REFORM STRUGGLE

June 2, 1998
		Since B.J. Habibie took over the presidency of Indonesia less than two weeks ago, he has attempted to smooth over political problems created during the rule of past president Suharto. Two experts discuss Habibie's attempts at forming a democratic society and how Indonesia is dealing with its current economic problems.

Online NewsHour Special Report: Indonesia Oct. 20, 1999: Wahid selected as Indonesia's president. July 8, 1999: A discussion on Indonesia's election process. June 2, 1998: Indonesia attempts to form a democratic government. May 22, 1998: A discussion on changes in the Indonesian government. May 21, 1998: Indonesia in the wake of Suharto's resignation. May 20, 1998: Should Suharto resign? May 19, 1998: Suharto announces plans to step down. May 15, 1998: A report on the riots in Jakarta. May 14, 1998: Students protest against Suharto. March 10, 1998: A discussion on Indonesia's economic importance. Feb. 27, 1998: Can Indonesia restore confidence in its currency? Jan. 9, 1998: Indonesia's stock markets take a tumble. Browse the NewsHour's coverage of Asia.   Former Indonesian President B.J. Habibie Presidential candidate Megawati Sukarnoputri Indonesian Department of Foreign Affairs	PHIL PONCE: Less than two weeks ago and for the first time in 32 years, Indonesia had a changing of the guard. After months of student protests and days of rioting that left 500 people dead, Indonesian President Suharto resigned. He handed over the presidency to his Vice President B. J. Habibie. With more than 200 million people, Indonesia is the world's fourth most populous nation and spreads over thousands of islands. It's now embarked on an experiment unprecedented in its 50 years of post-colonial history, an attempt at peaceful and democratic transition of power. The newly-appointed president, Habibie, immediately tried to distance himself from Suharto's controversial regime. First, he released two political prisoners arrested under the Suharto regime in 1994 for inciting riots. He then announced that citizens could form political opposition parties and join trade unions.
	Habibie: Under pressure
	PHIL PONCE: The press was suddenly free to write what it wanted. Earlier, the new president said there would be democratic elections but not until the year 2003. Protesters, who have formed new opposition groups like this one, stepped up their calls for immediate elections. And last week, under intense pressure from his cabinet and opposition leaders, President Habibie announced that elections would be held within the year. The student protesters also called for an end to corruption. They wanted the government to seize some of the wealth acquired by Suharto and members of his family. Estimates of the former president's wealth run as high as $16 billion, that of his family $40 billion. President Habibie's cabinet immediately responded, canceling tax breaks for businesses owned and operated by Suharto's son. And yesterday, the Indonesian attorney general announced an investigation into the entire Suharto family and their contracts with the government. These political reforms were being attempted as the country was dealing with the worst economic catastrophe in its modern history, a condition Habibie inherited from Suharto and which has been worsening in the last two weeks. The crisis forced the International Monetary Fund to suspend billions of dollars that were supposed to go to Indonesia as part of an international rescue program. In the country that was once a model of an Asian economic tiger consumer confidence has plunged to an all time low, and inflation has risen more than 50 percent in the last year. The World Bank estimates that growing unemployment will force more than 20 million Indonesians back into the poverty they'd escaped in the last three decades. Banks are in crisis, and the government has accumulated a public debt of more than $131 billion. In the last week fear spread among ordinary Indonesians that their economy was near collapse. Thousands began pulling their money out of banks and buying goods at local markets. The head of the IMF Asia Office told reporters over the weekend that Indonesia had no time to waste implementing economic reforms. HUBERT NEISS, IMF Director of Asian Affairs: With the economy deteriorating rapidly, movement to erase the decline and to initiate the recovery should be taken as soon as possible. Every week delay will make it more difficult. Substantial progress on the political side has been made within a very short time, within days, on human rights, on labor rights, and on other issues, so this is definitely a very positive development. PHIL PONCE: But today the IMF announced that loans from the $3 billion aid package could resume within a few weeks, and the World Bank announced a $225 million loan to reduce poverty.
