Nearly seven months in office, Indonesian President Abdurrahman Wahid can claim great achievements. Despite his blindness and diabetes, he has negotiated a ceasefire with separatist rebels in the gas-rich province of Aceh and staved off a military coup in Jakarta. But things look bleak on the economic front. The Indonesian rupiah, at almost 8,500 to the dollar, has weakened 21% since mid-November, shortly after Wahid took office. And the Jakarta stock exchange, measured in dollars, has slid more than 36% since the start of the year.
Both the currency and the stock market reflect rising investor anxiety over Wahid's ability to turn around the economy. His latest moves have achieved little to reassure investors. Wahid is taking control over economic policy from his official economic policy czar, Kwik Kian Gie--a possible sign of turmoil inside his Cabinet. He also has drawn criticism for sacking the bearers of bad news, such as the head of the Central Bureau of Statistics, which just predicted a disappointingly low 1.5% growth rate for this year, less than one-third the growth rate predicted by Wahid himself. Foreign corporations are also growing alarmed over the often punitive measures now being taken by local officials against their operations in Indonesia's remote provinces.
Yet Wahid maintains that the economy is stronger than outsiders realize, while rumors of discord between him and Vice-President Megawati Sukarnoputri are wrong. On May 17, the Indonesian President spoke to Business Week about these issues. Refreshed by a two-hour afternoon nap, the Javanese Islamic cleric met with Singapore bureau chief Michael Shari in the Istana Merdeka--a restored Dutch colonial palace that serves as the President's home.
Q: What have you accomplished since you took office?
A: Most important, we have achieved preservation of the national integrity for Indonesia. This happened in Aceh and the Moluccas and in Irian Jaya. But that doesn't mean the danger has passed, because now there are so many challenges. Second, there were many things not taken care of by [former President] Suharto, especially in the economic field because of his leaning on the economy just for the benefit of his children and his cronies. I have to rectify that. That's a very hard thing to do. I just hope I will be able to finish that during my administration. Third, we are beginning the rule of law. [In the past,] the law was not practiced.
Q: What's the most pressing priority on your agenda?
A: The first is to solve the economic crisis. That's why now I take the reins of the economy directly by myself.
Q: How are you taking the reins of the economy?
A: The [Cabinet] ministers should be coordinated. The Coordinating Minister for Economy & Finance, Kwik Kian Gie, is only a minister. In a sense, I become the Coordinating Minister's enforcer [laughter]. But we have to be careful to keep economic initiative in his hands. Otherwise, there will be a collision between myself and Kwik. If we collide, it will be disastrous for our economy.
Q: How can you avoid a collision?
A: I think the most important thing is that I should not look like the economic czar. That is Kwik's turf, not mine. For example, I would like to see the role of the government become smaller. That's my idea. Then Kwik has to go along with it. But never did I say, `It's mine.' Every decision is his. I mean, the implementation is.
Q: Is there a danger that economic growth will fall below expectations?
A: [The danger] is caused by the current chief of the Central Bureau of Statistics [Sugito Suwito]. He knows he will be replaced. Because of that, his figure came to 1.5% growth. In Kwik's estimate, growth will be between 3% and 4% in the year 2000. In my estimate it will grow by 5% to 5.5%, because I know the exports, the economic activity, and so forth.
Q: You're saying that the chief of the Central Bureau of Statistics is trying to sabotage the economy?
A: Yes, precisely that. That's the thing about Indonesian bureaucrats. If they know they are going to continue [in their jobs] or be appointed to a new position, they'll give a rosy picture. If not, they will give a gloomy picture.
Q: Why is he being replaced?
A: It's just tradition that after a number of years the chief will be replaced. I don't know his replacement. It's a lady, but she has very, very strong qualifications.
Q: There is a perception that you're turning to trusted advisers. But are they capable of giving you the advice that you need?
A: Look at it this way. I was forced to accept Cabinet ministers whom I didn't know. So when they make mistakes, I take steps to rectify them. And in rectifying them, I have to rely on so-called close advisers. I believe them because I have known them for a long time. As for Rozy Munir [the new Trade & Industry Minister], I have known him for more than 20 years. I know that he has the capacity to become a minister. But the press doesn't believe it.
Q: Why not?
A: Because they are led by somebody. I won't say who. They are against me. They don't want to see me succeed [or] even Megawati. The news that she is boycotting the government is wrong.
Q: What are some of the most immediate dangers facing Indonesia?
A: The danger of disintegration. You see, now it's very easy for people to protest. The unions strike on everything. Then there's the land rights of the tribes. Today [in the Cabinet meeting], there was a report from the minister of education that nearly all the land used to build schools in Irian Jaya [a resource-rich province in the east] belongs to the tribes. They are protesting against the schools while their children are in the schools. It's crazy, you know?
Another danger is too much autonomy for the regions. One local government at the district level in North Sulawesi took Newmont Mining to court. It's rather wrong. There are contracts to be respected. It was because of this that we sent Mines & Energy Minister Bambang Yudhoyono. He reached a kind of compromise in which Newmont provides the local government with $4 million of aid for humanitarian reasons as well as for the development of the area. What's forgotten is that the contracts were made in the Suharto era just to please Suharto's children.
Q: How long will Indonesia have to depend on the International Monetary Fund for assistance?
A: I think in the short run, maybe in two or three years, we will not be encumbering the IMF anymore. But the principles used by the IMF in helping us will stay there--cleanliness, openness, accountability--and staying within the confines of free world trade. In those things we will see the legacy of the IMF.