support from this quarter. Nevertheless, the military's role in the crisis that precipitated Megawati's rise to the presidency may have boosted its image as the ultimate guarantor of stability and unity.

Megawati emphasised the importance of the reform of the military and the police in her Independence Day address but was careful to sweeten this point with a promise of the provision of 'proper equipment and logistical support'.⁽⁵⁾ Megawati's attitude to the role of the military will be tested most acutely over her handling of the separatist movements in Aceh and Papua, where the army's actions have been accused of worsening the situation. She will also have to deal with the related and highly sensitive issue of past human rights abuses by the military. As mentioned above, her appointment to the position of Attorney General has not given encouragement to human rights activists. Yet, at the same time, the military has not increased its representation in the Cabinet and even the most political of generals agree that the military's role in politics must decline, even if slowly.

Constitutional Change and the Stability of Government in Indonesia

The political crisis that led to the fall of the Wahid government came about because of the peculiar and contradictory relationships between the arms of government set out in the Indonesian Constitution of 1945. There was little or no difference in discernible policy approaches between the parliament and the President. The initial pretext of Wahid's involvement in financial scandals was, as mentioned above, soon dropped after the evidence of his involvement was shown to be thin.⁽⁶⁾

The recent crisis has been seen by some commentators as an example of the vacuum of national leadership in Indonesia, a legacy of the Soeharto regime. As a special Independence Day report in Tempo expressed it: 'The monolithic character of the New Order and its obsession with depoliticisation has diminished the variety and the possibility of alternative leaders'.⁽⁷⁾ The crisis began with parliamentary leaders taking drastic action for short-term political calculations and, for his part, the President seemed to delight in goading the parliament and in refusing to seek some form of compromise.

Of course, short-term and opportunistic actions are a common occurrence in politics all over the world, but an effective constitution could have helped keep ambition in check and facilitate the resolution of political differences. The Indonesian Constitution of 1945, however, has arguably proved itself unable to function effectively in the post-Soeharto environment. It was an interim, provisional constitution drawn up at the time of the independence struggle against the Dutch. Few people expected it to become the permanent constitution for Indonesia and, indeed, it has never functioned in a truly democratic environment. In the 1950s, after a short period under a parliamentary constitution, the 1945 Constitution was reimposed by Soekarno as part of his authoritarian so-called 'Guided Democracy'. And it was also a convenient tool for the Suharto dictatorship.

Now that Indonesia is free of authoritarian rule, the contradictions in the 1945 Constitution are coming to the surface. The Constitution creates a system of government which is very complex and which, in many features, is quite unlike any other system in the world. In theory, Indonesia has a presidential system like that in the United States. The President and the parliament are elected separately and the President does not need a majority in parliament in order to stay in power. But, unlike presidential systems in other countries, the President is not elected directly by the people but is appointed by a third institution, the People's Consultative Assembly.

The People's Consultative Assembly is made up of all the members of parliament, plus people supposedly representing the regions and social groups, but actually mostly controlled by the parties in parliament. So to be elected, the President of Indonesia must, in effect, have a majority in parliament and must keep that majority to stay in office. Indonesia has a presidential system, but it has a parliament that can, indirectly at least, depose the government as a parliament can under a Westminster or parliamentary system. If the parliament is a rubber stamp, as it was under Soeharto, this contradiction presents no problems, but when the parliament is elected it will naturally be inclined to exercise the powers at its disposal. It was this situation that created the impasse that led to Wahid's downfall.

Recognition of this reality motivated Megawati to include constitutional reform as one the priorities for her new government. She has called for the establishment of a constitutional commission to consider amendments to the 1945 Constitution. Although her ascent to power was facilitated by the peculiarities of the existing Constitution, she has been concerned that she might be deposed in the same way as Wahid if she were to lose parliamentary support. The proposal has been backed by Amien Rais, the Speaker of the People's Consultative Assembly, which is the body charged with the power to amend the Constitution. Predictably, however, Rais has insisted that the process must exist under the auspices of the Assembly, while non-government organisations have called for maximum public consultation.⁽⁸⁾

Constitutional reform has been a topic of debate since the end of the Soeharto regime but recent events have brought the subject into sharp focus. Although the Indonesian political scene has stabilised for the moment, many people are arguing that without a thorough reworking of the 1945 Constitution, there will be a recurrence of such crises. The downfall of President Soeharto was not just a change of government it was a change of regime. It should not be surprising that such a transition demands fundamental rethinking of the structure of government.

Australia's Interests

Australia's relations with Indonesia in the post-Soeharto period experienced substantial strain and tension over the East Timor issue, especially in the lead up and aftermath to the UN-supervised ballot on 30 August 1999. Relations have since been improved by high level dialogue, particularly through the meetings of the Australia-Indonesia Ministerial Forum in December 2000 and President Wahid's visit to Australia in June 2001. This process should continue under the new government. President Megawati has indicated that her initial priorities in foreign relations will focus on Indonesia's ASEAN partners. The prospect of more stable economic management under the new Cabinet should assist Indonesia in working towards re-establishing its position as a leading force both within ASEAN and as an active participant more widely in the Asia-Pacific.

