ACADEMIC
project on environmental scarcities, state capacity, & civil violence
The Case Study of Indonesia – Section 3
by Charles Victor Barber
World Resources Institute
Cambridge: American Academy of Arts and Sciences and the University of Toronto, 1997
III. NEW ORDER STATE CAPACITY: GROWTH, STRENGTHS, AND WEAKNESSES
The New Order regime wrought vast transformations in Indonesia’s economy and society over the past three decades and systematically reshaped its political landscape. In doing so, the regime strengthened the power and capacity of the state far beyond any of its predecessors, whether measured by control over territory and resources, expansion of the bureaucracy, public expenditure, domination of sociopolitical expression and organization, projection of police power, or delivery of social services.
This transformation has taken place along three main dimensions: economic development, political institutions, and the structure of civil society and its relationship to the state. Natural resources have played an important role in this transformation. Economically, massive exploitation of natural resources, especially petroleum and forests, provided the capital for development expenditures. The political transformation created a system in which natural resource claims that compete with claims by the state are given little outlet for expression, policies are made and implemented in an insular, top-down way, and resource rents are used as a major source of patronage. The transformation of civil society eroded local resistance to the confiscation of resources by elites and the state, and delegitimized local resource management claims and practices.
But the state is neither omnipotent nor monolithic. The success of New Order development policies gave birth to new socioeconomic actors, such as corporate conglomerates, a budding middle class, and a growing number of college graduates. These policies unleashed new social and economic tensions and developed centers of power outside the government, primarily in the private sector. The concerted mobilization of natural resources led to widespread shifts in resource access and control. Those who lost access to resources faced policy-induced scarcities, while those who obtained access gained new wealth and power. These disparities create conflict between the resource rich and the resource poor. While the New Order has grown strong in many ways, it exhibits telling points of weakness and brittleness, which leave it ill-equipped to face contemporary challenges.
Economic Development and Natural Resources
The delivery of sustained economic development to broad sectors of society contributed fundamentally to the longevity and legitimacy of the New Order state. Sustained economic growth also improved state capacity along many measures: the bureaucracy expanded, the state apparatus became more loyal and coherent, and the government became more effective in implementing change on the ground. Systematic exploitation of natural resources provided the basic capital for the development process. Without vast reserves of oil, timber, minerals, and other resources, the Indonesian economic story would be very different.
On coming to power, Soeharto’s clearest mandate was to resuscitate the economy, which was in shambles in 1965,53 and remedy the nation’s grinding poverty. Development has been the focus and justification for his regime ever since. Indeed, he styles himself as “the Father of Development,” fully aware that development is “the very core of the New Order’s legitimacy.”54 As already noted, overall economic performance has been consistently good in conventional terms. From 1968 to 1993, average annual GDP growth exceeded 6 percent, inflation averaged less than 10 percent, and the incidence of absolute poverty fell from 60 percent to about 14 percent of the total population.55
New Order Economic Policymakers: Technocrats, Cronies, and Nationalists
Since the 1960s, Soeharto has been forced to balance and rebalance conflicting views and interests in his effort to produce New Order economic policy. In his attempt to respond to the demands of the international economic environment and domestic sociopolitical interests, Soeharto paid close attention to three key groups. First are the “technocrats.” These foreign-trained neoclassical economists consistently promote an outward-oriented economy, reliance on market forces, and progressive deregulation. Soeharto and his generals were basically unskilled in economic policy, and therefore placed extensive authority in the hands of these young economists. These technocrats controlled economic policy-making into the mid-1970s. Their influence since has waxed and waned, but many remain close presidential advisors today.
Two other groups have challenged the technocrats with varying degrees of success over the years. Economic nationalists believe that the state should play a large role in the economy, particularly by helping indigenous Malay (pribumi) businessmen compete with the dominant ethnic-Chinese firms. This group currently focuses on government support and subsidies for the development of “strategic” industrial sectors — measures they believe essential for Indonesia to catch up with industrialized nations and compete effectively in world markets. The premier economic nationalist and Minister of Science and Technology B.J. Habibie recently ascended into the top ranks of Soeharto’s cabinet advisors. Behind the scenes, this move has triggered heated debates on his expensive schemes to subsidize various “strategic” sectors of industry and technology financed in part with capital “borrowed” from a government fund derived from logging taxes and ostensibly earmarked for reforestation.56
A second key group that often opposes the technocrats’ policies is composed of “crony businessmen” — including a number of Soeharto’s family members. This group is united not by ideology or policy concerns but rather by close connections to the president and the vast opportunities to profit through these connections. Members of this group “have amassed wealth through government-granted import and trading monopolies, privileged access to government contracts and state bank credit, and the ability to bend government policies in their favor. In return, they bankroll a good measure of Soeharto’s patronage activities and stand ready to provide emergency funds in crisis situations.”57 They constitute a formidable adversary for both the technocrats and the nationalists, and “on many occasions they have succeeded in delaying or undermining the technocrats’ efforts to simplify the bureaucracy and make the economy operate more transparently.”58 Even in the face of sweeping economic deregulation packages in the mid-1990s, key cronies have held onto important privileges and protections,59 not least in the forestry sector (discussed in Section IV).