	A panel discussion
	PHIL PONCE: Now two views on developments in Indonesia. Paul Wolfowitz was U.S. Ambassador to Indonesia from 1986 to 1989, and Assistant Secretary of State for East Asian and Pacific Affairs from 1982 to 1986. He's now the Dean of Johns Hopkins University's Paul Nitze School of Advanced International Studies. Bambang Harymurti is the Executive Director of Media Indonesia, one of the country's largest newspapers. He's here on sabbatical. Gentlemen, welcome to you both. Mr. Harymurti, if you were a doctor assessing the health of Indonesia, what would you say about the status of your patient right now? BAMBANG HARYMURTI, Media Indonesia Newspaper: It's very critical, but, on the other hand, if everybody played a card right, Indonesia can become the third largest democracy in the world. But otherwise, it could be a fairly messy place to be. PHIL PONCE: And when you say people would have to play their cards right, what kinds of things would people have to do in your country? BAMBANG HARYMURTI: Well, I think, first of all, there is going to be a food shortage within two months from now, because Indonesia has been hit badly by two failed crops, also because of El Nino, apart from this political problem. And, you know, the currency worth only one fifth of its worth in U.S. dollars last year, so people are facing a very tough time, so if you are not careful, there might be an appearance of a very strong leader, which may not all of us would be very happy with it. PHIL PONCE: Mr. Wolfowitz, how do you assess the status of Indonesia right now--just a week and a half after this change in power? PAUL WOLFOWITZ, Former State Department Official: I think there is really a historic opportunity. It's absolutely right, that the fourth largest country in the world could move toward democracy in the country, the largest Moslem population of any country in the world. It would really be, I think, something of enormous benefit, not just Indonesians, but to the whole world, including the United States. And at the same time that country is facing an economic disaster that I think is probably worse than our Great Depression, except that we've learned some things about how you fix that kind of problem over the last 60 years, and that those lessons ought to be applied very quickly. And in the meantime I think Indonesia should be getting assistance from the United States and other countries on a massive scale. I think we're behind the curve in that respect. Frankly, I think the president ought to be saying here's a major opportunity threatened by a major economic disaster and let's move out and let's make the resources available. Our children and grandchildren will thank us for taking advantage of this opportunity. PHIL PONCE: Mr. Harymurti, is that what people in Indonesia want? Do they want a massive infusion of foreign assistance? BAMBANG HARYMURTI: Well, most people now feel very afraid of the future, because it's-there are too many unknowns. We don't even know whether we will have the same president next few months from now. People haven't really decided whether Habibie will be the president until the election next year, or he should be removed, and another-you know, more acceptable figure, should be there. So, so many people were paying attention to this political problem, there is a feeling among common people that, you know, no one pay attention to the economic woes. And this is very dangerous for them.
	Does Habibie have credibility?
	PHIL PONCE: As far as President Habibie is concerned right now, how much credibility does he have? For example, do people believe that he really does intend to hold elections within the year? BAMBANG HARYMURTI: Well, there is a Catch-22 problem here, because, on one hand, not many people believe in the credibility of Habibie, but, on the other hand, I mean, time is running short. You need someone at least to take control and do all of this reformation thing, including political and economic, and, you know, have the election. Then you have the real thing. But from now to the next year we need-you know-huge help in food and also maybe in organizing election. You have to remember, Indonesia is very large country from New York to San Francisco, and it's 200 million people. It's 17,000 islands. So I'm hoping that Indonesia would accept the internationalization of the election in Indonesia, because we cannot afford it otherwise. PHIL PONCE: Paul Wolfowitz, you talked about the economic situation in Indonesia being akin or worse than the Great Depression here in the United States. What happens when a country is in transition from autocratic rule to democracy, with that kind of-with those kinds of economic currents? PAUL WOLFOWITZ: It's a big problem. I think it's a mistake to get too hung up on Habibie and whether he's the right president or the wrong president. He's an interim president, and he will do a lot of the right things, because he has no alternative, no choice. He's releasing political prisoners, because he has no alternative. He's allowing a free press because he has no alternative. He will hold elections because he has no alternative. And I think he's already beginning to take steps to dismantle the monopolies. The Indonesian people to a very significant extent are governing themselves already, and it's very impressive. I think one has to give them very high marks for how they managed to remove an autocratic leader who'd been around for 30 years with astonishingly little violence. And, yes, there were the riots, but that actually was an aberration that was caused by the army pulling back. And I think in any major city anywhere in the world if you remove the police, you'll have a riot. They had that in Indonesia, but there was-the students avoided bloodshed; the army avoided bloodshed. I think the Indonesians have shown a lot of maturity. And now what they need is emergency assistance so that people don't starve to death in the next six to twelve months and a lot of expert help at how you rebuild a banking system that has this kind of crushing debt. A lot of our Great Depression was the collapse of our banking system in the panic of 1932, and we didn't know it was even going on, and we didn't know how to fix it. But we've been through a lot of banking collapses, including one in Texas just 10 years ago. We have some useful experience, and I think they now have the political will to take advantage of it. PHIL PONCE: Mr. Harymurti, who is in charge? You talked about that--Mr. Wolfowitz just said that the people have created this change-but even on people-I mean, there are centers of power within the country. What are the centers of power in Indonesia right now? BAMBANG HARYMURTI: The army, obviously-I mean, obviously, the army is holding the country together. I mean, without the support of the army, Mr. Habibie wouldn't even stand, even though they are not very happy with him, but they know they have no other choice. And, of course, the students restrain themselves. They don't like Mr. Habibie, but they know that there are other difficult things to be faced ahead, so it's a matter of how patient you are, whether you can wait until next year before you start really on the political development part of it, and in the meantime you take care of the-you know-economic or the human relief effort, and I mean in food and also in baby formula, for instance, because you have to remember, a lot of people still have fixed income, but the money worth 1/5 of what it used to be, and price has increases almost double or even more. So many people could not afford baby formula, could not afford some other thing that they were having before. The last report is that before we used to have only about 28 million people under what they call absolute poverty level in-definition. A few days ago there was a government report the number had increased to 106 million people. So you can imagine what tremendous problem we are facing now that needs to be addressed quickly.