Prime Minister Howard welcomed Megawati Soekarnoputri's election to the presidency and noted in his statement on 23 July that 'Indonesia is engaged in a transition to a modern, inclusive, decentralised democracy after thirty years of autocratic and centralised rule. This is one of the most momentous changes in the Post Cold War period'.⁽⁹⁾ Mr Howard moved rapidly to establish direct contacts with the new government by visiting Jakarta on 12-13 August, just after the inauguration of the new Cabinet.

Mr Howard had discussions in Jakarta with President Megawati and a number of figures in the government and parliament. The Joint Communique issued after his meeting with President Megawati reaffirmed the two countries' wide range of common interests, including trade and investment, educational and cultural links, and the significance of continued cooperation to deal with irregular people movements and transnational crime. In the Communique, Prime Minister Howard also 'reaffirmed Australia's commitment to support Indonesia as it addressed its social and economic challenges and to support international efforts aimed at assisting Indonesia's economic recovery'.⁽¹⁰⁾

The Joint Communique 'noted the importance of establishing good relations between East Timor and its neighbouring countries, including Australia and Indonesia' and endorsed continued and expanded regional dialogue to bolster regional security and prosperity. The Communique also addressed the issue of national unity in the following terms:

Conclusion

The new Government of Indonesia under the presidency of Megawati Soekarnoputri has a huge agenda of urgent tasks. The first of these will be to re-establish Indonesia's standing in the eyes of the international financial community as the first step to returning the country to a level of economic growth sufficient to absorb the annual growth in the workforce and to improve overall living standards. Recent experience has, shown however, that economic development cannot be sustained without fundamental political reform. In a rapidly changing and urbanising society, increasing numbers of Indonesians will no longer tolerate state authoritarianism, the plunder of the country's resources by a corrupt minority and abuses of human rights.

After the chaotic administration of the Wahid period, the first signals coming from the Megawati government have been fairly good. Despite the slow start, she showed unexpected political acumen in drawing up a Cabinet which balanced the competing political interests. The key economic seats in the Cabinet have gone to competent individuals and most of the other members of the Cabinet appear to have appropriate qualifications. The biggest concerns have been raised about the continuing role of the military in the Cabinet and in the Megawati administration as a whole and in the poor appointments to the positions that would oversee reform of the corrupt and incompetent legal and judicial system. In the longer term, it is an open question whether a Cabinet composed of all the major parties can hold together and maintain a coherent set of policies.

The change of government in Indonesia was brought about by a constitutional crisis in which the power of the executive was in stalemate with the power of the legislature. In the event, the country came through the crisis without upheaval but it could easily have slipped into violent conflict. The main cost was the total paralysis of government at a time when urgent decision making was necessary. As much as a year has been wasted while the economy stagnated, political reform came to a halt and popular disillusionment with democratic government increased. Indonesia cannot afford such costly diversions and immediate attention must be given to reforming or rewriting the country's current constitution so as the minimise the possibility of a repetition of the events of 2001.

Endnotes

1. The session was boycotted by Wahid's party, the Partai Kebangkitan Bangsa (PKB), the National Awakening Party. The only other party that supported Wahid, a very small party with mainly Christian supporters, also boycotted the Assembly.
2. Boediono holds a Bachelor of Economics from the University of Western Australia and Master of Economics from Monash University. The Minister for Health, Achmad Suyudi, holds a Masters degree from the University of NSW.
3. 'Jaksa Agung pilihan tentara?' (The Attorney General the choice of the military?) Tempo, 26 August 2001, pp. 20-7. The extended cover story discussion given to this issue in Indonesia's premier newsmagazine is an indication of the importance which it is accorded.
4. Republic of Indonesia, Address of State by H. E. The President of Indonesia, Megawati Soekarnoputri before the House of People's Representatives on the Occasion of the 56th Independence Day, 17 August 2001.
5. loc. cit. p. 18.
6. It has now almost been forgotten that the Consultative Assembly threatened to unseat Wahid in early 2000, only six months after he came to power. On that occasion there was no hint of scandal and the reason given was that he had raised the possibility of removing the ban on the Communist Party of Indonesia (PKI). The PKI is a long extinct organisation and unbanning it would have removed the official discrimination against its former members (and their families) that has continued for thirty years. But it touched many raw political nerves because it might also have re-opened old questions about the involvement in the massacres of 1965-66 by leading political figures of the present and recent past.
7. Tempo, 20 August 2001, p. 42.
8. Jakarta Post, 23 August 2001, p. 1.
9. Prime Minister, 'New Government in Indonesia', Media Release, 23 July 2001.
10. 'Joint Communique on the Occasion of the Visit of the Prime Minister of Australia, The Hon John Howard, to Indonesia', Prime Minister, Media Release, Jakarta, 13 August 2001.
11. ibid.

Appendix 1: Cabinet-Republic of Indonesia

'Mutual Cooperation' Cabinet announced 9 August 2001:

Source: Department of Foreign Affairs and Trade Homepage

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