January 15th 2000

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Articles from this issue:

BOOKS: 'Robert Menzies: A Life', by A.W. Martin


Letter from France - Farm subsidies a fact of life in Europe

DRUGS - Towards a drug free society

EDUCATION - Different abilities; different outcomes

FAMILY - Women and civilisation

The age of depopulation

CANBERRA OBSERVED - Peter Costello: when will he run?


ECONOMICS - Seattle conference: what did it all mean?

INDONESIA - Indonesia's dangerous year


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Indonesia's dangerous year

by Dr Greg Poulgrain

News Weekly, January 15, 2000
Dr Greg Poulgrain looks at some of the issues which arose during Indonesia's tumultuous 1999.

The withdrawal of Standard Chartered Bank from its plan to invest in Indonesia's Bank Bali, as announced last month, is just another stage in the scandal that has continued throughout this year of political tumult in Indonesia. With the Indonesian banking system facing the prospect of only 4% of all bad loans recoverable in the wake of the Southeast Asian monetary crisis, the withdrawal of Standard Chartered Bank cannot be welcome news.

Several weeks ago, there had been a walkout by Bank Bali's main office of several hundred staff who complained that so high was the salary of the handful of Standard Chartered representatives that they were being paid the equivalent of the entire Indonesian staff.

Standard Chartered had agreed in April 1999 to pay US$56 million for a 20% stake in Bank Bali to allow Bank Bali to qualify for recapitalisation. Subsequently, however, the auditors found discrepancies that seemed to implicate the Golkar party and then President Habibie, who was the leading Golkar candidate in the approaching presidential elections in November. This became the Bank Bali scandal.

Because it involved Òmore than US$80 million', according to one Indonesian lawyer dealing with the case, in the post-Suharto era of reform, it seriously undermined if not terminated B.J. Habibie's quest for re-election as President. The money trail led too directly from the controlling owner and president of Bank Bali, Rudy Ramli, to Habibie, so that the incumbent president became in effect a millstone around the neck of Golkar.

Access to Indonesia remains a primary goal of transglobal corporations, although unfettered access as occurred in the Suharto era can no longer be expected. In the opinion of some banking analysts, the withdrawal of Standard Chartered would not discourage foreign investors because ÒIndonesia was too large for them to ignore'.

Habibie's links with German industry were well-known. He had studied there under the patronage of former president Suharto and then risen to the upper echelon of the Messerschmidt administrative/research bureaucracy.

It goes without saying that when some Canberra government officials - Prime Minister John Howard being the most notable - attempted to nurture a 'special relationship' with Habibie, in the hope of bearing fruit in the event of Habibie's re-election, the reality was that Germany already had the advantage. Canberra officials were deluding themselves and the Australian public in believing that geographical proximity alone endowed them with some right to jump the queue when, in all likelihood, Germany was one of the first in the line which also included Japan and the USA.

Upon closer appraisal, this misconception was evident in the aftermath of the February 1999 meeting in Bali between Mr Howard and President Habibie, from which came the denial of the possibility that peace-keepers would be sent to East Timor prior to the proposed referendum.

An early introduction of peace-keepers would have jeopardised Habibie's presidential ambitions: he would have lost face overall and lost crucial support in terms of the seats still held by the army in parliament. Echoing the wish for a 'special relationship', some of Howard's advisers also overestimated the influence Australia had acquired by 'taking up the slack' after Indonesian ties with the US army had seemed to wane when placed under closer scrutiny by the US Congress reaction to the infamous 'Dili-Santa Cruz massacre'.

But the Bank Bali scandal was already gathering political momentum. It put paid to Habibie's presidential ambitions and showed the futility of Mr Howard's overtures to President Habibie.

When the world was shocked by the brutal excesses of the Indonesian army and their paid militia responding to their 'loss' of East Timor, John Howard's intentions that some trade-advantage might have accrued from nurturing the 'special relationship' with President Habibie if re-elected, were replaced by the urgency of the humanitarian crisis.

This came from Howard personally, and his 'regional-deputy' outburst can be seen as official retraction of the attempted 'special relationship'. Ironically, he was 'pulling his horns in' (from the American perspective) although it did not seem like it (from either the Indonesian or the Australian perspective). Canberra's outspokenness on East Timor belies any clarity of political vision.

Clarity was rarely evident during earlier Cold War times throughout the protracted saga of human rights abuse in East Timor, or for that matter in Java in 1965-66.