Because the entry points into policy-making differ among these three groups, business cronies have been able to maintain their influence and privileges. While the technocrats “could have significant impact on broad policies — in the economic case, on monetary policies and on major allocations of resources — they could have little influence on the processes responsible for policy implementation — on contracts, licenses, promotions, profits, payoffs, and all those events of microeconomy that are the stuff of daily economic life.”60 Conversely, the cronies have little to say about monetary policies and other broad macroeconomic measures, but often have decisive influence over decisions affecting specific deals and industries where their own economic interests are implicated.61
The relative influence of these three groups has shifted with the economic winds, and with Soeharto’s political needs of the moment. Each group serves him in different ways. “The economists are the producers of wealth, the patrimonialists [cronies] are the distributors of a large portion of it for political purposes, and the nationalists are the embodiment of his dream for more rapid progress toward an industrialized, internationally powerful Indonesia.”62
The Stages of New Order Economic Development
Hal Hill divides the evolution of New Order economic development into four periods. This schema usefully illustrates the centrality of natural resources in development policy, although natural resource policies change with the economic climate and with the relative influence of the technocrats, nationalists, and cronies.63
Rehabilitation and recovery (1966-70)
Technocrats dominated this period. Priorities included controlling inflation, reestablishing ties with international financial and aid institutions, and rehabilitating physical infrastructure. Basic laws and policies that facilitated massive natural resource exploitation were established during this period. These laws included basic regulations on foreign investment, forestry, mining, and petroleum exploitation. Subsequently, all of these sectors saw the dawn of explosive growth.
Rapid economic growth (1971-81)
Real GDP grew at an annual average of 7.7 percent during this period, fueled largely by oil and other natural resource revenues. The technocrats’ continued to dominate economic policy until 1974 to 1975. At that point, dramatic oil price increases (a $4.2 billion windfall in 1974 alone) put vast new resources at the government’s command, and riots in January 1974 highlighted growing dissatisfaction with perceived foreign and ethnic-Chinese economic domination. In the following years, the economic nationalists gained influence over economic policy and the country adopted an import-substitution development strategy. Oil revenues subsidized a number of state industrial mega-projects and provided credit for pribumi businessmen. Regulations and licensing requirements proliferated, while restrictions on foreign investment became more onerous. These growing inefficiencies were masked, however, by the roaring stream of oil revenues and the growing contributions of other resource-based sectors such as mining, agriculture, and forestry.
During the First Five-Year Development Plan (1969-74), timber earnings rose 2,800 percent. Most of this revenue was generated from the province of East Kalimantan, where newly granted logging concessions covered nearly 11 million hectares.64 While only 4 million cubic meters of logs were cut from Indonesian forests in 1967 — mostly for domestic uses — by 1977 the total rose to approximately 28 million cubic meters, with at least 75 percent destined for export markets.65 Gross foreign exchange earnings from the forestry sector rose from $6 million in 1966 to more than $564 million in 1974. By 1979, Indonesia was the world’s major tropical log producer, with a 41 percent share ($2.1 billion) of the global market. Indonesia had a greater export volume of tropical hardwoods than all of Africa and Latin America combined.66
Adjustment to lower oil prices (1982-86)
A worldwide drop in oil prices and general economic slump, combined with rising levels of foreign debt, repeatedly shocked the economy during these years. The government reacted promptly to an initial 1982 economic slowdown — and decline in oil revenues — with remedial reforms of fiscal and currency policy (where the technocrats had the most influence). Yet trade barriers, subsidies, monopolies, and general red tape continued to proliferate until another sharp fall in oil prices in 1986 (to $10 a barrel, down from $30 in 1984) provided the opening for a more systematic technocrat assault. Due to strong growth in agriculture and forestry, the economy continued to grow in this period at an annual average of 4.6 percent. Foreign debt rose sharply, however, from 28 percent of GDP in 1980 to a peak of 72 percent in 1987.
The sudden drop in oil prices and its impacts on state revenue led the regime to adopt a policy of reducing their dependence on oil revenues during this period. As a result, pressure intensified for further exploitation of renewable resources such as forests and “idle” lands suitable for cash crops and timber plantations in the Outer Islands. Logging increased, and the state launched a major push to “add value” through development of wood-processing industries. The state phased out the export of raw logs between 1982 and 1985, and offered incentives for loggers to develop processing facilities. By the end of 1988, 106 plywood mills were in production with a total installed annual capacity of more than 6.7 million cubic meters, and 39 more mills were under construction.67
This period also saw the development of new environmental laws and policies, under the leadership of veteran technocrat Emil Salim, the nation’s first minister of environmental affairs. (Most environmentally minded Indonesian officials are foreign-trained technocrats.) A basic environmental law was passed in 1982, and environmental impact assessment regulations were established in 1986.
Liberalization and recovery (1987-present)
Since 1987, annual GDP growth has averaged nearly 7 percent. The economy relies much less on oil revenues and has experienced a sharp growth in manufacturing profits. Through successive deregulation packages, technocratic prescriptions gradually transformed import-substitution policies to an export-oriented approach.68 While natural resource-based sectors made up a progressively smaller share of GDP, the absolute value of oil, mining, and renewable resources remained the same or rose slightly; a trend expected to continue into the future, as discussed below.
