Day 2: On the Road to Democracy

Reinventing Indonesia

Day 2

On the Road to Democracy

Graduate School of Asia-Pacific Studies
Waseda University, 14 February 2007

The Habibie Administration

The objectives:
as the country was deep in crisis, a continuation of
policies, especially in the economy, should be
maintained;
it had to be rid of the characters whom people saw as
the personification of nepotism;
it should reflect the spirit of reform, and
be broadly representative of Indonesia’s various
shades of interests and political aspirations.

GSAPS-2007-Day2 www.ginandjar.com 2

The Habibie Administration . . .

The agenda:
Foremost in the political agenda was the repeal of
the
th much-reviled political l
h il d liti l laws th t were th
that the
foundation of the New Order political system—the
laws on political parties elections and the
parties, elections,
representative assemblies.
On the economy, the priority was to alleviate the
impact of the crisis on the populace, especially
those who were economically weak, and to get the
economy on its feet and moving again.


Inauspicious beginning
Habibie started his presidency amidst widespread
misgivings.
The
Th country was in deep political t
t i d liti l turmoil.
il
His claim to presidency was questioned.
The
Th resignation of Suharto had not halted th
i ti f S h t h d t h lt d the
demonstrations and protests.
Many opponents of the New Order shifted their attacks
to target Habibie.


Inauspicious beginning . . .

His biographer, Bilveer Singh (2000), acknowledges that
Habibie brought with him many negative images of a
negative record “including his penchant for ’wasteful
record, including wasteful
mega-projects’, his poor or lack of understanding about
the workings of the economy, his lack of acceptance by
g y, p y
ABRI (the Indonesian military), of being a front or tool for
Islamic fundamentalism, and probably worst of all, of
being hi h
b i nothing more than a pawn and puppet of S h
d f Suharto.””


The legitimacy dilemma
Habibie’s
H bibi ’ presidency f
id from th b i i was plagued b
the beginning l d by
doubters of its legitimacy.
One argument against Habibie s legitimacy was based
Habibie’s
on a technicality: the way by which the transfer of the
presidency was performed.
Other more serious arguments against Habibie taking
over the presidency were based on legal and
constitutional grounds
grounds.


The legitimacy dilemma . . .

In line with the message of the constitution the President
received his mandate from the MPR, and therefore if he
resigned, he had to return the mandate to the same
institution—the MPR which would th withdraw th
i tit ti th MPR, hi h ld then ithd the
mandate and gave it to a new president.
Others argued that Suharto and Habibie was a
g
“package” elected by the MPR—and Habibie was
Suharto’s choice for vice president— when Suharto
resigned, Habibie s ou d a so go, a d the MPR s ou d
es g ed, ab b e should also and e should
appoint a new president (and vice president).



On the other hand Habibies’ suporters argued that the
constitution stipulated that should the president die or
resign,
resign be removed or disabled from executing the duty
of the presidency, the Vice President should replace him
until the expiry of his term.
p y
That should mean that Habibie had the constitutional
right to hold the presidency until 2003.


Within the government, among the cabinet ministers,
there were also some doubts as to whether the
government should continue until the former president’s
term ended.
They were of the opinion that the present government
was only “transitional” and a fresh general election
should be undertaken to establish a new mandate from
the people.
It was based not on the question of constitutional
legitimacy because the message of the constitution was
very clear, but more on political and moral grounds.



To
T many of his critics it was difficult t separate th
f hi iti diffi lt to t the
figure of Habibie and Suharto, and the ascension of
Habibie to presidency could only happen because of that
p y y pp
particular relationship.
For Habibie to be able to claim political and moral
legitimacy, h h d t get th mandate f hi
l iti he had to t the d t for himself.
lf
Many saw the existing MPR as lacking the legitimacy to
decide on who should be the next President as it was
President,
the same MPR that elected Suharto unanimously less
then three months before.
Therefore, they argued, a new election should be held as
early as possible.



After an intensive behind the screen political
behind-the-screen
consultation, a consensus within the government
emerged that an early general election should be called.
The decision to call for an early election however had to
overcome a legal hurdle.
The MPR had decreed in the March 1998 general
session that in accordance with the five-year presidential
term, a general election should be held in 2002 to elect a
new president in 2003
2003.
And only the MPR could revoke and amend an MPR
decree.


MPR Session
According to the constitution the MPR meets in:
constitution,
General session
Special session
During the New Order, MPR met only once in five year in
general session to elect the President
President.
With reform, MPR meets every year in annual session to
receive reports from the executive, the parliament, the
Supreme Court the Supreme Audit Board and the
Court, Board,
Supreme Advisory Board.


People’s Consultative MPR is manifestation of the
Assembly (MPR) people sovereignty has the
authority to:
Amend the Constitution.
Elect the President and/or
Vice President.
Parliament Regional Functional Impeach the President
(DPR) Representatives Group and/or Vice-President.
Determine the State Policy
Guidelines.

Elected directly Elected by Appointed:
by the people Regional Representative of mass
Assembly organization and Civil
Society


MPR Special Session
The MPR convened a special session on November
10-13,
10 13 1998
The MPR issued decrees on:
1. The rescheduling of the elections
2. To revoke the 1983 MPR decree, requiring a national
referendum to amend the constitution.
3. Withdrawing the extraordinary powers given to the President,
4. On human rights, on corruption, collusion and nepotism —in
which the former President was singled out—
out
5. Revoking the guidance for the propagation and
implementation of Pancasila or P4.
6.
6 Limiting the Presidential terms of office in the unamended
office—in
constitution there was no limitation—to a maximum of two
terms.


MPR Special Session . . .

7. On the economy, the MPR issued a new guideline on
economic democracy.
8. An important decree that would have significant and long-
p g g
term effect on the country’s governance was a guideline on
regional autonomy and decentralization, including fiscal
decentralization.
9. On th l f th ilit
9 O the role of the military, to have gradual withdrawal of the
t h d l ithd l f th
military from politics.
The MPR decisions serve as constitutional basis that
would constitute the foundation for democratization,
improvement of governance, and protection of human
rights, i iti t d or enacted b th H bibi government.
i ht initiated t d by the Habibie t


Opposition against Habibie
The special session of the MPR met amidst a tense
political atmosphere, as students, encouraged by die-
hard opponents of Habibie among the political elite, were
demanding th t H bibi should b b
d di that Habibie h ld be brought d ht down.
In the days leading to the special session the capital was
transformed into a military complex, with security
y p , y
apparatus manning strategic sections of the city.
To support the military efforts the Commander of the
Armed Force Wiranto decided to recruit civilians as
Force,
volunteers (Pamswakarsa).
Unavoidably these groups of vigilantes would clash with
students in various parts of the city, making th situation
t d t i i t f th it ki the it ti
even tenser.


Opposition against Habibie . . .

On the final day of the MPR session things came to a
head.
The carnage occurred in the Semanggi area, in front of
g gg
Atmajaya University, a private Catholic institution, which
had been a hotbed of anti-Habibie students.
In the confrontations that took place in the afternoon of
November 13, shots were fired and at the end of the day
13 had died, among them were four students and one
military personnel.
personnel
Hundreds were injured, many needing hospitalization.


Opposition against Habibie . . .

