Public Lecture Singapore, 18 November 2010

Provost Professor Bertil Andersson, Dean Barry Desker

Excellencies Distinguished Guests Ladies and Gentlemen

Good afternoon. It is a great honour to be here in Singapore to deliver a public lecture to such a distinguished audience. Singapore is so much of a second home to me that I do not really feel like a foreigner here. The problem in Singapore is never in arriving: It is in leaving.

It is my pleasure to say that, this time, I will be leaving behind a token of my family’s appreciation of Singapore’s position as a regional hub of scholarship. This morning, the Bakrie Center Foundation has endowed, with a matching grant from the Singapore Government, a professorial Chair in Southeast Asian policy at the Rajaratnam School of International Studies at Nanyang Technological University. The Chair will provide insights into development in Southeast Asia that lend themselves to policy formulation and policy implementation.

Today, however, I am billed to speak about my own country. But first let me express my admiration for Singapore and for the leaders of this great country, particularly Mr. Lee Kuan Yew. I remember Professor Henry Kissinger once said that Lee Kuan Yew was a great leader in a small country, and he could be greater still in a bigger country.

I agree with Prof. Kissinger about Mr. Lee, but Singapore was never a small country. In the modern world, size and numbers do not really matter. It is the quality of the people – their mind and their spirit, their determination and their willingness to sacrifice for the future, their loyalty to the nation and their dedication to the cause of progress: these are all that matter. And therefore, in my eyes, Singapore is a big and a great country. It is a story of how, in only one generation, a poor, multicultural society managed to break the chain of poverty and backwardness. Singapore, in short, is a story of success, one of the greatest wonders of the 20th century. I am proud of my country and a strong believer in its bright future. But I have to admit that Indonesia has a lot to learn from Singapore.

Distinguished guests

Ladies and gentlemen

Let me begin by explaining my own view about Indonesian history before talking about the state of contemporary Indonesia, its future and its role in the world. My favourite point of departure in explaining Indonesian history is globalization. Globalization is old stuff, starting in mid-17th century in Maluku islands, also known as the spices islands. Nutmegs and cloves, which could only grow there, were among the first mass products of world trade, which were the reason why great explorers, traders, and conquerors from Europe, mainly the Portugese, the Dutch, and the British, risked years of hazardous sea journeys competing to reach and control the islands.

In the 17th and 18th century time-scale, Maluku was very far away, located on the eastern most corner of the Indonesian archipelago, about 3,000 km from Singapore, or about 2,500 km from Jakarta. It was therefore an imperative of logistics and security of the supply line that whoever controlled Maluku had to control also the port and build outposts on the sea-line stretching from Ambon, Makassar, Surabaya, Jakarta, Malacca, and beyond. It was this network of ports and outposts that connected the islands in Maluku with Amsterdam, London and Lisbon, the great European cities whose traders, financiers, sailors and shipbuilders were the most responsible in creating early global capitalism.

So for about 3 centuries the archipelago became the major theater of world trade, wars, imperial politics, and subjugation, which ushered the era of colonialism in the Indonesian archipelago, a story that was also familiar with the people of Singapore.

Colonialism had many faces, some were bloody, cruel, and tragic, but some were uplifting and progressive. The Dutch introduced modern education and modern technology, and it was Raffles (yes, Sir Thomas Stamford Raffles, the brilliant, tragic hero, founder of Singapore), who implemented for the first time the methods and elements of modern government in Indonesia.

Raffles was a true example of a devoted, multi-talented reformer. He abolished slavery, created a modern civil servant, founded a national garden, advanced the science of botany and wrote an influential book about the history of Java. He did all this with great personal sacrifice: his wife, Olivia, died in Bogor, while three of his four children died in Bengkulu. But despite all this, the British imperial government did not seem to appreciate what he did. He was accused of mismanaging the public money, and were therefore forced to pay mounting debts. In the end, he died at the age of 45 a broken and indebted man. He might not be highly appreciated in his own country, but for us Indonesians, and for Singaporeans as well, Raffles was a gift of colonialism, however ironic that might be, whose influences can still be seen even today.

There were several more progressive aspects we can talk about, but it is sufficient to say at this point that the biggest by-product of colonialism, mostly unintended by the Dutch and Japanese conquerors, was the emergence of modern nationhood, the shared feeling among many different people that they were treated unjustly by the same foreign master.

The old kingdoms of Java, Sumatra and Sulawesi could not provide the answer to the most important question of the day. The people looked for something new, something more profound which could bring them together as an antithesis of the colonial master.

It was this new, shared feeling of nationhood that created Indonesia. The Javanese, the Sundanese, the Buginese, the Batak, the Balinese and many others: In the dawn of the 20th century they began to feel that they were one nation. And once the new nationhood was consolidated, the rest was history – a story shared by many other emerging nations in Asia and Africa; a familiar history of the struggle for independence with heroic and larger-than-life political figures, like Soekarno, Nehru, Gandhi, Nasser, and Nyerere.

