EXECUTIVE SUMMARY AND RECOMMENDATIONS
Indonesia has undergone an extraordinary transition during the last two years from a society long ruled by a military-backed authoritarian leader to one in which an elected government was installed through an open and largely democratic process. This has occurred notwithstanding massive economic collapse in the wake of the 1997 Asian financial crisis, which aggravated social tensions, including ethnic conflict, in many parts of the country: the anti-Chinese rioting was particularly damaging because it led to the withdrawal of much commercial capital and expertise.
While impressive political progress has been made, Indonesia's crisis is far from over. The key challenges discussed in this report are:
Overcoming the enormous obstacles in the path of economic growth including the restoration of a failed banking system, the restructuring of huge private debts, the reform of commercial law, and measures to remove the many non-economic disincentives to investment.
Indonesia's crisis at present is chronic rather than acute. The nation faces serious political, regional, communal, legal and economic problems and challenges but it is not on the point of breaking up and descending into chaos. On the other hand, the government has not yet been able to show the way forward to a permanent resolution of these challenges.
The purpose of this report, the first in a proposed new series systematically addressing these problems and challenges, is to sketch the overall state of the nation, and to identify in outline appropriate policy responses by the international community. Later reports will address the key issues in more detail; the recommendations which follow do no more than offer broad guidelines.
1. International measures should, as far as possible, support Indonesia's own ongoing programs and avoid imposing external priorities which do not accord with those of Indonesians themselves. It is particularly important that pressures emanating from the international community should not aggravate political and social tensions in ways that could upset the delicate balance of forces which at present is favourable for continuing democratisation.
2. While the IMF¡¦s close supervision over economic policy and continued pressure for change strengthen the influence of pro-reform elements in the government, it should be sensitive to the domestic political implications of its policies, recognising that measures which trigger political upheaval can undo much of the benefit flowing from successful economic reform.
3. The international community should welcome and be prepared to assist constitutional reform, but recognise that its details are for Indonesians to decide, with the objective being eventual compromises with which the large majority of Indonesians feel comfortable.
4. Restored military cooperation with Indonesia should be confined to areas related primarily to national defence until forces involved in internal security duties have been thoroughly reformed. But Indonesia needs a security force that can maintain public order when it is threatened by ethnic, religious and other violence, and the international community needs to consider carefully how it can help Indonesia to transform the present military and police into such a force.
National Unity and Separatism
5. The international community should endorse the current Indonesian government's moves to engage separatists in dialogue, and be prepared to assist it, for example by providing neutral venues and financial support.
6. The international community should recognise that the complexities of communal conflict are so intricate that international pressure can easily be directed to the wrong targets. Humanitarian aid in the wake of communal conflict is necessary and welcome, and efforts to assist in building bridges between communities may be helpful. Any professional training of police or military forces, designed to meet the need for quick and effective intervention if such violence does break out, must be fine tuned so that it enhances peace-keeping rather than repressive capacity ¡X if that is possible.
7. The most immediate focus should continue to be on the accountability of those involved in human rights abuses in East Timor and Aceh. There should be support for the recommendation of the UN Commission on East Timor that an international human rights tribunal be established if Indonesia fails to deal adequately with these cases; but, given the need for Indonesian reformers to manage a fragile balance of political forces, the international community should not rush to judgment here.
8. While recognising that a legal culture based on corruption has become so deeply embedded that quick solutions will be difficult, the international community should be prepared to offer all possible financial and technical assistance in building new institutions.
Jakarta/Brussels, 31 May 2000