The Importance of Natural Resources to the Economy
In 1969, the production of primary commodities constituted some 60 percent of total GDP: minerals, primarily oil, accounted for 27 percent; agricultural output contributed 28 percent; forestry and fisheries made up another 5 percent. First-stage processing (e.g., logs into sawn wood, hides into leather) contributed only 4 percent, while further processing (e.g., sawn wood into furniture, leather into shoes) contributed less than 2 percent. By 1990, however, the absolute value-added of industries that processed natural resource commodities underwent nearly an eight-fold increase, and constituted 11 percent of a vastly larger total GDP. Meanwhile, although the relative share of primary commodities as a proportion of GDP declined from 60 to 39 percent during the same period, the absolute value of primary commodities has more than doubled in that time.69
In the forestry sector, for example, total 1993 export earnings were estimated at $6.5 billion, up from $5.2 billion in 1992, and in early 1994 the industry projected further growth to $7.7 billion for that year. Indonesia now controls 90 to 95 percent of the world’s tropical plywood market, up from 70 percent in 1989.70 In 1993, the timber industry accounted for 7 percent of GDP, and 20 percent of nonoil exports.71
In short, in the past the dramatic economic expansion under the New Order regime was overwhelmingly dependent on exploitation of the natural resource base, and natural resources continue to support the increasingly important processing industries.
The Fruits of Development
The New Order regime places much of the fruits of sustained economic growth and natural resource exploitation in investments that provide tangible benefits to a large proportion of the Indonesian populace. This strategy greatly bolsters the regime’s support and legitimacy, and accounts in part for its relative lack of opposition. Social resistance to state policies is minimal, even to the regime’s often oppressive and heavy-handed measures employed when restructuring the political, social, and environmental landscape of the country. Public expenditure on agriculture has been relatively high by developing-country standards, accounting for over 9 percent of total budgetary expenditures from 1984 to 1988.72 Indonesia was the world’s largest rice importer in the late 1970s, but achieved rice self-sufficiency in 1985. The state has since maintained self-sufficiency in rice production, although the costs in fertilizer and irrigation supports have been high, and investment in other crops has been relatively neglected.73
Development of physical infrastructure has also been a high priority, and accounted for 40 percent of total development expenditures in the 1975 to 1990 period. During this period, the length of paved roads increased nearly six-fold, the number of telephone lines rose seven-fold, and the installed capacity of the state electric company increased eighteen-fold.74 Between 1969 and 1993, irrigation systems that covered 2.9 million hectares of cropland were rehabilitated, while new systems that irrigated an additional 1.6 million hectares were installed.75 The government has also made a “concerted effort”76 to improve social services such as health care and primary education, with impressive results as noted in Section I. And while the distribution of income has remained essentially constant over the period from 1965 to 1990, both the number and percentage of people in poverty declined dramatically. This led Hill to conclude that “Indonesia’s record on poverty alleviation has been a resounding success.”77
In the late 1990s, however, the population’s satisfaction with these development achievements is being overtaken by frustration and anger caused by rising expectations, growing scarcities of land and employment opportunities, and the lack of effective avenues for the population to air their grievances. Increasingly, the wide gap between rich and poor — often symbolized to poorer Indonesian by the ethnic-Chinese business elite — is the subject of widespread discontent, and increasingly leads to violence. A February 1996 cover story in the Far Eastern Economic Review,78 entitled “Indonesia: Asia’s Smoldering Volcano?,” reported a string of violent confrontations (concerning land disputes, industrial pollution, and anti-Chinese incidents) in the second half of 1995. The article concluded that “Indonesians now seem more prepared than in the past to turn to violence” in the face of high unemployment, growing resource scarcities, and a government which, in the words of a former member of Parliament, “is trying to apply the same old approach and the same old methods to what are really a lot of new problems.” A member of the ruling Golkar party quoted in the article acknowledges that “there is a perception that all we are doing is protecting corporate interests. The most important issue we should be addressing is the distribution of income. Economic distortions are not caused by the economy itself, but by the political culture.” The riots of July 1996 only strengthened the perception that Indonesia’s apparent stability masks frustrations that could easily erupt into violence.
Political Institutions and Natural Resource Policies
Economic changes under the New Order have been accompanied by transformations in political structures, institutions, and relationships from the capital to the village. Four political changes are particularly important: the transformation of the electoral process, the strengthening of the bureaucracy and government administration, the role of patronage in holding the whole system together, and the denial of an independent role for the judiciary. With these changes, the regime can use natural resources and resource polices for its political as well as economic ends. The elevation of “development” to a nearly sacred status and the equation of development with state-determined natural resource control justifies the extension of the regime’s political and economic control into the farthest corners of the archipelago. The compliance of electoral, legislative, and judicial institutions ensures that resource policies move forward essentially unchallenged. And the distribution of rights to profit from resource exploitation has been an important source of patronage.