	A real transition to democracy?
	PHIL PONCE: Mr. Wolfowitz, for the last-more than three decades, one person was in charge. Do you feel confident that the essentials are there for the country to make a real transition to democracy? PAUL WOLFOWITZ: No. I don't want to be overconfident. I said there's a real possibility for it. I would say the Indonesians I've talked to-they're aware that there are two bad alternatives. One is to continue having military pick the government and run the government. That's been the way of the past. But it's not much better to have the largest mob in the street pick the government either. What they need is to have a democratic process, but the rules for that process haven't really-I mean, they don't exist. The rules that Suharto set up were rigged to arrange his re-election. And I think over the next six to twelve months, that's probably the time it takes, they're going to be negotiating rules and, as in our system, everyone knows one set of rules favors one candidate, another set of rules favors another candidate. Ultimately, you want to agree on a set of rules and then have an election and people accept that the person who won by those rules is the next president. PHIL PONCE: By the way, do you agree with Mr. Harymurti that at this point it's largely up to the military whether or not there is a transition to democracy? PAUL WOLFOWITZ: I think, no. I think the military-he's absolutely right-the military holds very important cards and the military, to some extent, holds the country together. But I think if he'd had a little more time, he would have also said, look, there have been two huge Moslem organizations-one a little over 30 million headed by a man named Abdurak Manwahid, one a little less than 30 million headed by Amien Reiss, who also became a leader of the students. These are very important mass organizations that have shown, I think, extraordinary common sense and reasonableness as they have pushed against Suharto. You know, too often we hear nonsense about the Moslem threat in Indonesia. I'm not saying religion isn't an issue. It's always an issue when it gets introduced into politics. But this is not the Middle East, and it's not China either. And it's not Tiannamen. There's been a lot of good sense shown by the various actors, and I think what we have to do is hope-it is hope-that in the next six to twelve months they will negotiate a reasonable set of rules that the country as a whole will agree on. That's a big challenge. It's an even bigger challenge to do it when people are literally starving. So let's help them with the starvation and hope they can do the negotiating. PHIL PONCE: Mr. Harymurti, how much of the Indonesia's transition to democracy or progress from this point on will be dependent on sort of putting the Suharto past behind them? For example, will people sort of have to "forgive" Suharto in some way to advance at this point? BAMBANG HARYMURTI: Well, maybe because Indonesia is tropical country, things, you know, rot quickly. In Indonesia, people tend to be very forgiving. They quickly forget the past misdeeds of other people. So I'm hoping this will be the case here, but you have to remember, Indonesia has undergone 32 years of mass de-politicization process. A lot of the students on the street don't have any, you know, education on how to compromise, how the political process is working, so they have to learn quickly now. But, of course, some of them-we have some good modalities there, because in any given year for the past-you know-maybe decade or so, we have at least 10,000-more than 10,000 Indonesian students who studied here in Indonesia, and maybe another 10,000 in Europe, another 10,000 in Australia, and they're now back in Indonesia. They know what democracy is all about, and they are now playing a part in talking to the students about what the democracy is, and you have to compromise in India, and you can't win them all. I hope this will become a reality, and- PHIL PONCE: Well, gentlemen, I'm afraid we're out of time. I thank you both for being here very much.