The incident, which came to be known as the Semanggi
incident
tragedy, left another scar on the national psyche
alongside the Trisaksti tragedy.
Elsewhere a number of members of Pamswakrsa were
lynched by angry mobs, many in a gruesome manner.
After the MPR session ended the opposition against
Habibie had redirected its focus to the election the
following year.
The unseating of Habibie had become the agenda of
many politicians from various political spectra.


Habibie’s Political Pillars
Habibie s

Habibie relied on the support of three political forces: the
military, Golkar, and political Islam.
The ili
Th military under Gen. Wiranto ( f
d G Wi (a former ADC to
President Suharto) was supportive of Habibie.
Both of them being very close to the former president
them, president,
needed and supported each other in the ensuing political
game.
At the onset of his presidency Habibie had vetoed the
opposition from his advisers and senior military figures to
having Wiranto continued in the top military position
position.


Habibie’s Political Pillars . . .
Habibie s

Political Islam was basically sympathetic to Habibie,
regarded as a person who had been able to turn the tide
of long time prejudice against Islam in Indonesian
long-time
politics.
His position as the Chairman of ICMI had helped
improve the stature of many professionals and politicians
with Islamic credentials.
As ICMI gathered Muslim intellectuals from various
backgrounds, Habibie’s support among political Islam
had become more widespread.


Habibie’s Political Pillars . . .
Habibie s

The opposition to Habibie mounted by students based in
the campus of a Christian university also had driven
many Muslim students to support Habibie, or at least
Habibie
choose not participate in the movement directed against
Habibie.
Unlike the united front against Suharto shown by the
students in May 1998, the students were no longer as
united with regard to Habibie
Habibie.


Communal Strife
In the meantime the security apparatus had to deal with
meantime,
communal strife in several regions of the country: In East
Java (Banyuwangi), Maluku (
( y g) (Ambon), South Sulawesi,
)
and West Kalimantan.


Aceh
Another trouble
A th t bl spot fl d up i A h th westernmost
t flared in Aceh, the t t
province of Indonesia.
Aceh had been long simmering in conflicts between
separatist elements of the population and the
government forces.
During the New Order the separatist movement was
harshly dealt with through military action.
At the end of the New Order the situation had been put
Order,
under control and the rebel movement had become more
or less dormant, although there were still remnants of
g
rebels under the name of Free Aceh Movement
(Gerakan Aceh Merdeka or GAM).


Aceh . .
Aceh.

In early 1999 however the situation began to heat up
1999, however,
again.
The immediate cause of the upsurge of hostilities was a
p g
series of kidnappings and killings of soldiers, some of
whom were on leave.
The military mounted an operation to respond to the
attacks and the situation further escalated.
In the process many civilians became victims of the
ensuing violence, provoking outcries of brutality and
violence
human rights abuses by the military.


Aceh . .
Aceh.
In September a law was passed that gave Aceh a
special status (Law No 44/1999).
The new law on fiscal decentralization (Law No 25/1999)
provided the province with a certain degree of authority
over, and substantial returns from, their natural wealth,
particularly from the gas fields in Arun.


Aceh . .
Aceh.

Thus two of the main grievances, the demand for syariah
law and equitable distribution of resources, had been
basically addressed
addressed.
However the relaxation of the security situation was
exploited by GAM as a way to expand their control of the
territory and population.
At the time Habibie left o ce in Oc obe 1999, the
e e ab b e e office October 999, e
conflict in Aceh had been not resolved.
(The Aceh conflict would only be resolved after the Government
was ready to negotiate and reach an agreement with GAM; The
Helsinki agreement signed on August 15, 2005 in Helsinki, Finland)


Papua

Irian Jaya (Papua) was another hot spot. The province had been
plagued by separatist movements demanding independence for
y
years.
As in Aceh, this separatist movement was triggered by feelings of
injustice suffered by the people of West Irian (Papuans), which,
though was one of the naturally richest provinces of Indonesia,
remained th most b k
i d the t backward i th whole nation.
d in the h l ti
A Law was later passed to allow for a special status for the Province
of Papua, including economic privileges (Law No. 21/2001).
On J l 17 2006 Pap a was divided into 2 pro inces Pap a and
July 17, Papua as di ided provinces: Papua
Western Irian Jaya.


The economic quagmire
The economic situation at the time Habibie came to
power had grown much worse less than a year after the
financial crisis hit the economy.
Due to the upheavals in May, the distribution networks
had been seriously damaged.
Basic supplies were disrupted Rice cooking oil sugar
disrupted. Rice, oil,
and other essential items became scarce and prices
were rising.
Rice imports had to be increased because of the
prolonged drought.
Due to the sudden surge of imports—amounting to 4.1
g p g
million tons for fiscal year 1998/99—prices in the
international markets soared.


The economic quagmire . . .

The increased cost for import meant more pressure on
the country’s depleted foreign exchange reserve.
To make matters worse, overseas banks continued to
refuse to honor Indonesia’s letters of credit, meaning that
all imports had to be paid for by cash.
Public transportation was also disrupted because of the
lack of spare parts, a substantial number of which had to
be imported.
As a result exportation of manufactured goods was
result,
disrupted at the time when Indonesia’s exports should
have actually enjoyed an advantage because of the
huge d
h depreciation of th currency.
i ti f the



The heat generated from political tension did not help the
economy.
F i i t t
Foreign investors stayed away, and i t d of i
d d instead f incoming
i
capital, rampant capital flight took place.
By the time Habibie s government took office the
Habibie’s
economy was out of foreign currency.



Domestic companies were struggling for survival Many
survival.
had simply stopped paying their debt, domestic as well
foreign.
The default made the condition of the already battered
banking sector even worse as the volume of their non-
p
performing loans suddenly j p
g y jumped.
The Indonesian banking and corporate sectors were
both in a downward tailspin, each pulling the other
further down
down.
The amount of foreign debt owed by Indonesian
companies was staggering.
By March 1998 the total amount of private foreign debt
had reached $84 billion, around $30 billion due in 1998.



Without a way out of the debt burden Indonesian
domestic companies would remain paralysed.
With the steep depreciation of the rupiah, the rise in food,
p p p
fuel and other commodities, inflation surged. Between
January and May 1998 inflation had reached 40%.
During the same period the year before it had been less
than 3%.
By the end of August inflation had reached 70%.
Because of the collapse of many i d
B f h ll f industries and
i d
businesses, unemployment increased, and with the high
level of inflation, the number of poor families also
p
increased substantially.



The progressive reduction of poverty one of the most
poverty,
significant achievements of the New Order, had been set
back.
Poverty levels went from 11% in 1996 poverty to 24.2%
of the population or 49.5 million by the end of 1998.
In year 1997-1998 the number of wage earners decline
1997 1998
by 5.1%, while at the same time real wages declined
sharply by 35%.
Illustrating the resulting re migration from the city back to
re-migration
the rural areas is the drop in the employment of the
manufacturing sector by 9.8%, while in the agricultural
sector, employment actually i
t l t t ll increased b 13 3%
d by 13.3%.