Elections and the Parliament
The New Order has devoted considerable energy to shaping an electoral process that periodically renews the regime’s constitutionality without posing a serious threat to its dominance. In 1972, the nation’s many political parties were required to consolidate into two fractious umbrella parties, one for the Islamic parties (the PPP) and the other for the remnants of Sukarno’s nationalist coalition (the PDI). Meanwhile, Golkar, the regime’s political machine (which is defined by the regime as a coalition of “functional groups” rather than a “political party”), contested and won the 1971 elections. Their victory was assisted by massive government pressure on civil servants to vote the right way, and requirements that district leaders round up “quotas” of Golkar votes.79 And under the regime’s “floating mass” doctrine, there can be no organized political activity at the village level between elections — it is better for the masses to “float” apart from politics. Golkar, since it is conveniently not defined as a political party and has ABRI’s supportive presence in every village, effectively circumvents these restrictions.80
This pattern has continued in the elections, which are held every five years. A large number of seats in Parliament are allocated to the armed forces and a special expanded house of Parliament periodically “elects” the president (there has never been an opposition candidate). These rules give Soeharto what he wants in an electoral and parliamentary system: “With one and only one road mapped out, why should we then have nine different cars? The General Elections must serve the very purpose for which they are held, that is, to create political stability. Only these kinds of elections are of value to us.”81
The Parliament generally plays a passive role, although it has occasionally served as a platform for opposition views. Environmental NGOs, for example, have facilitated visits to the Parliament by rural groups dispossessed of their lands and resources without compensation by development projects. Such visits have prompted committee debates on these disputes. While Parliament has no power to act on such matters, parliamentary debate permits the media to publicize these conflicts — since the state cannot easily ban reports of proceedings in open Parliament. However, the limits of parliamentary debate became clear in February 1995, when the government engineered the dismissal of two outspoken members for criticizing government policies. And in July 1996, prior to the riots set off by her ouster as PDI chair, Megawati Sukarno was officially prohibited from running for Parliament in 1997.82
The Bureaucracy and Administrative Apparatus
Bureaucratic capacity building has proceeded along two tracks — the strengthening of central agencies and the strengthening of the center’s hold on regional and local government. Soeharto inherited a weak and demoralized civil service in 1966, which he further gutted in order to root out leftist elements. Within the remainder of the civil service, the regime moved to ensure loyalty with the establishment of a single national Corps of Civil Servants (Korpri).83 Military men were inserted into key bureaucratic positions. The bureaucracy grew rapidly, from perhaps 600,000 in 1965 to 1.6 million in 1974, to over 3 million in 1986.84 By the late 1970s, military appointees held half the cabinet positions, over two-thirds of the governorships, and 56 percent of district-head positions. Within the bureaucracy, 78 percent of director-generals and 84 percent of ministerial secretaries were military appointees.85
Jakarta’s control over regional and local governments also expanded “to a degree that would have been barely imaginable in Sukarno’s time.” While this enhanced central control has been accomplished partly through formal structural changes, the oil revenues of the 1970s allowed “vastly increased revenue transfers from the central government to regional authorities. The price the latter paid for a steady flow of funds to pay local officials and to finance local development projects was a compliant relationship with the central government.”86
Another tool of bureaucratic transformation has been the 1979 Law on Village Government, implemented gradually over the past fifteen years. This law mandates the formation of uniform village units called either desa or kelurahan, which are divided into hamlets known as dusun, and headed by a kepala desa and lurah.87 To effectively differentiate the new system from traditional settlement patterns, this system dissolved or amalgamated territorial units established by the communities themselves. The system for choosing local leaders reinforces central control. While village and hamlet communities may nominate candidates to lead these units, local government officials screen out those considered too independent, and appoint the leaders from two final “nominations.” When the law’s transformation of a village is complete, all salaried officials at both village- and hamlet-level become civil servants, ensuring that their obligations and loyalties run upwards to the state. Their positions are consolidated by their control of all development funds channeled to the village, in consultation with an advisory council of the village elite.88
Patronage: Holding the System Together
The glue holding New Order political institutions and alliances together is a pervasive system of patronage:
[A] system of relatively autonomous, highly personal groupings, bound together by a diffuse sense of personal reciprocity found between patron and client. Each group or circle is composed of a set of unequal but reciprocal obligations between leaders and followers. . . . These diffuse, personal, face-to-face enduring noncontractual relationships are the primary social cement integrating Indonesian organizations to the limited degree that they are integrated at all.89
Under this system, the New Order coopts potential opponents and binds allies and clients to the state with the allocation of rights to exploit oil, minerals, and timber. Forestry concessions were a popular patronage resource in the early years of the regime, in part because logging does not require the technological sophistication and capital inputs that are needed in the petroleum and mining industries. Eager to settle power struggles among political and military factions in the early years, the regime handed out literally hundreds of concessions to companies linked to various military commands and other power centers. These companies usually worked through an ethnic-Chinese partner (cukong).90 As the technical and managerial capacities of client groups have improved, the regime has been able to use its control over oil and mineral resources to strengthen its bonds with its clients.
