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The IMF and the Indonesian Elections

The Invisible Hand at the Voting Booth

by DIANE FARSETTA

According to many observers, this year’s Indonesian elections can be summed up by the informal slogan of Bill Clinton’s 1996 U.S. presidential campaign: It’s the economy, stupid!

It’s easy to understand why economic issues might weigh heavily on the minds of Indonesian voters. Unlike its neighbors, Indonesia has yet to see meaningful recovery from the 1997-1998 Asian economic crisis. According to the United Nations Development Program, the Indonesian economy shrank by more than 15% in the first six months of the crisis. Poverty more than doubled, from 12% in 1996 to at least 25% in 1998. Today, more than 18% of Indonesians live below the poverty line, more than half live on less than $3 per day, and 20% are unemployed.

Just prior to Indonesia’s general elections in April, Indonesian news magazine Tempo observed, "Voters generally see the biggest challenge facing the country in the future to be economic recovery, at least to the levels in the golden era of the New Order," referring to the period of dictator Suharto’s government.

Sylvia Tiwon, Associate Professor of Indonesian at the University of California at Berkeley, takes issue with the reportedly widespread nostalgia for Suharto-era prosperity and security. "There seems to be a memory lapse about the financial crisis during the Suharto years," she observes. "Many people say that things were better during the New Order. They don’t seem to relate the crash and the aftermath of the crash, including the unrest and violence, to the New Order’s economic policies and five-year development plans, and what the huge national debt (private and public) did to the economy." The day before the general elections, the Jakarta Post’s Imanuddin Razak wrote that Suharto was only "relatively successful" in "bringing prosperity to some groups of Indonesians," while failing to establish institutions to consolidate and build upon those gains.

However misguided, New Order nostalgia, along with frustration at the lack of improvement under incumbent President Megawati Sukarnoputri, might have helped lead Suharto’s Golkar party to victory in April’s general elections. Golkar won nearly 22% of the vote. Megawati’s PDI-P party, although the next highest vote getter with more than 18%, lost big relative to their 34% showing in 1999.

Indonesia’s general elections are among the world’s most complicated. In April, nearly 450,000 candidates competed for more than 15,000 national and regional offices. It’s not surprising, then, that they didn’t proceed as smoothly as many had hoped or that many reports suggested. Almost 11 million votes — or nearly 9% of all cast — were declared invalid. More than 7,000 election violations were reported, including multiple vote-buying incidents. And in at least one tragic circumstances, recently evicted homeless people in West Jakarta were not allowed to vote, as they no longer lived at the address given during voter registration. One woman with two children stated simply, "Now I can’t vote for anybody that will provide a home and a job for me."

The five parties that garnered at least 5% in the general elections fielded presidential candidates for the July elections. What were their economic policy proposals? One week prior to the election, Patsy Widakuswara, television producer of Voice of America – Indonesia, said, "The platforms that they have are very vague and formative, more at a philosophical level. They’re not really saying, ‘I want to do A, B, C to alleviate corruption.’ Mostly they’re saying corruption is a bad thing and that we want to get rid of it." Tiwon noted, "There are a lot of campaign promises but little in the way of specific economic policies, except for Megawati, who can rely on her past record."

The Jakarta Post questioned the economic promises made on the presidential campaign trail, observing "One of the candidates promised to create almost 13 million jobs within the next five years. Another candidate promised free education up to high school for all students and generous subsidies for small enterprises and farmers. Still another candidate committed to creating millions of jobs through labor-intensive projects such as the building of low-cost public housing. These promises are obviously unrealistic and almost impossible to deliver given the severe restraints within the state budget. One may wonder how the candidates could be so ignorant about the sorry state of public sector finances."

Since no presidential candidate won more than half the votes in the July elections, the two top vote getters — incumbent President Megawati and her former security minister, now Democratic party candidate Susilo Bambang Yudhoyono — will compete in a run-off election September 20. Does the fate of Indonesia’s poor depend on the outcome? "There is no real reason to expect that any president will be able to improve the economic situation," asserts Tiwon, for two reasons. One is "the dominance of Golkar in Parliament" and the other the dominance of international financial institutions.

In March 2004, the International Monetary Fund, to which Indonesia owes $10 billion, directed the country to "enhance non-oil tax revenues through broadening the tax base and strengthening tax administration"; to cut down on the current "uncertainty to business" including "arbitrary tax assessments, burdensome customs procedures and inefficiency in the refund systems"; and to build "a clear and competitive framework for labor relations" as the "key to attracting the investment in labor-intensive industries needed to make progress in reducing unemployment." Tiwon translates these directives as "maintaining a docile labor force, minimizing the high-cost investment environment by streamlining the bureaucracy and, to some extent, acknowledging that there is corruption and that it has to be cleaned up."

The role of the IMF and related institutions is crucial in Indonesia, and it is "discussed in the media and by civil society groups," says Tiwon. But there’s "very little real discussion of this by political parties," and "ordinary Indonesians are not really aware of the role of these international institutions." Thus one of the major — if not the major — forces shaping Indonesia’s economy isn’t even up for debate, let alone a vote, even though the economy is the voters’ major concern.

Depending on the future course of their economy, it’s not hard to imagine Indonesians becoming increasingly frustrated and more likely to stay home on election day. Why should there be 80% plus voter turnout, as there has been so far this year, if the elections don’t offer a real choice, if the candidates can’t make a difference in people’s lives? It’s a sad and sobering question, especially for a country that emerged from three decades of military dictatorship just six years ago.

DIANE FARSETTA is the coordinator of the Madison chapter of the East Timor Action Network, senior researcher at the Center for Media and Democracy, and community radio volunteer at WORT FM in Madison, WI.