Indicating the
I di ti th pressure exerted on th meager economy
t d the
in the rural areas as urban employment was shrinking.
The impact on social and health sectors was devastating
devastating.
There were medicines shortages because of the difficulty
of importing the raw materials. Those medications that
p g
were available had gone up in price.
Infant mortality was rising. According to a report of the
Minister of Health, in March 1999, two million children
Health 1999
under five years old suffered from severe malnutrition.
There were reports from various regions that children
were dying from malnutrition.



There were talks about a lost generation as a result of
millions of children growing up undernourished, thus
retarding their mental and physical development for
years t come.
to
Many school children had to leave school because their
families could not afford the cost.
Many were forced to find work or other ways to help their
families, including fleeing to the cities to become street
urchins.
urchins
The increasing unemployment and poverty caused a
steep rise in crime.



Especially disturbing—not least from the environmental
protection point of view—was illegal logging, including in
protected forests
forests.
The crisis had by now become countywide.
This created an environmental and health hazard that
added another dimension to the problems already faced
by the cou y
e country.


Laying the g
y g groundwork
for economic recovery

Undaunted by the surrounding political controversy the
controversy,
new government’s economic team immediately
embarked on a series of measures to halt the
deterioration and restart the recovery of the economy.


Laying the groundwork for economic
recovery . . .

The economic recovery agenda consisted of five main
programs:
1) restoring macroeconomic stability;
2) restructuring of the banking system;
3) resolution of corporate debt;
l ti f t d bt
4) continuing with structural reform;
5) stimulating demand and reducing the impact of the
crisis on the poor through the social safety net.


recovery . . .
International cooperation supporting Indonesia’s efforts
at recovery was channeled through multilateral venues:
IMF, CGI, and the Paris Club.
The first IMF LOI under the Habibie’s government was
agreed on June 24, 1998.
Due to the severity of the crisis the agreement was
crisis,
reviewed almost every month during 1998, resulting in
renewed LOI.


recovery . . .
The
Th CGI meeting was co-hosted b th I d
ti h t d by the Indonesian
i
government and the World Bank.
During Habibie's presidency the consortium met twice in
Habibie s
Paris, on 29-30 July 1998 and 27-28 July1999.
Members of the CGI were Indonesia’s donor countries
and international organizations such as the World Bank,
the Asian Development Bank, the Islamic Development
and the European Union
Union.
Two of the biggest donors were Japan and the World
Bank.
Japan usually provided one third of the pledge coming
out of the CGI meeting.


recovery . . .
Another meeting also held in Paris was to reschedule
Indonesia’s sovereign debt under the aegis of the “Paris
Club.”
The rescheduling of debts was essential in view of the
fiscal burden that Indonesia was facing.
There is but one caveat for a Paris Club debt
rescheduling: The country concerned needs to be under
an IMF program.
On September 23, Indonesia successfully negotiated the
23
rescheduling of its debt due to fall in the 1998-99 and
1999-2000 to the amount of $4.2 billion.
It was a much-needed relief to the severe fiscal situation.


Restructuring of the banking sector
The economic team recognized that implementing a
comprehensive solution for the banking system should
be given a high priority.
It was an essential condition for the recovery of the
corporate sector and to get the economy moving again.
The objective was to resolve the financial difficulties of
the weakened banks and establish a sound functioning
banking system as quickly as possible.
Key elements in the strategy involved:
a. measures to strengthen relatively sound banks,
b
b. with regard to weak banks to s t y recapitalize, merge o
t ega d ea ba s swiftly ecap ta e, e ge or
effectively close them, while at the same time
c. maintaining the commitment to safeguard the interest of
depositors and creditors.


Restructuring of the banking sector . . .

The
Th economic team established th t decisions regarding
i t t bli h d that d i i di
individual banks had to be based on uniform, transparent
and publicly known criteria, drawing from the results of
p y , g
portfolio reviews done by international accounting firms.
The remaining 211 banks were subjected to audit, of
which all th 67 b k th t were li
hi h ll the banks that licensed t conduct
d to d t
foreign exchange trading were audited by the “big six”
international aud g firms, a d the rest were aud ed by
e a o a auditing s, and e es e e audited
Bank Indonesia.



Owners and management of the bank also had to go
through a certain fit and proper test.
In March 1999 the government announced that seventy-
g y
three banks, comprising 5% of banking sector assets,
were strong enough to continue without government
support.
pp
Nine banks comprising 10% of banking sector assets
were eligible for joint recapitalization scheme with the
government.
government



Seven banks comprising 3% of banking sector assets
had failed the criteria for joint recapitalization, but due to
their size —having more than 80.000 depositors —they
were t k over by IBRA and
taken b IBRA; d
Thirty eight banks comprising 5% of the banking sector
with below the minimum capital adequacy ratio (
p q y (CAR),),
were closed.



The efforts to establish a healthy banking system was
not only limited to bank restructuring.
A strong foundation was needed to p
g prevent similar crisis
in the future and to provide for sound governance in the
banking sector.


Strengthening regulatory and prudential framework for a
sound banking system constituted another important
element of the strategy to reform the banking sector.
In October 1998, the parliament passed the amendment
to the banking la allo ing for major impro ements in
law, allowing improvements
areas of bank licensing and ownership, openness to
foreign direct investment, bank secrecy and
empowerment of IBRA.
t f IBRA
The most far reaching was the new law on Central Bank
p
providing for independence of Bank Indonesia p
g p passed in
May 1999.



The new law on the Central Bank was intended to
reduce the danger of moral hazard and prohibit
government interference in the banking and monetary
policies.
li i
Accompanying the law on the independence of the
Central Bank another law was passed to augment the
p g
authority of the Central bank to monitor the traffic of
foreign currency and corporate external debt.


Restructuring of the corporate sector
The financial restructuring of the private sector was
crucial to the economy, and an essential counterpart to
the banking system restructuring, as a sound corporate
sector is necessary f a sound banking system and vice
t i for d b ki t d i
versa.
The economic team pressed ahead with a
p
comprehensive program of measures to address the
pervasive debt problems of the private sector.
The private external debt team supported by the
team,
government had collected data from corporations on
their external obligations, and had taken the initiatives to
hold talks with representatives of the creditors
creditors.
One of the major policy measures was to empower of
Indonesian Banking Restructuring Agency (IBRA).

Restructuring of the corporate sector . . .

The law on IBRA gives the authority to the agency to
clear the corporate debts that had become public debts
due to the blanket guarantee provided the banking
system in th early efforts to overcome the financial
t i the l ff t t th fi i l
crisis.
The objectives was to revitalize the p
j private sector to g
get
the real sector moving again.


One important aspect of the scheme was to resolve the
problem in the provision of trade financing which had
been severely disrupted.
Another essential part of the corporate debt restructuring
strategy was to the establishment of an effective
bankruptcy system (exit mechanism)
mechanism).
The existing law on bankruptcy was century old having
been inherited from the colonial era, and could no longer
cope with the complexity of modern commerce.
In July the parliament ratified the revised bankruptcy law.



In f th
I further efforts to improve governance, in early 1999
ff t t i i l
the parliament passed the law on the prohibition of
monopoly p
p y practices and unfair competition.
p
The law provides legal guidelines for the prevention of
corrupt practices through the granting of licenses,
special t t
i l treatment and monopolies t certain group of
t d li to t i f
people.
A law on consumer protection was also promulgated
promulgated.
The role of civil society in consumer protection was
constituted in the law.