In addition to securing loyalty, the patron-client system that hands out natural resource exploitation rights provides the regime with important extra-budgetary sources of income. Ubiquitous charitable foundations called Yayasan are controlled by almost every power center in the regime, including the president and his family. With their sources of income and expenditures shrouded in mystery, and with an aura of charity — undertaking many charitable works — Yayasan play a poorly documented but important role in receiving contributions from clients and financing the political needs of the regime. In some cases, clients have been called upon directly to bail the regime out of embarrassing circumstances. When a bank controlled by three Yayasan headed by Soeharto suddenly registered foreign exchange losses of $420 million, cronies Liem Sioe Liong and Prayogo Pangestu — the latter the director of the largest timber firm in Indonesia — promptly donated the losses.91 And in June 1994, when Soeharto came under criticism for closing down Tempo, the country’s leading news magazine, timber tycoon and crony Bob Hasan promptly hired 150 of Tempo’s staff to produce a look-alike weekly (which, however, faithfully echoes the government line).92
The New Order Judiciary
Little has changed in the judiciary since the colonial period. The judiciary essentially functions as an arm of the government — separation of powers is specifically rejected. The few changes implemented under the New Order reinforced the dependent nature of the courts.93 As a result, the “rule of law” in Indonesia — the meaning and enforcement of specific regulations — varies according to who is applying the law, and, most importantly, to whom it is being applied.
In a few instances, persistent lawsuits by NGOs have set the precedent to sue polluters under the environmental impact assessment statutes. But in 1994, a lawsuit by a group of NGOs challenging Soeharto’s transfer of reforestation funds to the state aircraft industry was thrown out of an administrative court. Because this lawsuit appeared to be a very strong case, it underlined the impotence of the courts as an avenue for the redress of disputes with the state.94 The NGOs who joined the lawsuit soon found themselves blacklisted by the government. Their access to funding from foreign donors was rapidly restricted which illustrates the costs of using the courts even as a venue for political and media theater.
Civil Society and Local Natural Resources Management
Before the advent of the New Order, Indonesia was essentially a dual society. Politics and national economic policy were the domain of a small, mainly urban-centered elite, while the majority of the population lived largely unaffected by government policies. However, the New Order followed the integralist model. Religion and culture, patterns of rural settlement and subsistence, ownership and control over natural resources, and local forms of sociopolitical organization are all subject to state-led control and transformation. As a consequence, day-to-day life is rapidly changing in much of the hinterland.
The Erosion of Traditional Societies and Local Custom (Adat)
Indonesia is home to a vast array of distinct cultures, each functioning under norms, rules, resource management strategies, and spiritual belief systems known collectively as adat. Adat has weakened in many regions — most recently because of the unprecedented level of government intervention and indirect effects of other changes (such as improved road and river transport). However, adat remains strong in other regions, particularly among more isolated rural peoples in the Outer Islands. The New Order, like the Dutch colonial regime, acknowledges the existence of adat laws and institutions, if they do not impede state political or economic objectives. But virtually all aspects of economy and society are fair game for state control under the New Order. Therefore, the current vitality of adat in a particular region or aspect of life depends on whether the state has intervened in that region or turned its attention to that aspect of life.
“Development,” in social terms, is the primary vehicle through which the state has moved to replace adat beliefs, structures, and practices:
Development became the means to introduce uniformities both of a material and a cultural nature. The President took the title of Bapak Pembangunan (Father of Development), associated with the concept of progress (maju) towards a clean, orderly and “modern” society. . . . Development became the means of legitimization for the New Order as it demonstrated the ability of the central government to bring material benefits to its subjects.95
Power over the definition of “development” is guarded by the state, and is closely associated with the “national interest,” and Pancasila ideology. Local resistance to development initiatives is at best viewed as a sign of “backwardness,” and at worst, an insurrection against the government. According to this view:
[P]easant resistance to development projects is due not to the possibility that a project was planned without regard for the peasants’ own interests, but rather to the fact that the project was simply not completely understood by (or adequately explained to) them. . . . [T]he possibility of government error is thereby categorized out of existence: there are no bad projects and mistreated peasants, but only “misunderstood” projects and “misunderstanding” peasants.
[I]t has been common practice for officials to justify in terms of the “national interest” development policies that in fact benefited the interests of only a single person, group, or industry. Whereas peasant resistance to such policies has been attributed to treasonable sentiments or ignorance, in reality it has often been a simple matter of the peasants defending their personal interests against the equally personal interests of the policy makers.96
Fundamental to the New Order’s goal of a uniform and “modern” civil society is its strong resistance to diversity. The regime denies that Indonesia is home to distinct “indigenous peoples” with autonomous claims over territory or resources, or independent local systems of spiritual beliefs and political authority.97 A recent study on land rights and indigenous people notes that since the 1960s any attempts to emphasize diversity in matters of tribe, religion, or race have been viewed as subversive threats to national unity.
To the present day this diversity and its potential adverse effects on national unity remains a sensitive issue and the strength and depth of this feeling should not be underestimated. Plans, activities, and strategies aimed at supporting “indigenous peoples” should therefore be presented in national context rather than as support for particular groups or minorities with specific cultural or social identity.98
Mandatory monotheism is a central element of the New Order organization of local culture, arising from the first principle of Pancasila. All Indonesians must legally be a member of one of the five approved world religions — Islam, Hinduism, Buddhism, Catholicism, or Protestantism. Proclaiming oneself an “agnostic,” “atheist,” or “animist” is, quite literally, illegal.99 Because of the strong connections among spiritual, economic, and political life in many adat cultures, the imposition of monotheism has displaced a much wider range of adat institutions, such as long-standing resource conservation practices based on religious taboos.