This subject - 1965-66 when the Sukarno Government in Indonesia was replaced by Suharto - warrants special mention here in view of a claim (made two weeks ago in Jakarta) that a secret agreement was reached between Sukarno and Menzies. When Indonesia took control of Netherlands New Guinea in 1963, Australia was concerned that in the event of a communist government coming to power in Jakarta, the Australian territory of Papua New Guinea would have a contiguous land border of almost 800 kilometres with an Asian communist power.

According to an Indonesian government official who served in West New Guinea during the 1960s, Sukarno promised the Australian government that he had no intention of letting the Indonesian Communist Party attain government in Indonesia, and this statement was welcomed by Australian officials. In return, they acknowledged that the Portuguese colonial territory of East Timor was potentially Indonesian territory.

Whether this claim has any validity has yet to come to light in the Australian archives, or yet to be verified by officials serving at the time. It was Foreign Minister Barwick, who reversed Australian opposition to any Indonesian ousting of the Dutch colonial government in West New Guinea in 1962.

At that time, the local inhabitants were not included in the decision by the Dutch Government - under American pressure - to hand over the vast territory to Indonesia. The transfer of sovereignty came about by means of the New York Agreement, but the terms of this treaty were never fulfilled. That is, the local inhabitants were to decide by 1969 whether or not they wanted to remain part of Indonesia - but this choice was never provided.

On 10 December 1999 - more than three decades after the event - the Dutch Minister of Foreign Affairs, Van Aartsen, has agreed to reinvestigate aspects of the incorporation of Netherlands New Guinea into Indonesia.

As President Habibie discovered to his dismay earlier this year when he invited 100 West Papuans from Irian Jaya (formerly Netherlands New Guinea), the local inhabitants have never accepted that their land should pass from one power to another without the inhabitants themselves expressing their opinion.

The political tension and sporadic armed uprisings that have not abated over the last 36 years since Indonesia took sovereignty of the territory, attest to the fact that many local inhabitants have not accepted Indonesian rule.

On December 1, 1999, in urban areas all across the province, Papuan flags were raised alongside the Indonesian flag in peaceful demonstrations that, in some localities, involved more than 30,000 people. Only at the gold-mine area operated by the US company, Freeport, were demonstrators shot. More than 55 were wounded and (according to latest reports) 15 killed.
Whether or not Jakarta can turn the Papuans' peaceful lack of acceptance into some form of approval will depend very much on the way that the new government of Abdurrahman Wahid and Megawati Sukarnoputri deals with the people of West Papua. And also, how the new government deals with the mining giant, Freeport. The new Indonesian president has proposed to visit Papua New Guinea on the last day of 1999 and step onto West Papuan territory - the locals are insisting there be a name change from Irian Jaya - on the first day of the new millennium.

The issue of autonomy is now the main debate in Jakarta. Several provinces are seeking separation from the government of Jakarta because their natural resources have been plundered by the central government and in return they have received only a pittance. The province of Riau is one, while Aceh in north Sumatra has been fighting an armed struggle for more than a decade against the military power of Jakarta.

Autonomy would bring greater revenue back to the provinces, and the Indonesian state would become more decentralised, but it would remain a unitary state. Some provinces, on the other hand, prefer a federated structure.

Many in Java feel that a Federation would ultimately disadvantage the Javanese whose island is so densely populated but has none of the rich natural resources such as oil, minerals and natural gas, that are produced in abundance in places such as Aceh, Riau and Irian Jaya.

The question of precisely how much revenue should flow back to the outer provinces is yet to be decided. Ominously, it seems that it will be determined not only by the wave of democratic reform that has swept through Indonesia after the political demise of Suharto and in the wake of Habibie, but also by the vociferousness of regional complainants.

One further complicating factor in the autonomy-federation debate is that of the upsurge in popularity of Islam in Indonesia. During the last decade, Indonesian Muslims (particularly in deprived rural areas) became de facto opposition to Suharto who recognised their potential strength. He endeavoured to garner the urbanised Muslim support.

The election of Abdurrahman Wahid, a Muslim cleric, was a reflection of the growing political power of Islam even though it encompasses a range of Islam, of which only a small minority focus on establishing an Islamic state.

This minority does not include Wahid or his mass support, but the speaker of the new parliament, Amien Rais, has openly advocated a Federated structure for Indonesia in the hope that one or more states might then adopt Islamic law.

So those who are promoting a federated structure for a future Indonesia include a variety of causes. And against those who advocate splitting away from the central government, the army - still in a position of power despite the ongoing political reform - has undisguised opposition.

Thus Indonesia faces the new millennium with the promise of the new president to attend to the troubles of his populous country. He will start first with the problems of the people in Irian Jaya - Indonesia's richest province but also one with the potential for differences to be the deepest.

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