The parliament also passed a new law on environment
protection providing for a stronger role of the community
and civil society on matters related to environment
environment.
The 1967 law on forestry was revised establishing the
principles of environmental protection equity justice and
protection, equity,
transparency in the forestry management and
exploitation.


Restructuring of the public corporation
The economic team gave particular attention to public
enterprises that still played an important role in the
economy.
To improve their efficiency and governance international
auditors subjected key public companies to special audit.
International auditing companies were assigned to audit
the financial account of Pertamina (state oil company),
PLN (the state electricity company), Bulog (the logistics
agency) and the Reforestation FundFund.


Restructuring of the public corporation . . .

The second round of special audit included the principal
national airline, the port corporations, the domestic
telecommunication company, and the toll road operators.
A master plan on the reform of state enterprises had
been devised including the restructuring and privatization
of state enterprises to improve efficiency, p
p p y, profitability,
y,
and service-delivery and therefore lay the foundation for
future growth.


Improving governance
To
T provide f a stronger legal b i t d fi and
id for t l l basis to define d
criminalize corrupt practices, in May 1999, the
p
parliament ppassed the law on Clean Government.
This law includes provisions requiring fair and equal
treatment from government officials for all people, as
well as th right of th public t seek i f
ll the i ht f the bli to k information about
ti b t
policy-related matters and to express views on those
issues in a responsible manner.
ssues espo s b e a e
Another provision of this law requires that public officials
—elected as well appointed— should report their wealth
before and after taking office, subject t investigation b
b f d ft t ki ffi bj t to i ti ti by
a special commission to ensure that government officials
do not enrich themselves improperly.

Improving governance . . .

It was followed by another law on the Eradication of
Corrupt Practices.
This law provides stronger g
p g guidelines on investigation
g
and prosecution of corrupt practices.
The new law also provides for the establishment of an
independent committee to eradicate corruption
corruption.


Helping the poor
High priority was given on measures to protect the poor
from the worst impact of the crisis.
The strategy consisted of two elements:
a) general economic policies that would have impact on the poor,
and
b) targeted policies for the benefit of the poor.
Foremost in the first prong of the strategy was restoring
macroeconomic stability.
Improvement of the value of the currency and arresting
inflation would substantially improve the economic
condition of the poor, directly and indirectly as the
economy began to recover
recover.
Adequate supply of food and other basic necessities
would reduce the cost of those items.

Helping the poor . . .

To th it d
T the severity and complexity of the crisis th general
l it f th i i the l
economic policies alone were not enough to protect the
p
poor from the worst impact of the crisis without a
p
specifically targeted policy for the poor.
The targeted policies for the poor, or the social safety
net encompassed three broad areas of actionaction:
1. maintaining the availability and affordability of key
co
commodities important to the poo ;
od es po a o e poor;
2. generating employment and maintaining incomes;
3. preserving key social services.



The
Th most important basic commodity was rice.
ti t tb i dit i
A program was initiated in July 1998 to provide 10 kg
(later increased to 20) of rice at about one-half of the
market price to low-income families, covering 17 million
poor families.



To improve purchasing power in rural and urban areas,
the government had set up public works projects
throughout the country to boost incomes of the poor the
poor,
unemployed and the underemployed.
To supplement these efforts food-for-work programs are
efforts, food for work
being implemented in drought-stricken areas of the
country.



Preserving access to critical social services for the poor
constituted an important aspect of the social safety net.
In what was considered by the World Bank as the most
y
successful intervention, among the social safety nets
had been the scholarship and grant program designed to
maintain enrolments and quality of schooling at p
q y g pre-crisis
level.
The program extended to the poorest 6% of students
enrolled in primary schools 17% in junior secondary and
schools,
10% in senior secondary schools.
It also provided grants to the 60% of the poorest in each
category (see World Bank, 1999)
t ( W ld B k 1999).
The program had reached 4 million students.


In health services, the priority was given to the poor to
have access to basic health services and essential
medicines, and prevented malnutrition and micronutrient
deficiencies.
The government made available supplementary food for
young children through the school system and pregnant
and lactating women in poor villages
villages.
This program had reached 8.1 million pupils in 52.5
thousand schools nationwide.


On the cusp of recovery

By the end of Habibie’s presidency, Indonesia was
emerging from the crisis.
Th exchange rate, i fl ti and i t
The h t inflation d interest rate h d
t t had
responded well to the governments economic recovery
policies.
policies
The gradual return of market and investor confidence,
revitalizing the s oc market a d restarted e po s
e a g e stock a e and es a ed exports.


On the cusp of recovery . .
recovery.

Special attention was given to empower the small
business.
The b in
Th numbers i poverty h d also stopped rising.
t had l t d i i
The progress toward recovery had reached the stage
where in fiscal policy the government had shifted its
focus from fiscal stimulus to fiscal sustainability.


Monthly Rate of Inflation
y
(in percent)

Month
Year
1 2 3 4 5 6 7 8 9 10 11 12
1998 7.2 12.7 5.3 4.7 5.2 4.6 8.6 6.3 3.8 -0.3 0.1 1.4
1999 3 1.3 -0.2 -0.7 -0.3 -0.3 -1.1 -0.9 -0.7
0.2 0.7 0.3 0.3 1.1 0.9 0.7
Source: President’s Accountability Speech to the People’s Consultative Assembly of the
Republic of Indonesia in October 1999.


Inflation has been smothered . . .
(12 month percentage change in consumer & food price index)


…and the Rupiah has been relatively stable in recent
months despite political ups and downs
(Rupiah per US$, spot rate daily)


Interest rates have declined . . .
(
(one month Bank I d i
th B k Indonesia certificates and Rupiah deposit of
tifi t dR i hd it f
domestic bank rate)


...as has the risk premium on the Indonesia
...as
Yankee bond
(Spread of Indonesia Yankee bond, in relation to the 10 year US
Treasury Bill)


GDP has stabilized and is starting to recover...
g
(Index of GDP; 1995 Q1 – 100)


…helped, in part, by industrial output
p , p , y p
(production index in selected real sectors)


Poverty Rate Trends
(February 1996-February 2001)
(F b 1996-F b


Laying the foundation for democracy

The recognition of the basic principle of the separation
of powers of the executive, legislative and judicial
branches of government.
g
Revoking the much hated New Order political laws, and
establish new law on multiparty political system, and
free general elections
elections.
Freeing the press from government control and
censorship.


Laying the foundation for democracy . .
democracy.

The dual function of the military was revoked.
The police were separated from the military.
Basic human rights were given strong legal protection
protection.
“Political prisoners” were released from detention.
East Timorese were granted a referendum to determine
g
their own destiny.


Laying the foundation for democracy . . .

In J l
I July 1999 a multiparty election was h ld Th election
lti t l ti held. The l ti
was supervised by an electoral committee of the
p
participating p
p g political pparties and watched by thousands
y
of foreign observers.
It was universally agreed that the election was open, fair
d l The lt fl t d th
and clean. Th result reflected the will of th people and
ill f the l d
thus heralded the re-birth of democracy in Indonesia.