Delegitimization of Local Resource Management Practices
Transformation of traditional farming and natural resource management practices has been another fundamental part of the New Order strategy for reshaping civil society and its relationship to natural resources. As noted above, the intensification of agricultural production with an overwhelming focus on rice has been a central — and successful — New Order undertaking. But the state’s systematic suppression of traditional systems of swidden agriculture has gone hand-in-hand with the promotion of irrigated rice.100 Traditional swidden systems — often ironically based on dryland rice — are generally well adapted to poor soils, low land/labor ratios, and livelihood needs of rural communities in the Outer Islands.101 Yet swidden agriculture contradicts both the irrigated rice-based system that the New Order promotes and the growing appropriation of the Outer Island’s land and resources for logging, commercial agriculture, and resettlement. Echoing colonial assessments and Javanese cultural biases, the New Order maintains that swidden cultivation and its practitioners are environmentally destructive, backward, and wasteful.102 Swiddens left to fallow — an essential part of the system — are legally considered “abandoned.”103 And the Indonesian Forestry Action Programme104 identifies shifting cultivation as the source of nearly one-fourth of all deforestation in the country, while logging concessions (which cover more than half of all remaining forests) are not even counted as a cause.
Between 1969 and 1994, the government-sponsored “transmigration” program resettled some 8 million people from Java and Bali to the Outer Islands. These migrants ostensibly would cultivate irrigated rice and tree crops in settlements carved out of some 1.7 million hectares of state forestland.105 The transmigration program epitomizes this effort to impose a Java-centric uniformity on farming and resource management throughout the country. While the record of transmigration in establishing sustainable agricultural communities is checkered at best, its impacts on local indigenous communities have been very negative.106
Local resistance to the seizure of land for transmigration sites and the government’s desire to sedentarize shifting cultivators caused a transformation in program objectives. A share of transmigration dwellings and farming plots are now set aside for “local transmigrants.” Reflecting this transformation, the ministry that runs the program was recently renamed the “Ministry for Transmigration and the Resettlement of Forest Squatters.” Since World Bank assistance to the program peaked in the late 1980s, spontaneous migration to the forest frontiers of the Outer Islands has become the source of at least as many settlers as the official transmigration programs. The widespread failure of annual cropping systems at the sites, and heightened demand for labor on new industrial timber plantations and tree crop estates created a new form of transmigration. Transmigrants are now sent to plantation areas expressly to fill labor shortages. Whether successful or not, there is no doubt that transmigration sites have fundamentally transformed cultures and resource-use patterns in many areas of the Outer Islands.
The Construction of a New National “Adat”
The importance of New Order ritual in penetrating ideology and programs throughout society cannot be underestimated. The regime has, in essence, created a uniform national “adat” of its own and tirelessly promoted it throughout society.
President Soeharto appears daily on national television and newspapers as “father” of the nation, above any divisive sectional interests. His picture, and usually that of the Vice-President, hang in all government and village offices, and in many private homes and offices. Independence Day (August 17) is a day celebrated nationwide with marches, flag-raising, ceremonies, and local celebrations. . . . The rituals continue throughout the year. Throughout the nation, school children attend in uniform and parade before the flagpole to sing the national anthem, and they attest to their loyalty at least one morning a week. Public servants do likewise, attending the office in uniform and parading at least one day a week.107
Other rituals include the annual television broadcast of a government film presenting its version of the events of 1965, the occasional execution of a “communist” after decades in prison,108 and the periodic trials of dissidents.
Regular Pancasila indoctrination courses are required throughout the civil service and educational system, and are urged within the private sector as well. The 1985 Law on Societal Organizations requires all NGOs to accept and proclaim Pancasila as their sole ideological basis, and requires that all their activities conform to the goals and programs of national development.109 Under another law — on immigration — the government may prevent citizens who criticize the government while overseas from returning home, and may revoke their citizenship.110 Many NGOs believe this law is targeted specifically at activists who speak out against New Order policies and development projects in international fora such as the International Forum on Indonesian Development (INFID).
New Order State Capacity: Strengths and Weaknesses
Returning to the indicators of state capacity discussed in Section I, what can be concluded about the capacity of the New Order state?
Within the central components of government, the regime’s human capital is far greater than in the past — technical and managerial skills in most agencies are quite strong. But human capital remains relatively weak at provincial and subprovincial levels, despite recent moves towards decentralization.111 Because of this imbalance, the regime’s capacity for instrumental rationality is constrained — information from the provinces is often incomplete, inaccurate, and slanted to flatter local officials, which decreases the quality and effectiveness of the center’s decisions and actions. Therefore the empirical basis for many central policy decisions is weak, and feedback on failures on the ground is unlikely to be reported or acted on.
The coherence of the New Order state is the highest of any Indonesian regime to date, but still quite fragile. On coming to power, Soeharto inherited a bloated and weak bureaucracy, unable to project its policies into the hinterlands. The political ferment of the Sukarno years fragmented the bureaucracy into factions. Soeharto moved quickly to remold the bureaucracy into a tool to establish heightened political control and to carry out his ambitious development plans. Having come to power with the backing of a diverse coalition of anti-Sukarno forces, Soeharto quickly moved to centralize power. He eliminated the influence of most of these groups over politics and the bureaucracy.112 He created a permanent place for the civil service on the political arm of the regime: the Corps of Civil Servants of the Republic of Indonesia (KORPRI) was established as an all-encompassing civil servants’ organization parallel to Golkar, the ruling political party. With loyalty assured — and revenues from oil and timber flowing in — the civil service received greater funding, and expanded rapidly.113 Higher levels of education gradually improved the skills and overall capacity of the civil service, while vast infrastructure development facilitated its penetration into the countryside. Laws on Regional Government (1974) and Village Government (1979) consolidated the bureaucracy at those levels.