What was unique about Indonesia was its size and complexity. The fourth most populous nation on earth, with a geographical span of about 5,200 km from East to West (or about the distance from Baghdad to London) with thousands of islands, languages, and ethnic groups, plus major religions like Budhism, Hinduism, Islam, Christianity and many local and traditional beliefs. On top of that, the country had sizeable numbers of Arabs, Tamils, Gujaratis, Pakistanis, and Chinese, whose forebears came to the archipelago centuries ago.

Fortunately for us, our founding fathers made wise and thoughtful compromises in creating the foundations of modern Indonesia. They adopted a language not from the largest ethnic group, the Javanese, but from a relatively small ethnic group, the Malay in Sumatra, which became our only national language, Bahasa Indonesia.

This was an act of brilliant statesmanship, a historic decision which had been the strongest unifying force in our country. Moreover, the founders also proclaimed that the working principles of our nation was Bhineka Tunggal Ika, or unity in diversity, with its basic philosophy of Pancasila, which integrated nicely the ideas of religiosity, tolerance, freedom, humanity and justice into one organic unity. These principles were simple, but they tied us together and gave us a sense of common purpose, a direction as to where our journey as a nation should lead to.

All of this was our sacred heritage. It is the basis of our being as a country and as a people. From time to time there had been conflicts and crises within our country, fightings among ourselves, but in the end we always found ways to compromise, to make peace and moved on, refreshing once again the sacred principles we inherited from our founders.

Distinguished guests

Ladies and gentlemen

From our days of independence in 1945, our story has been a story of ups and downs, of crises and renewal, of despair and hope. Soekarno, the proclamator of our independence, was the greatest of our hero. With his inspiring speeches, he united the country and nurtured our new nation. He gave the newly independent Indonesia a new vision and a sense of pride. At the peak of his time as our first president, which coincided with the beginning of the Cold War, Soekarno became the personification of Indonesia’s emergence as one of the major players in the Non-Aligned Nations, particularly in Asia and Africa.

All great men, however, make great mistakes. His biggest mistake was that he gave only a very vague and wrong ideas of how to build a modern economy. He once said that building the economy was only a child play, not a business of great statesmen. Like many countries in Asia and Africa, he followed the Soviet-style development, adjusted to Soekarno’s flavor and Indonesian context.

The result was an economic disaster, which interplayed with the political dynamics of the day, centered around simultaneous and multilayered competitions between the majority of the people, supported by the military, vs the communists and between the Islamic parties vs the secular parties. Hence, in the early 1960s, Indonesia was on the brink of a civil war, with a bankrupt economy.

When Soekarno could no longer controlled the situation, the military moved in, led by a young, handsome, low-profile, smiling General Soeharto. After purging the communists — one of the saddest and bloodiest events in our history — Soeharto gradually gained the upper hand and, supported by the majority of the people, established the New Order regime.

With Soeharto as the new leader, Indonesia began a new chapter. Soeharto’s objectives were simple but clear: Political stability and economic development. No more fiery and colorful rhetorics. No more revolutionary passion. Instead, with iron fists, Soeharto coldly and systematically strengthened the central government, controlled the political parties, and supported the technocrats to open the market and to plan for major development programs.

In many ways, Soeharto was successful. He emerged as one of the strongest and most admired leaders in Asia, a respected and proud counterpart of Lee Kuan Yew and Mahathir Mohamad. With stable politics, the Indonesian economy enjoyed a long period of high growth, about 7 to 8 percent annually for about 2 consecutive decades. China and India are now the darling of the world and investment houses. But in the 1970s and 1980s, these two giants were still the basket cases of economic failure. It was Indonesia, Singapore and other East and South East Asian countries who made the news and impressed the world.

Under Soeharto’s rule, 50 millions people were uplifted from absolute poverty. Thousands modern schools, hospitals and infrastructures were built, and a new middle class was born. Such scale of rapid economic progress had never happened before in our history. With these achievements, Indonesia, along with other successful Asean countries, were considered Asia’s little dragons, the emerging countries whose impressive growth would soon enabled them to catch up with Japan and the West.

But it turned out that things were not that easy. By the early 1990s, Soeharto was already in his third decade in power. Nobody can win the fight against time. Soeharto’s biggest mistake was that he stayed in power (32 years to be precise) much longer than it was humanly possible and politically necessary. Gradually he began to lost his touch, his feel, and worse, his determination to succeed. So, when the Financial Crisis of 1997 struck the world economy like a dark typhoon, Indonesia was hit hard.

