Indonesia's Promise. Indonesia's Peril

Democracy and free speech have blossomed since the Suharto regime was ousted, but growth and prosperity are proving harder to cultivate

By Mark Clifford

It's painful to watch a country in decline. But in Indonesia, decline is in the air, along with a sense of tragic inevitability. It's like watching an aged relative wither. When you ask where Indonesia is heading, it's unsettling to hear people make a comparison to Nigeria. That African nation is another large country rich in natural resources but with a weak and corrupt government that's incapable of building a modern, prosperous nation.

Indonesia wasn't always like it is now. Jakarta buzzed during the late 1980s and through much of the 1990s. Spurred by market-friendly government policies, business boomed. Armies of construction workers built highways around the sprawling capital. The city's business district saw more than a dozen shimmering steel-and-glass skyscrapers tower above the low-rise tropical city, punctuating the red-tiled roofs and tree-lined streets.


  Outside the city, vast industrial estates employed tens of thousands of workers churning out goods for the likes of Sony, Samsung, and Nike. Money poured into the country, despite increasingly corrupt and autocratic rule by President Suharto, the man whose self-proclaimed New Order had forcefully held the country together for three decades.

Today, Suharto lies enfeebled, hounded out of office by violent riots in 1998. His son, Tommy, is in jail, accused of the murder of a judge who held him accountable for a series of deadly bombings. Indonesia's currency fetches less than one-quarter of what it did five years ago, before the onset of the Asian financial crisis.

Since the Suhartos were booted out, it's hard to find anyone who looks on the old days with any nostalgia. The freewheeling Indonesian press has an edge it never enjoyed before. Parliament -- which, under Suharto, was a rubber-stamp affair that met infrequently -- now is a boisterous body with 11 political parties.


  A sweeping regional autonomy bill has shaken Jakarta's grip on power and returned it to the provinces. Tommy Suharto's arrest and the detention of the head of the former ruling party, both of which occurred in the past two weeks, are signs of a new transparency and a budding rule of law. Consumer spending continues to power some parts of the economy.

Nonetheless, the decline in Indonesia was shocking to me when I revisited earlier this month. This is the world's fourth-most-populous country, with 220 million people, yet its tiny neighbor Singapore, with a population of just 3 million, has a larger economy.

Indonesia's government professes to be pleased with a low inflation rate and annual growth of 3% to 4%. But that barely keeps up with population growth running at 1.6% a year, and it doesn't begin to provide jobs for the millions of people attempting to enter the workforce each year. The country has perhaps 45 million unemployed workers. Shaking down people for bribes is far too common, and corruption reaches into high levels of government.


  Even by the most optimistic estimates, the economy won't reach its pre-Asian crash levels for two years. On a per-capita basis, it'll take even longer. Indonesia is one of the world's most productive agricultural countries and was self-sufficient in rice under Suharto, yet the government announced it will import rice again this year. Large parts of the capital were under water at the end of February, as the city's sewer and runoff systems proved unable to handle heavy rains.

Yet many Indonesians still blame outsiders for their problems. And too many still see trade and economic reforms as a zero-sum game. A Jakarta tech executive whined to me about the money that Indonesian students spend on education in Australia. He believes they should instead be focusing on what they could contribute to their country on their return. He didn't seem to understand why Indonesians go overseas to get an education in the first place.

Much of the problem starts at the top. Those who know her say President Megawati Sukarnoputri has a Javanese belief that it was her destiny to become President, following in the footsteps of her father, the revered nationalist Sukarno. Having won the job last August, Megawati has achieved the destiny. But having ascended to the presidency by doing nothing, she acts as if she can rule passively. Suharto, too, thought it was his destiny to be President of Indonesia. But, as a Jakarta-based scholar reminded me recently, he also thought it was his duty to develop Indonesia.


  "Mother Mega," as the nation calls her, seems to have no such ambition, even though she's the fourth President in as many years. Despite the difference in style between Megawati and her orator father, she runs the danger of repeating his mistakes. Sukarno left the society and economy in such a shambles that the way opened for Suharto to take power. While he considered development his duty, his strategy was fatally flawed. Suharto was unwilling to build the civil institutions, especially a strong legal system and a free, responsible press, that would have ensured a firm foundation for development.

I'm too much of an optimist to believe that it's Indonesia's destiny to remain poor forever. This is truly a vibrant country, rich in resources of all kinds. Unfortunately, Megawati and most of the rest of her government seem to be doing their best to prove me wrong.

Hong Kong-based Asia Regional Editor Clifford has been visiting Indonesia since 1989

Edited by Douglas Harbrecht

Before it's here, it's on the Bloomberg Terminal.