While sectoral and regional rivalries exist and often ambush the implementation of development schemes and policies, they are no more serious than in many other countries. Despite the weakness of the civil service at lower levels, for the first time in history, the state apparatus now functions more or less as one system. This system extends from Jakarta to the village, animated by the Pancasila ideology and the rest of the “national adat” promoted by the regime.
The New Order is vastly more autonomous than the regime of Sukarno. State actions face few challenges from the Parliament, judiciary, or various components of civil society (NGOs, labor unions, universities, etc.). Opposition political parties have essentially been eradicated (the two umbrella parties created under New Order pressure repeatedly endorse Soeharto’s re-election). Golkar, the regime’s party, easily wins huge majorities in every election. Separatist movements in East Timor, Aceh, and Irian Jaya provinces have been largely crushed. The print media is never more than mildly critical — especially after the closure in 1994 of Tempo, the country’s leading news magazine — while television news is entirely controlled by the government and serves largely as a mouthpiece for its views. Although a number of NGOs have taken fairly bold steps to oppose government policies and projects, they lack a mass support base. Their impact is fairly marginal, especially when compared with NGO movements in neighboring countries such as the Philippines and, to a lesser extent, Thailand.
But economic transformation raises a number of new challenges. The growth of manufacturing industries fosters the development of a nascent independent labor movement, and strikes over wages and working conditions are becoming more frequent. A growing new entrepreneurial class in the country’s booming business districts is increasingly impatient with government red tape and the accompanying petty corruption. The crony system irritates these entrepreneurs, as it often denies them access to the most lucrative contracts and deals. And much of the business community and some elements of the armed forces are increasingly annoyed with the ever-expanding and increasingly conspicuous business empires of the president’s family and inner circle, as well as the accompanying routine grants of government privileges on which these empires depend.
Internationally, Indonesia’s heightened integration into the world economic system intensifies pressures to deregulate the economy. Deregulation diminishes the store of economic favors available to the regime for patronage and hampers the president’s ability to swing from technocratic to nationalist policies when it is to his political advantage. To a certain extent, this is counterbalanced by the declining influence of aid donor organizations on the regime’s policies. Although Soeharto has not yet echoed Sukarno’s famous “go to hell with your aid” remark, the regime did expel the Dutch aid program in 1992 over the Netherlands’ human rights criticisms, and terminated preparations for a major World Bank forestry project in 1994, partly in annoyance at repeated criticisms of its forest policies.114
International criticism of Indonesia’s environmental record has also grown in the past decade, focusing mainly on the rapid deforestation that has accompanied the past several decades of rapid growth (see Section IV). With the large timber industry so dependent on exports, the specter of environmentally inspired boycotts and bans has induced the regime to take some steps to clean up the industry’s image, and to put more emphasis on biodiversity conservation.
Decades of economic growth and considerable success in bringing development benefits to the populace have established the regime’s legitimacy in the eyes of most citizens. Familiarity, too, has bolstered this legitimacy: most of Indonesia’s young population have never known another leader or system, and those who remember the early 1960s are not nostalgic. The regime’s constant efforts to reinforce the constitutionality and legality of the political system may not withstand a severe economic slump that seriously affects living standards. The political turmoil and riots of mid-1996 indicate that allegiance to the regime’s vision of political life may be relatively weak, at least among some sectors of society.
In terms of its reach, the regime has molded a far-flung and culturally heterogeneous archipelago into a coherent nation. For the first time in history, Indonesia is united — politically, economically, linguistically, and culturally. The exponential expansion of road, air, sea, and telecommunications infrastructure has played a central role in this process of penetration and integration. The New Order has been extremely effective in extending its ideology, sociopolitical structures, and administrative apparatus throughout the nation, although the durability of these achievements appears highly dependent on continued high levels of economic growth. And the state’s capacity to form comprehensive development plans is also quite high — as the 2,600-plus pages of the current Five-Year Development Plan attest.115 With respect to forests and biodiversity, the National Forestry Action Plan116 and National Biodiversity Action Plan117 compare favorably with similar efforts in other developing countries.118
However, the regime’s reach is not extensive. The state’s capacity to design and implement programs and projects on the ground is weak. The nation is littered with the detritus of plans and projects that were never implemented or failed, due to some combination of inappropriate objectives, unworkable design, or poor implementation.119 Such failures are particularly prevalent in the renewable resource sectors, which require project designers and managers to adapt to diverse and complex social and environmental conditions, respond to the input of local interests and actors, and mobilize voluntary action.120
This problem is compounded by the highly sectoralized design and implementation of programs. Sector specific programs are particularly troublesome in forestry; a vast area of the country (74 percent) is classified as state forestland. Therefore, a wide range of activities apart from forestry (such as agriculture, transmigration, and mining) must be coordinated. The New Order’s long-standing practice of delegating significant on-the-ground rights to the private sector to manage resources and carry out development projects is also problematic. Granting these rights to the private licensees (such as the logging concessions covering more than 60 million hectares, nearly one-third of the country), significantly complicates the implementation of subsequent programs. Conflicts between such concessions and government initiatives (such as transmigration sites and nature reserves) are widespread.
