The Limit of Political Compromise and Technocracy

While the former was necessary for a new democratic regime to be formed, economic reforms are needed for the benefits of democracy to be distributed to all citizens. Failures to implement economic reforms often inhibit democratic consolidation. In light of these difficult tasks of carrying out both political and economic reforms, Indonesia’s experience in dealing with democratization and economic reforms in the late 1990s and early 2000s deserves special attention. It is true that Indonesia’s political and economic conditions are still far from perfect. Yet it is equally true that the country has made a number of progresses in reforming its political and economic system. What are the necessary conditions for sustained political and economic reforms? Why has Indonesia’s record in dealing with economic and political reforms been mixed at best? While not specifically aimed at answering these questions, Reinventing Indonesia offers invaluable information that can be used to answer such questions. Co-authored by a former bureaucrat and an adviser to the government of Indonesia during the last years of Soeharto and Habibie’s transition period,[i] the book offers an insider’s views about political and economic processes during the critical period of Indonesia’s political and economic reform years.

Political Compromise and the Power of Technocrats
In a chronological order, Reinventing Indonesia traces the development of Indonesia’s economy and politics from the rise of Soeharto in the mid-1960s, economic liberalization in the mid-1980s, and the economic crisis in 1997, which subsequently brought down Soeharto’s power in 1998 and the appointment of B. J. Habibie as the new president to replace Soeharto. Yet the core argument of the book lays in Chapter 7, which chronicled Indonesia’s efforts under Habibie’s and Wahid’s presidencies to deal with economic and political crises after Soeharto’s resignation on 21 May 1998. Despite mounting economic problems, and massive criticism from opposition groups, student activists and popular protests against the appointment of Habibie as the new president, Habibie was politically resilient, and succeeded to make a number of achievements in both political and economic areas during his short interregnum (May 1998 - October 1999). While not explicitly, Ginandjar Kartasasmita and Joseph Stern opined that Habibie’s success to preside over Indonesia’s transition period owed much to political compromises that Habibie made with the key elements of the previous regime, and technocratic expertise of his economic team.

First, to gain political legitimacy for his presidency, Habibie expanded his political support by including in his cabinet representatives from various political backgrounds. He brought into his political bases three major components, namely the military, Golkar, and political Islam. From the military in particular, Habibie recruited Soeharto’s allies such as Wiranto on the ground that the former president still had power in the military so that it is important to neutralize Soeharto’s threat to the new government by recruiting military figures such as Wiranto (pp. 139-40). This strategy proved to be effective for Habibie to achieve his political purposes. Combination of the military, Golkar, and his supporters from modernist Islamic groups was instrumental for Habibie to carry out a number of reforms such as restoring the freedom of the press and association, separating the police from the military, liberalizing political prisoners detained under Soeharto, and promoting regional autonomy and decentralization. Most importantly, the successful implementation of a democratic election for members of the legislature in 1999 will be considered as one of the most important legacies of Habibie’s presidency.

In economy, Habibie recruited into his cabinet mostly “professionals with advanced degrees or credentials” (p. 132). This included technocratic figures such as Ginandjar Kartasasmita, Boediono, and Bambang Subiyanto. Under the leadership of Kartasasmita as the Coordinating Minister for the Economy, the government took immediate measures to restore macroeconomic stability with the support of the International Monetary Fund. Recognizing the need for wide support public, the government also consulted with leading economists, domestic investors, and prominent figures of civil society before taking important policy decisions (p. 153). Partly as a result these efforts, Indonesia’s economy under Habibie was improving quite considerably. It is a fact that when Habibie came to power in May 1998, Indonesia’s economy was much worse than it was in the beginning of the economic crisis in 1997. Capital flights intensified due to Soeharto’s mismanagement of the crisis, and his conflict with the International Monetary Fund over the course of economic reforms. The outbreak of riots in Jakarta and other cities, which disrupted distribution networks of basic supplies, further deteriorated the economy. The rupiah depreciated steeply, inflation surged, and the price of food, fuel and other basic necessities rose significantly. Yet a number of economic reforms taken by Habibie’s economic team succeeded to address these problems, and restored the country’s economic stability. As noted by the World Bank in July 1999, Indonesia “appeared to have navigated the most treacherous passage of the crisis” and that “Indonesia stands on the cusp of recovery” (p. 170).

The Limit of Political Compromise and Technocratic Power
In Chapter 8, Kartasasmita and Stern went further to discuss Indonesia’s political and economic performance under Wahid, who was elected democratically by the People Consultative Assembly (Majelis Permusyawaratan Rakyat) on the 20th of October 1999. In line with their proposition on the significance of political compromise and technocracy in carrying out political and economic reforms, Kartasamita and Stern showed how the elimination of technocrats from Wahid’s administration, and the collapse of political coalition that supported the rise of Wahid contributed to the poor performance of his administration. Although the initial formation of Wahid’s cabinet was not anti-technocracy, as there were some technocratic figures in the cabinet, cabinet reshuffles by Wahid dismissed figures with strong technocratic credibility from his administration. Furthermore, the reshuffle also disrupted the unity of political coalition that brought Wahid into power. Reflecting the anger of his political coalition members, Amin Rais, the chairperson of National Mandate Party (Partai Amanat Nasional) stated that “the new Cabinet did not serve the interests of the country, composed as it was to serve the interests of Abdurrahman Wahid” (p. 206).

While there are some elements of truths in Kartasamita and Stern’s point, that the elimination of technocracy and disruption of political coalition contributed to the poor performance of Wahid’s administration, economic and political deterioration under Wahid’s presidency raised an important question about the sustainability of reforms under political compromise and technocracy like the one pursued by Habibie. This question is important for the fact that Wahid presided rightly over political and economic institutions left by Habibie. If Habibie’s political compromise and technocracy really succeeded to reform Indonesia’s politics and economy, why did Indonesia’s political and economic performance deteriorate easily in just a few months after the end of Habibie’s term? Answering this question require us to dissect the effect of political compromise and technocracy on political and economic reform critically. While technocrats are likely to work with economic actors regardless of their political origins or orientations, political compromises made it difficult for Habibie’s administration to “to sweep away the very interests and forces incubated within Soeharto regime, which underpinned and defined it” (Richard Robison and Vedi Hadiz, Reorganising Power in Indonesia, London and New York: Routledge, 2004, p. 10). Shortly after the crisis, these interests could reorganize themselves and exert influences over Indonesia’s economic and political institutions. It was these forces that whoever presided the country after Habibie had to face while running the government. Unfortunately, while being critical against Wahid’s presidency, Kartasasmita and Stern did not apply the same lens of criticism while assessing Habibie’s period. Despite this weakness, however, Reinventing Indonesia will be certainly of important reading for students of politics, comparative political economy, and economics, especially those with major interests in political economy of reforms and Indonesia.

[i] The first author, Ginandjar Kartasasmita was as the Coordinating Minister for the Economy under Habibie’s presidency. Before that, he had served in a number of different cabinets under Soeharto. Kartasismita served as a Coordinating Minister for Economic, Financial and Industrial Affairs (1998-1999), State Minister of National Development Planning/Chairman of the National Development Planning Agency (1993-1998), and Minister of Mines and Energy (1988-1993). Meanwhile, Joseph Stern was a chief of technical assistance project between the government of Indonesia and the Harvard Institute for International Development (HIID) between 1990 and 1999 (pp. xiii-xiv).