The people were confused, panic and angry. Soeharto did not really know how best to respond. He appeared in public still dignified as an old president, but the painful economic downturn, followed by the student protests and the cries for him to step down, was too much for him to handle. Thus began the era of reformasi and democracy, a new era that is still going on today, which I hope will stay for many years to come.

Ladies and gentlemen

Distinguished guests

So here we are at the state of contemporary Indonesia. I am sorry I have taken a bit of detour in history, but I think it is important for our friends in Singapore to know us better, by understanding our national journey from early on. By knowing the past, we can better understand the present and the future.

Now, about the present, let me begin by what President Barack Obama said when he visited our country last week. In his beautiful and moving speech at Universitas Indonesia, before at least 6,000 audience, mostly students and Jakarta’s young leaders, the US President expressed his admiration for Indonesia’s flourishing democracy and freedom. He was also deeply impressed by our religiosity, combined with our gentle and tolerant predispositions. As someone who spent 4 years of boyhood in Jakarta, he said he had great optimism about our future and our democracy.

President Obama captured the essence of our time since the fall of Soeharto in 1998. But we have to bear in mind, the journey to democracy had never been easy. In the first year or two, the birth of freedom was followed by messy and confusing signs. It fed euphoria, and sometimes anarchy and bloody conflicts, particularly in areas where there were preexisting historical competitions between religions or ethnic groups, like Sampit, Ambon and Poso. Jakarta was also torn apart for several days by anti-Chinese riots. The army and the police were discredited, the central and regional governments were uncertain to exercise their authority to impose order.

Nobody was in charge. Everybody was afraid to take responsibilty. To use the historical example from the French Revolution, the short period after the fall of Soeharto was the reign of terror, inflicted not by particular state agencies, but by our own worst self, by our own weak and dark angels. It was the time when thousands of middle class Indonesians, particularly of Chinese origin, went away to find shelter in Singapore.

Fortunately, it was short. Gradually the government and the people found the way to strike a healthy balance between freedom and order, between authority and democracy. Of course, even today we are still working that out. It may take one full generation before the true character of our democracy is consolidated and becomes relatively permanent. But there is no doubt that we are moving on, learning by doing the best way, under limited circumstances, to conduct a responsible, open, and accountable exercise of power.

Indonesia has now experienced the coming and going of four different presidents and governments in the last 12 years. But the circulation of elites, the transfers of power, the exercise of the people’s will through open elections, have been mostly peaceful and orderly. A wide concensus has now emerged that we can no longer turn the clock back. We have understood that the imperfection of democracy is not an invitation to tyranny and blind power – instead, it is a challenge to try harder, to strike a balance, to compromise with the guidance of common sense and respect to each other.

We are proud that we have taken the chances. Now we are the third biggest democracy in the world. As President Obama and others understand very well, the people of Indonesia have shown the world that Islam and democracy can coexist peacefully. We have given an example of how a large country with more than 240 million people, with a diverse, multi-ethnic society and a relatively less developed economy survived against all odds, widening the room for liberty, reforming the government, fighting against bigotry and extremism, devolving the power of the central government to the regions, and many more.

Of course, there are many other things we have to do in the future. Corruption and incompetency of the bureaucracy are major challenges. The justice system, the police, the quality of our teachers and nurses, the quality of our basic public services: These are all difficult problems. We have to deal with them with skill, determination, and patient, like a mountain climber in his search for the path to the cloudy peak.

But however difficult, I strongly believe that Indonesia will succeed in the coming years. A healthy democratic foundation has been established. We have become more mature as a nation. Given enough time and opportunities, Indonesia will emerge as a strong, proud, friendly country to its neighbors in the region, and to the world.

Distinguished guests

Ladies and gentlemen

Now, let me take your time for several minutes to talk about the economy. Democracy and freedom, in the context of our country, cannot survive for long in a stagnant or deteriorating economy. Money is not everything, but democracy will be much easier to manage if the people feel that their job opportunities are expanding and they can send their kids to better schools. It is therefore a general rule in politics that democracy and economic growth usually need each other.

Fortunately for us in Indonesia, four different governments in the last 12 years — one of which I am proud to admit that I had the opportunity to serve as the coodinating minister for the economy and also for the people’s welfare – have basically practiced prudent and relatively sound economic policies. Each had their own style and emphasis (Habibie, Gus Dur, Megawati and SBY), but the substance was almost the same: coping with the aftermath of the financial crisis, reforming the banking sector, keeping the macroeconomy stable, managing the debt below a certain level of GDP, improving social safety nets for the poor, and many other programs, big and small.

Policy continuation and stability were among the reasons why the Indonesian economy is now a relatively healthy one, with growth predicted to be around 6.2 to 6.4 percents next year, increasing to 8 percent in 2014. The foundations are now better. When the 2008 global financial crisis struck, which created havoc in many countries, Indonesia was relatively left untouched (compare this to the 14 percent contraction of GDP in 1998).