The responsiveness of the New Order is weak, which detracts from the effectiveness of its strengthened reach. The top-down nature of development policy and implementation is problematic: “The `development from above’ approach is now so firmly entrenched at all levels of the government in Indonesia that many doubt that a decentralized approach which gives (a larger) role to local initiative can really be made to work.”121
As Hill concurs, “This is a system in which orders flow down from the top, but there is little scope for institutionalized input of pressures, requests, or ideas from the bottom upwards.”122 And Jackson notes that the New Order’s depoliticization of society hinders state efforts to mobilize the populace to do most anything else as well.
The most fundamental limit on the power of the president is that common to all bureaucratic polities: Inability or unwillingness to organize and mobilize the masses into politics on a regular basis means that bureaucratic polities find it difficult, if not impossible, to mobilize the general population to make sacrifices for particular national programs. Although the isolation of the bureaucratic polity from society enables it to remain in power, the same isolation prevents it from achieving goals which require substantial voluntary participation from the populace as a whole.123
Compared to the situation in the late 1960s, the current fiscal strength of the state is extremely high. As already noted, the World Bank considers Indonesia’s economic performance to be among the best in the developing world, whether in terms of per capita income ($884 in 1995 and rising), foreign investment commitments (approvals rose by 200 percent in 1994, up to $24 billion), or general economic growth rates (averaging around 7 percent annually). Diversification away from oil dependence has been quite successful, with nonoil exports and taxes now accounting for the bulk of total exports and government revenues.124 The bank sounds only two major notes of caution. First, the country’s short-term debt exceeds $20 billion, with a debt-service ratio of more than 30 percent, and ambitious infrastructure borrowing is likely to increase this debt further. Second, regulatory inefficiencies and inequities — such as monopolies granted to political interests, and various tariffs and nontariff barriers — continue to hobble economic performance.
Any appreciable increase in political turmoil could stall much of the foreign investment upon which the government’s current economic strategy so heavily depends. Investor sentiment towards Indonesia “severely soured” in the aftermath of the July 1996 riots, and while no panic selling resulted, one foreign broker in Jakarta noted that “foreigners just can’t look beyond political risk any longer. Even when the violence . . . settles down, you still will have the succession issue staring at you in the face. And this, quite honestly, is the main question.”125 In short, Indonesia’s economic fundamentals are essentially in order, but its fiscal strength is highly vulnerable to political developments, and in particular, foreign perceptions of those developments.
The New Order faces its most serious challenge in its resilience to change — specifically, political change. As already noted, the regime’s technocrats have been able to adapt quite nimbly to external economic shocks such as the oil-price slump of the 1980s. Economic policymakers have moved relatively quickly to adapt to the challenges of an increasingly free global trade regime, as attested by progressive deregulation packages and Soeharto’s backing for Asian Pacific Economic Cooperation (APEC) regional free-trade targets.
Even in the economic sphere, however, the regime (principally Soeharto) is unwilling to deal decisively with the problems posed by business monopolies and privileges of his family and close associates. Few are bold enough to confront the president on this issue directly, and those who do find that he responds “with indifference, occasional anger, and a trace of confusion.”126 Thus the problem grows — in recent years, “hardly a single major infrastructure contract has been awarded without one Soeharto relative or another having a piece of it. . . . The only suspense is over which crony will emerge victorious.”127 Despite public criticism, a senior regime spokesman continued to maintain in mid-1995 that the children of high officials enjoyed no special privileges whatsoever, an assertion that, according to one Jakarta business journal, “will leave some people thinking about the wisdom of George Orwell.”128
More fundamentally, the regime seems nearly paralyzed in the face of growing demands for a more open and democratic political system and a more grassroots style of development planning. The regime even refuses to forthrightly address the looming issue of who will succeed the aging Soeharto, who says only that the succession will be carried out constitutionally. However, the “constitutional” process instituted by the New Order has repeatedly and unanimously re-elected Soeharto without even a glimmer of opposition, and without the benefit of an opposing candidate.
Most dramatically, the government steadfastly insists that the July 1996 riots were the work of a few communist-inspired troublemakers and not a reflection of growing public demands for democratization. As Soeharto himself said, “these riots had no correlation whatsoever with democracy,” but were in fact the work of resurgent communism.129 As one local political analyst stated in the Far Eastern Economic Review, “this is evidence of the rigidity of the political system, and the unwillingness of the powers-that-be to take into account new developments.”130
On a day-to-day level, the lack of state resilience is manifested in the inability of the state to resolve growing conflicts over development policies and projects, access to natural resources, labor conditions, and many other issues. Partly this is due to the lack of serviceable dispute resolution mechanisms within the New Order structure — and the dismantling of traditional ones at the local level. However the state seems reluctant to even admit that conflicts exist, or that mistakes have been made. This denial stems in part from the Javanese concept of power which values harmony and the reconciliation of opposites, and accordingly views discord as a sign of weakness.131
In short, the New Order state has developed very strong capacities in many areas. However, the state suffers weaknesses in other areas, and is overall quite fragile in the face of rapidly accelerating changes in the coming years.