Political Parties and General Election 1999
o
No a t es
Parties Seats Vote (%)
ote
1 PDIP 153 34
2 GOLKAR 120 22
3 PPP 58 13
4 PKB 51 11
5 PAN 34 7
6 PBB 13 2
7 PK 7 1
8 Others 26 10
9 ABRI 38
Total 462
Note: From 48 political parties participating 21 parties represented
participating,


During Habibie’s presidency the government worked
together with parliament to produce 6 laws that
67
formed the legal foundation for the establishment of
the strong p
g political and economic institutions that are
essential to the development of a democratic nation
with a market economy.
Of the 67 laws 16 are on the economy, 32 are political
economy
laws and 19 concern human rights.
Five of the laws originated from the parliament, in itself
a significant departure from political practices under
the New Order, when the parliament played second
fiddle and was regarded as mere rubber-stamp to the
government.
government
It showed that the parliament has begun to establish
itself as the legislative authority in the country.
g y y

Some of the important p
p political laws
Law No 2/1999 on political parties
Law No 3/1999 on general election
Law No 4/1999 on the composition and status of the
People’s C
P l ’ Consultative A
lt ti Assembly MPR
bl MPR,
the parliament DPR, and the regional
representative councils
Law No 5/1998 the convention against torture and
cruelty
Law No 9/1999 the right to freely speak, demonstrate or
st e
strike
Law No 22/1999 on the decentralization of government
down to the district level

Some of the important political laws . . .
Law No 25/1999 on fiscal decentralization
Law No 26/1999 to revoke the 1963 anti-subversive
activities law
Law No 28/1999 on Clean Government
Law No 29/1999 the convention on abolition of all forms
of racial discriminations
Law No 35/1999 put the administration of the whole legal
system under the Supreme Court
Law No 39/1998 on Human Rights
Law No 40/1999 freedom of the press


It was apparent and increasingly acknowledged that it
was during Habibie’s era that the country had rapidly
’
moved towards democracy.
Such a rapid burst of liberalization would have been
highly unlikely were there was no crisis and Suharto still
was president.
These reforms have come from the top, which is not to
top
say that there has been no yearning from the bottom.
Yet many would agree that Indonesians civil society
engaged i d
d in democracy and hd human rights activism h
i ht ti i have
only very recently become sufficiently organized enough
to have significant influence at the level of policy.



It was during Habibie’s administration th t most of th
d i H bibi ’ d i i t ti that t f the
initiatives that significantly accelerated Indonesia’s
democratization were initiated.
The process of democratization had been in conjunction
with the process of economic recovery, one reinforcing
the th
th other on the way up, in contrast with the situation
th i t t ith th it ti
when the confluence of economic and political crises
had brought the cou y do
ad b oug e country down deepe into the abyss
deeper o e abyss.


Ironically
Ironically…

Habibie, who initiated most of the basic economic and
political reforms, failed to get reelected in the
presidential election


The pitfalls

The East Timor issue.
The Bank Bali affair.
The IMF decided that further review of its program
should only be done after the presidential election.


The end of the beginning

October 1, 1999 the democratically elected MPR started
its session.
B th ti the
By the time th MPR b t t
began it fi t session th contest
its first i the
for presidency was between Habibie and Megawati, who
represented the two parties with the biggest electoral
vote.
Habibie had bee nominated by Go a to be its
ab b e ad been o a ed Golkar o s
presidential candidate.
However, as the election time drew closer, a different
political configuration emerged.


The end of the beginning . . .

For ti l d
F some time leaders f from various M li
i Muslim
organizations had been waging campaigns against
Megawati and her p y
g party.
But the campaign against Megawati herself was
particularly fierce. It focused on the fact that she was a
woman, and i th i view I l
d in their i Islam did not allow a woman t
t ll to
lead a nation.



Another issue was her religiosity. Pictures were
distributed showing her “praying” in a Hindu temple.
Some of Megawati’s early supporters d
S fM ti’ l t deserted h most
t d her, t
notably Abdurrahman Wahid, the head of the powerful
Muslim organization Nahdathul Ulama (NU) and founder
of the party PKB, who saw an opportunity become a
candidate himself.
Amidst the controversy surrounding Megawati and the
widespread opposition to Habibie among the populace
as well as among the original reform movement, leaders
of the Muslim parties joined forces in an Islamic coalition.



The
Th coalition was called P
liti ll d Poros T
Tengah or C t l A i
h Central Axis.
Their main objective was preventing Megawati from
becoming president as at that time most of the leaders
president,
of the Central Axis were sympathetic to Habibie.
However they also considered the p
y possibility of a third
y
Alternative.



On 14 October Habibie delivered his accountability
speech. He reported on the challenges that he had to
face when he took over the government and the
progress that the country had made during his
stewardship.
p
He also reported his decision to allow a referendum in
East Timor and its results, and recommended that the
MPR revoke the 1968 decision on the integration of East
Timor and Indonesia.



He l
H also reported th t th i
t d that the investigations of f
ti ti f former
President Suharto by the attorney general about alleged
abuses of power did not find any indication of criminal
p y
wrong doing, and hence were stopped.
On the 19th the MPR voted on Habibie’s accountability
report.
t
With a vote of 355, more than half of the members of
MPR, Habibie’s
MPR Habibie s accountability report was rejected
(against 322 who accepted it).
Habibie effectively was excluded from the presidential
y p
race.



O the 20th th MPR t k th vote f president
On th the took the t for id t
between two candidates: Megawati and Abdurrahman
Wahid.
The result of the vote: Wahid received 373 votes against
Megawati’s 313 votes.
Although many doubted Wahid’s ability to lead the
country because of his physical condition, the vote was a
reflection of a number of factors
factors.



The joined forces of the Islamic parties and the Islamic
factions within Golkar and the supporters of Habibie had
defeated the nationalist coalition of PDI P and nationalist
PDI-P
faction within Golkar.
The reaction among PDI-P rank and file to the defeat of
PDI P
Megawati was ferocious. Riots broke out in various
strongholds of PDI-P, especially in Jakarta, Solo, Bali
and Batam. The worst riots were in Bali and Solo.



After the presidential election the MPR was to decided
who would be the vice president.
Because of her disappointment at result of the
pp
presidential election, Megawati at first declined to be
nominated as vice president.
She was furious about her defeat and suspected that the
same coalition would defeat her again, as by the
morning of the day of the vice presidential election the
Central Axis had come out with their candidate Hamzah
candidate,
Haz from PPP.
After intensive persuasion Megawati finally agreed to run.
M ti th l ti
Megawati won the election, garnering 396 votes against
i t i t
Hamzah Haz’s 284 votes.



When the MPR sessions ended the country new leaders
had been elected democratically. The first time in
Indonesia s history
Indonesia’s history. Democracy had taken its hold
hold.
The next challenge was to consolidate the gain, to make
it endure and bring tangible benefit to the lives of the
people.


Reinventing Indonesia

Democratic Reversal

Introduction
The l ti
Th election of Abdurrahman W hid t th presidency
f Abd h Wahid to the id
itself created another legitimacy problem because of his
p y
party’s lack of support shown in the number of electoral
pp
votes won and the fragility of the coalition that put him in
the presidency.
Th coalition was not b
The liti d
t based on a ““positive” consensus of
iti ” f
having launched the best candidate for the job, but on a
“negative” co
ega e common p a o to s op Megawati from
o platform o stop ega a o
becoming president.
Different elements of the coalition acted this way for
different reasons. It was a fragile coalition that could
diff t f il liti th t ld
easily break when the common interest was no longer
maintained.