So we are now standing on a better ground. Domestic consumptions are rising, local banks are free of crippling debts, the stock market has been performing very well (much better compared to many other countries in the region), exports and investments are respectable. As the result of all this, Indonesia’s per capita income improved significantly, from USD 2,000 in 2004 to about USD 3,000 now. Because of this success, some high-profile investment houses, like Morgan Stanley, have suggested recently the possibility for Indonesia to be included to the BRIC club, along with Brazil, India, and China. It would certainly be nice to us if BRIC becomes BRIIC, with two “I”s.

Now, by saying all that, I am not implying that everything is all well. Anybody who has visited Jakarta recently will understand this. The road traffic has become impossible, the power supply unstable, and Cengkareng International Airport is deteriorating. It is a clear sign that the development of our infrastructures has not been keeping up. This problem is creating bottlenecks everywhere in the country, in almost every big cities.

So the government has to take major initiatives, by inviting the private sectors to participate. And for this, the biggest issue is legal certainty and the ability of the government to implement the law, especially in land and property acquisition for eminent domain. Our records here are not so good: Most of the toll road projects are now being postponed simply because we do not have the determination to proceed, forcefully if necessary, to implement the law.

Apart from this problem, we are also facing the issues of job and poverty. We need at least 7 percent growth per year to fully absorb our expanding work force. So far, some policies, like the well-known PNPM (the national socio-economic empowerment programs), has been quite successful in providing jobs and projects to the district and village level, covering a significant number of people with relatively little public money. But we need more programs of this nature, providing security for our people at the grassroot level.

Our fiscal policy needs to be more aggressive in its spending, provided that the purpose and the target are well and clearly defined. Deficit spending, under the current conditions, is necessary to help the economy going.

Of all the economic challenges we are facing, perhaps among the trickiest ones is the question of how to define the proper role of the government in the economy. It is dynamic and constantly evolving. But sooner or later we have to come up with a better formulation, a working and productive relationship between the public and the private, between the government and the market. We need smart government interventions as well as efficient private sectors.

Apart from that, we also have to strike a healthy balance between the government and the parliament in governing our economy. Sometimes the line of responsibility between the executive and the legislature is blurred, which creates big uncertainties for all economic actors. This need to be settled well: The government should be able to execute its programs, and the legislature should be able to play constructive role in exercising its legitimate power.

Distinguised guests

Ladies and gentlemen

Those are all big stuff, the economic problems and challenges. I know they are not easy. But the structure of our economic governance is of the utmost importance: It is what enables Indonesia to become more competitive in the global economy and to achieve higher-quality growth. Without solving these problems at the structural level, our economy cannot achieve its true potentials.

Again, from my experience both in the private and public sector, I know that my country has a lot of promises. Sometimes we forget about this and we are busy squabling with ourselves. But overall I am optimistic that we are all going to be fine.

Indonesia in the future will grow stronger, both as an economic power house or as a democratic nation. A more self-confident Indonesia is a friendly force to the region and the world. Especially for our neighbor like Singapore, a stronger Indonesia means a more reliable friend, a more dependable brother, as well as an expanding market and a potentially huge customer.

Asia now is a place of wonder. With the rise of China and India, the dragon and the tiger, people the world over are now rising many questions. I, for one, do not see the rise of the two giants as a threat. I see them as almost boundless possibilities. If Indonesia can pull it off and close the gap, it means that about three billion people, or half of world population, are rapidly advancing, doubling their income every 6 or 7 years.

This may happen in the near future. And if it is, we have a very good reason to rejoice. One generation ago our region was a theater of proxy wars among major powers during the most intense periods of the Cold War. Now it is an economic power house, a region where smart investors from around the world are looking for a place to make some profits, a region where better schools and universities are expanding the mind of millions of our young generation, a place where tomorrow is always better than yesterday.

However, this great possibility will also be affected by the dynamics of international politics. Here, the role of the US and Japan are also of the utmost important. We need to remember that the most important aspects are balance of power and national interests. Therefore, we need also to embrace them as our partners. The US in particular has many roles: major economic and technological power, with second to none in its military capabilities. So, as emerging economic countries, we have to play our cards well, playing the game of power balancing and pursuing our own national and regional interests.

There is one thing we have to remember also that our international trade system is being threatened by the failure in resolving WTO agreement. Moreover, the currency problems and currency wars are now the topic of the day. China and the US in particular are in disharmony. We should resolve these problems sooner rather than later, because they can become a threat to world economic order, and in the end, to world peace.

Finally, let me conclude this lecture by thanking all of you, especially the Nanyang Technological University. I enjoy being here with you and I am deeply thankful for the opportunity given to me and my family to make a small contribution for the advancement of learning in this great university.

Thank you.