Introduction . . .

Megawati’s election t th vice presidency partially
M ti’ l ti to the i id ti ll
solved the problem of legitimacy.
Having Megawati whose party had the largest vote in
Megawati,
the parliament, as his vice president provided
Abdurrahman Wahid’s presidency with the needed
political l iti
liti l legitimacy.
From the very beginning it was clear that Wahid owed
and would depend a lot on Megawati’s support to be
Megawati s
able to effectively rule in a democratic political setting.


On democratic
transition and consolidation
The end of the Habibie government and the election of
the new government by democratic means completed
the transition to democracy.
During his presidency the process of dismantling the
authoritarian system and the establishment of rules and
procedures for the installation of a democratic
government was completed.
It met with Linz and Stepan’s standard definition of when
a democratic transition is complete.


On democratic transition and consolidation
consolidation…

Democracy is consolidated if it becomes the only game
in towns
Linz and Stepan believe that for a democracy to be
consolidated there are five interconnected and mutually
reinforcing conditions (“arenas”) that must exist or be
crafted; that
1) allow and support the development of a free and lively civil
society,
2) an autonomous and valued political society,
t d l d liti l i t
3) a rule of law,
4) an effective state bureaucracy, and
5) an institutionalized economic society.


consolidation…

In earlier writing Dahl advances the idea that “the
that,
consolidation of democracy requires a strong democratic
culture that provides adequate emotional and cognitive
support for adhering t democratic procedures.”
tf dh i to d ti d ”
The implication is that a democratizing country without a
democratic culture rooted in its polity is fragile and could
p y g
whither or even collapse in the face of severe crisis such
as economic downturns, regional or communal conflicts
o political crises
or po ca c ses caused by inept o co up o fractious
ep or corrupt or ac ous
leaders.


consolidation…

Huntington: Democratic culture means that the polity
understands that democracy is not a panacea.
Hence, d
H democracies b
i become consolidated when people
lid t d h l
learn that democracy is a solution to the problem of
tyranny but not necessarily to anything else
else.


consolidation…

Systemic problems would most probably be confronted
by the new democracy as it became more consolidated
and achieved a certain stability, and might include
political stalemate, inability t reach d i i
liti l t l t i bilit to h decisions,
susceptibility to demagoguery and domination of vested
interests.


On democratic transition and
consolidation…
The years after the first democratic government has
come to power are usually characterized by the
fragmentation of the democratic coalition that had
produced th t
d d the transition, th d li i th effectiveness
iti the decline in the ff ti
of the initial leaders of the democratic governments and
the realizations that democracy in itself would not and
ld t ff l ti t
could not offer solutions to major social and economic
j i l d i
problems facing the country.
The c a e ge to de oc a c co so da o is how to
e challenge o democratic consolidation s o o
overcome and not to be subdued by those problems.


The Euphoria
The emergence of the Wahid Megawati government was
Wahid-Megawati
well received domestically as well as internationally.
Even those who at the outset were opposed to
pp
Abdurrahman Wahid’s election accepted the result of the
election as the best as it could be under the
circumstances.
The country came back to normal, demonstrations
stopped, students returned to schools, the warring
factions lay down their arms
arms.
There was high hope for democracy and confidence in
the course that the country was taking. In contrast to
Habibie, Wahid
H bibi W hid was endowed with significant political
d d ith i ifi t liti l
capital at the onset of his presidency.


The Euphoria
Euphoria…

Abdurrahman Wahid had marginal political support in
parliament and with the polity as the election results
showed.
He needed the support of the larger parties that had
larger political constituents than he had.
This recognition was reflected in the way he formed his
first cabinet.
Some commentators were critical of the cabinet
composition,
composition claiming that it didn’t reflect professional
didn t
competence.


The Euphoria
Euphoria…
Although he himself had been the chairman of the NUNU,
the largest Muslim organization, his support was
particularly strong among secular and non-Islamic civil
society that had long been his political habitat
habitat.
He was also revered by international NGOs for his
unorthodox political views, such as his moderate (for
some hi pro) view on I
his ) i Israel.
l


The Euphoria
Euphoria…
His effort to put the military under civilian control also
won him accolades, especially among international
observers.
He appointed a civilian to become the minister of
defense, the first after so many years.
It was also a first when he appointed th N
l fi t h h i t d the Navy Chi f as
Chief
the Commander of the Armed Forces, the top military
p
post that traditionally had been reserved for the army.
y y


The Euphoria
Euphoria…

His idea for a solution to the Aceh problem was to agree
to the referendum that was demanded by the GAM
(Independent Aceh Movement).
Although it was not followed up by actual measures due
to strong opposition from the military and most of
Indonesia’s public as well many Acehnese themselves,
p y ,
his statement on the referendum strengthened his image,
especially among the international media and observers.


The Euphoria
Euphoria…
He also made a statement allowing the raising of the
rebel’s flag on the anniversary of the founding of GAM
on 4 December as part of the freedom of expression.
Furthermore he initiated th negotiation with GAM
F th h i iti t d the ti ti ith
brokered by an international NGO with a base in Geneva.
He had shown lenience toward the independence
movement in Irian Jaya by agreeing to the use of name
Papua instead of Irian Jaya and, as in Aceh, allowing the
flying f the Papuan fl th Bi t
fl i of th P flag the Bintang K jKejora (th M i
(the Morning
Star).


The Euphoria
Euphoria…
Wahid also allowed the ethnic Chinese to celebrate their
holidays openly, as part of the country’s holidays.
In a daring move he stated that the ban on the
g
Communist Party and communist teachings should be
lifted.
This endeared him even more to his admirers especially
admirers,
among western observers and NGO’s.


The Euphoria
Euphoria…
Although he was the head of the largest Muslim
organization and was an established and knowledgeable
Muslim scholar, he set an example of tolerance in
religious practice and b h i i l di th b i ones
li i ti d behavior, including the basic
such as the five-time daily praying and fidelity, and
religious syncretism.


Political limbo
However good his intentions, Wahid’s unorthodox
approach to governance would bring him and the country
a lot of trouble.
trouble
His daring departure from accepted political norms
endeared him to some elites and foreign admirers but it
admirers,
also eroded his political support, which, without
Megawati, was on thin ice any way.


Political limbo . . .

One of the first public rows was over the issue of
opening trade and cultural relations with Israel.
Although the rationale g
g given was appeasing the Jewish
pp g
lobby that was dominant in Wall Street to get them to
help the Indonesian economy, it encountered strong
reaction from among pg political Islam and the Muslim
community in general.
Students from various organizations staged
demonstration all over the country
country.
They were joined by ulama and political leaders from the
Central Axis who were his allies in the presidential
election.
l ti
There were other issues concerning his conduct that had
damaged his credibility among many Muslims.
g y g y


If the above issues had disillusioned the political Islam
and the Muslim community outside his own close circle,
his statements on the referendum in Aceh, and allowing
Aceh
the raising of the rebel flag had eroded his credibility
among the nationalists.
g
His views in regard to similar issues in Irian Jaya had
further distanced him from the mainstream nationalists
who regarded keeping the country together as the
utmost priority.



But h he disclosed th t h wanted t lift th b on
B t when h di l d that he t d to the ban
the communist party and the propagation of communist
teaching he made enemies out of both Muslims and
g
nationalists.
His relationship with the military had also been
deteriorating. Hi public stance on A h and I i J
d t i ti His bli t Aceh d Irian Jaya
had hurt his standing with the military.
His constant accusations of impending coups of
coups,
generals conspiring to bring his government down and
his habit of blaming the military for the disturbances that
happened d i hi presidency h d di t
h d during his id had distanced hi f
d him from
the armed forces.



His hands-off attitude on matters of importance to the
state exasperated many people.
The l k f l d hi had left the
Th lack of leadership h d l ft th government and th
t d the
political situation in limbo.



There was a widespread feeling that he was thrilled by
the trappings of the presidency, and seemed to be more
interested in enjoying it than in discharging the
responsibility th t came with it
ibilit that ith it.
Wahid was seen by many as more concerned about his
image abroad than about addressing the p
g g problems at
home.
His penchant for conspiracy theory and creating
scapegoats based on heresy and the absence of
sufficient proof created confusion not only in the public
but also among his ministers.



He
H accused hi ministers of corruption without giving any
d his i i t f ti ith t i i
proof.
He eventually fired them from his cabinet but did not
cabinet,
follow it up with prosecution, as he should have if indeed
he had proof of their corruption.
He also spoke derogatorily of his vice president.
He completely ignored Megawati in her capacity as his
vice president and disregarded her suggestions
suggestions.



His treatment toward people who were supposed to work
with him and support him —his vice president, his
ministers,
ministers his political allies and the military— would
military
soon throw his government into disarray.
Cracks in the government soon appeared
appeared.



The random firing of ministers without clear explanation
explanation,
many of them political leaders, antagonized the polity.
It triggered a summons from p
gg parliament, which asked the
president to explain his actions.
The parliament did not question his right to change his
cabinet.
cabinet What they demanded the president answer for
was why he publicly said that they were involved in
corruption. The parliament demanded proof of this
accusation
accusation.



As expected, Wahid could not substantiate his
accusation against them.
Alth h the li t t take ti i t
Although th parliament did not t k any action against
him on this matter, by the end of December the
relationship between Wahid and the parliament suffered
because of it.



It became worse when he made a comment that would
be taken as an insult to the intellectual integrity of the
members of parliament, comparing them to
parliament
“kindergarten.”
The government was accused of disunity of being
disunity,
riddled with internal strife, and according to some
observers, “of having too many unprofessional ministers
who were incapable of performing their tasks properly
and who lacked leadership”.



The confusion, uncertainty and inconsistency were
confusion
notable not only because of the lack or absence of
decisions when decisions had to be made, but also
because th were coupled with retractions and
b they l d ith t ti d
revocations of decisions when they were made.
By the end of December 2000, barely six months into his
y , y
presidency, Wahid was losing political ground.
There were voices in the public demanding that the next
MPR annual session should decide on the president’s
president s
political future.



The
Th MPR met annually in the month of August and the
t ll i th th f A t d th
2000 session was scheduled to meet on 7 August.
Prior to the session the PDI-P Golkar and the parties
PDI-P,
belonging to the Central Axis were maneuvering to have
Wahid replaced by Megawati.
By this time, the opposition from the Islamic parties to
Megawati as a presidential candidate had subsided.
However Megawati was reluctant to take the final step
step,
agreeing instead on a compromise solution that would
allow Wahid to continue to be president but for the day-
p y
to-day affairs of the government to be handed over to the
vice president.



Understanding that it was the only way from being
ousted by the MPR, Wahid in his statement indicated his
acceptance of the compromise.
compromise


Dishonoring the deal
However, within d
H ithi days W hid i di t d th t h h d no
Wahid indicated that he had
intention of carrying out his part of the deal.
He announced that he would give Megawati additional
tasks and not additional power.
He did give the vice p
g president some minor tasks with
limited freedom of action.
He dismissed PDI-P, Golkar and Central Axis ministers,
some of whom held important portfolios and replaced
portfolios,
them with people of questionable competence and
background except for the fact that they had close
g p y
personal relationships with Abdurrahman.


Economic slippage
It was expected that the economy would further improve
under Wahid government.
According to a World Bank report instead of improving
the economy was deteriorating.
Early slippages in reforms and an increasingly uncertain
political climate raised risk premiums and contributed to
renewed downward pressure on the rupiah (World Bank Bank,
November, 2001).
The rupiah continued to weaken passing the 10,000 line
to d ll
t a dollar.
Conflicting statements from the president and his
ministers had created confusion and uncertainty,
mirroring the economic limbo during the last months of
Suharto's government.


Economic slippage . . .

Wahid’s forays into economic policies were ill advised
ill-advised
and irresponsible.
They were not based on careful consideration and
y
consultation with the experts, but were intended mainly
to advance his political popularity at the cost of the
economy. y
His statement that the government would increase
substantially the salary of civil servants, admittedly
necessary was not supported by the financial capacity
necessary,
of the government at the time.
His encouragement for people living around the
plantation-estates to just take 40% of the land scared
l t ti t t t j tt k f th l d d
investors away, as the respect for law and of property
had been violated.

Deja vu?
The political and economic limbo took a toll on the
everyday life of the people.
The economic, political and security conditions were
p y
deteriorating.
There were demonstrations against Wahid everywhere.
He responded by mobilizing his supporters and his
supporters,
followers attacked a newspaper office in Surabaya, when
it criticized him.
To h
T show their anger at W hid' opponents hi f ll
h i Wahid's his followers
in East Java had cut trees all over East Java, bringing a
comment from Wahid that it was better to cut threes than
heads.


Deja vu? . . .
Wahid had also shown a preponderance toward
nepotism.
As discussed above he had dismissed ministers who
were not readily willing to accept his wishes or
represented parties that were critical to him, replacing
them with sycophant ministers some previously involved
ministers,
in scandals or questionable activities.
Wahid also had his brother appointed to a top position in
IBRA/BPPPN although he had no background in finance
or banking.
A pattern of nepotism re emerged causing many to be
re-emerged,
reminded of the nepotism charges against Suharto.


Deja vu? . . .
The feeling of deja vu was not only confined to the
political confusion and the resulting stagnation of the
economy.
Rumors flew about corruption in high places, some
finding way into the media.
Abuse of power for personal gains re-emerged into the
re emerged
spotlight: appointment to high position in government
was reportedly traded for money.
In particular the high level jobs in the public enterprises
particular,
were subject to negotiation.


Deja vu? . . .

A lucrative business had developed in dealing with
businessmen who had to account to the authorities their
bad loans and other past business misconduct
misconduct.
Kwik Kian Gie, after his dismissal as the Coordinating
Minister for the Economy revealed that during a cabinet
Economy,
meeting Wahid, insisted that certain “black
conglomerates” should be allowed to continue
undisturbed as entrepreneurs.


Deja vu? . . .

The final blow to the credibility of the Abdurrahman
Wahid government and its avowed agenda to fight
corruption were two scandals involving the president
himself known as Buloggate and Bruneigate.


Democratic reversal
The indirectly related scandals created such public furor
that the parliament was drawn to act.
The parliament created a special commission to
p p
investigate both cases.
On 28 January 2001, the special commission reported its
findings to the plenary session of the parliament
parliament.
On Buloggate, the commission found that there was
strong indication that President Abdurrahman Wahid
“had a role in the release and the use of funds belonging
had
to the welfare foundation of Bulog employees.”


Democratic reversal . . .

On the contribution from the Sultan of Brunei the
Brunei,
commission found, “there was inconsistency in President
Abdurrahman Wahid statement pertaining to the
ti f th t ib ti
question of the contribution of the Sultan of Brunei
f th S lt fB i
indicating that the president has given false statement to
the publicquot;.


The conclusion of the special commission was a serious
matter,
matter because if the parliament adopted it the
it,
parliament could issue a memorandum to the president
warning him and asking him to answer to the findings of
the
th special commission.
i l i i
If the president did not provide satisfactory answers to
the memorandum after three months, the parliament
, p
could issue a second memorandum.
If the president again failed to respond to the second
memorandum,
memorandum than the parliament could propose to the
MPR to convene a special session to ask the president
to account for his conduct.
If the MPR could not accept the accountability, in
accountability
accordance with the constitution, the MPR could
impeach the president.

Instead of following the constitutional procedure to
defend his presidency, Wahid chose to be belligerent.
One day after the special commission submitted its
report to the plenary session of the parliament
parliament,
Abdurrahman made a statement in a meeting with
Indonesia's Islamic university presidents threatening to
issue a presidential decree to declare a state of
emergency and dissolve the parliament if parliament
persisted with the memoranda process.
Since th constitution h d clearly stipulated th t th
Si the tit ti had l l ti l t d that the
president could not dissolve the parliament in any
situation and for any reason, it was seen as an
y
unconstitutional and dictatorial response to a democratic
process.



On 20 May, Wahid summoned the military leadership
May
and served them an ultimatum: If they still did not
support the decree by the end (midnight) of the day, they
would b replaced.
ld be l d
The military brass refused to accede to Wahid's demand
to support the decree.
pp
They also rejected any change in the military leadership
for the moment.
Those who had been offered the job of Commander of
the Armed Forces and chief of the military services by
Wahid refused the offer of promotion.



With the military solidly refusing to give in to his demand
demand,
Wahid turned to the police.
As the chief of police had also made clear his p
p position
opposing the decree, Abdurrahman maneuvered to
replace him with somebody who would support him in his
p
plan to dissolve the pparliament.



As in the case of the army the majority of high ranking
army, high-ranking
police officers jointly issued a statement supporting the
chief of police and urging him not to resign.
They insisted that the police was a state institution and
should not be politicized.
All former chiefs of police also made statements
supporting the position of the serving officers.



To prevent further deterioration of the political and
security situation, on that same day, 20 July 2000, the
leadership of MPR decided to accelerate the special
session that was scheduled to begin on 1 August 2001
to deliberate on the memorandum sent by the parliament
y p
to 21 July.



Wahid
W hid was summoned t appear i f t of th MPR on
d to in front f the
23 July to answer to the charges of the parliament
against him.
g
At 01:10, Monday 23 July 2001 with Wahid at his side, a
President’s spokesman appeared in front of a televised
press conference to read a presidential d
f t d id ti l decree i which
in hi h
the president decreed the dissolution of the MPR, the
pa a e , and e Golkar party and called o e
parliament, a d the Go a pa y a d ca ed for the
holding of a new election within one year.
It was the ultimate of the reverse-democratization
process th t had b
that h d been going on f th past year.
i for the t



From the theoretical perspective, as Diamond (1999) h
F th th ti l ti Di d has
argued, defending the constitution entails more than
defense against blatant overthrow; it means defending
g ; g
constitutional norms, limits and procedures against
subversion or encroachment.
D ti l t l
lid ti involves not only agreement
Democratic consolidation i t
on the rules for competing for power but also
fundamental a d se e o c g restraints o the e e c se
u da e a and self-enforcing es a s on e exercise
of power.
For democracy to be consolidated there most be a broad
normative and b h i l consensus on th l iti
ti d behavioral the legitimacy of
f
the constitutional system, however poor or unsatisfying
its performance may be at any point of time.

Impeachment
On th
O the same day after conferring with the leadership of
d ft f i ith th l d hi f
the MPR, the Speaker of the Parliament sent a letter to
the Chief Justice of the Supreme Court asking for a legal
p g g
guidance on the constitutionality of the president’s
decree.
The
Th supreme court gave its opinion that the presidential
t it i i th t th id ti l
decree was unconstitutional; that the constitution
e p c y stipulated a e president could o dissolve
explicitly s pu a ed that the p es de cou d not d sso e
the parliament; and that according to the constitution the
president was elected by and accountable to the MPR.
As for h ldi
A f holding a new election, th next round of election
l ti the t d f l ti
had already been decided by the MPR and only the MPR
could change its decision.

Impeachment . . .

On the question of the Golkar Party, according to the
new political law, only the Supreme Court had the
authority to dissolve a political party and only if it was
found guilty to be violating the electoral law. Thus, the
supreme court opined, the p
p p , president had no authority to
y
dissolve a political party.
After hearing the opinion of the supreme court, the vote
was taken, and the MPR unanimously rejected the
decree and declared it as illegal.


Impeachment . . .

The next agenda was the presidential accountability
report scheduled for that day.
Since Wahid was not present at the p
p pre-determined
time, a vote was taken to decide:
1) that the president had violated the state guideline by his
absence and refusal to give an accountability report in the
special session of the MPR as determined by the constitution,
and
2) to remove Abdurrahman Wahid as president.
) p
To be sure that there would not be a vacuum in
government, at the same time the MPR also decided
that Vi P id t Megawati b
th t Vice President M ti become th president
the id t
succeeding Abdurrahman Wahid.


Impeachment . . .

The next order of business was to elect the vice
president. The election for vice president was held on 25
August.
There were five declared candidates who were running
in the first ballot.
Hamzah Haz the chairman of a Moslem Party (PPP)
Haz, (PPP),
who was supported by the coalition of the Central Axis
and PDIP, after a third ballot won the election.
The proceeding was widely covered by both domestic
and foreign media.


Impeachment . . .

The nation once again watched democracy in function as
their national leaders were chosen by democratic means.
The young democracy had p
y g y passed a severe test and
proven its resilience by protecting the interest of the
country and the people from a floundering and
incompetent leader.
p


Impeachment . . .

The Abd
Th Abdurrahman Wahid episode i I d
h W hid i d in Indonesia’s political
i ’ liti l
history had demonstrated Huntington’s foresight that
new leaders of democracy might emerge as, “arrogant,
y g g , g ,
incompetent, or corrupt, or some combination of all
three.”
In th t
I that sense they would come t be viewed as no
th ld to b i d
different than their authoritarian predecessors, and may
e e
even be co s de ed as worse, as they have not
considered o se, ey a e o
produced tangible performance in comparison with
authoritarian regimes whose legitimacy were based on
performance,
performance on successes in producing political stability
or economic benefit or both.


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