Keynote Address at the 2008 Wilton Park Conference on “Indonesia: Political and Economic Prospects”, United Kingdom, 3 March 2008







3 MARCH 2008

Honourable Meg Munn, MP, Parliamentary Under-Secretary of State, Foreign and Commonwealth Office
Ladies and Gentlemen,

I am  pleased to be back here in Wilton Park. The last time  I was here was in late 2000 in a different capacity then as Ambassador / Permanent Representative to the UN in Geneva. I was attending a conference on disarmament, a very relevant issue today as the UN Security Council is scheduled to vote today on the Iran nuclear issue.
I am asked to speak on the future prospects of Indonesia. May I extend my thanks and appreciation to Wilton Park and its co-sponsors for making the case of Indonesia a key subject at this prestigious forum.

I understand that for several observers, news coming out of Indonesia during the last decade may have given them mixed signals. It is quite often that the noises and hustle-and-bustle captured much of their attention, leaving the underlying trends unspotted by many of them. Moreover, when the same observers look at the development within the context of the larger dynamics in East Asia, especially with the rise of China—and lately India—then Indonesia might very well “disappear” from their radar screen. At an extreme end, some would even argue to the extent that Indonesia’s future is at best to become an illiberal democracy, or at worst a failed collapsing state.
On the contrary, Dr. Andrew Steer, leaving his job as country director of the World Bank in Jakarta, made a farewell presentation in front of President Yudhoyono and his cabinet. Mr. Steer’s presentation was aptly titled “Indonesia Rising.”

More than just presenting economic indicators and data, he emphasized three major trends that mark the rise of democracy: genuine and democratic elections, new democratic institutions, and decentralization of governance. It was quite a vote of confidence for Indonesia.

At this forum, I would argue that Indonesia does have a future—a good one—and indeed, there is always a good place for Indonesia in the dynamics of East Asia. Hence, today I have the honour of addressing this forum with a message of confidence: Indonesia Rising. It is with such confidence that Indonesia has carried out 10 years of reform and faces future prospects.

Ladies and Gentlemen,

This year Indonesia marks the first decade of “Reformasi” that was launched in the wake of the Asian financial crisis. Indonesia suffered the brunt of that crisis. Until that fateful time, our economy had been growing at an average of 7% annually. Suddenly we had to bear a negative economic growth of 14.2%. Inflation rate rose to more than 80%. Scores of banks and factories closed down. It doubled the number of people who were unemployed and who lived below the poverty line. To make matters worse, we suffered political and social turmoil.

But in the midst of our tribulations we realized that our only salvation lay in reform. Hence, we launched an era of political, economic and social reform that pushes forward our transition into a fully democratic system. Today we are proud to be cited as the world’s third largest democracy. And we are proud to serve as living proof that Islam, democracy, and modernity can flourish together.

We have restored all fundamental freedoms through four major amendments in our 1945 Constitution. Promotion and protection of human rights has now become a priority national agenda. We have instituted the on-going reforms in our military and kept it away from politics. We have transformed our national police into a civilian force. The rule of law has been much strengthened.

We have carried out structural reforms to our economy and adhered to a policy of that is ‘pro-poor, pro-job creation and pro-growth’. This has ensured stability and steady progress.

We have also sustained a campaign to rid of corruption in all sectors of our society—notably the bureaucracy, the law-enforcement, judiciary, and the corporate sector. A powerful and independent Anti-Corruption Commission is spearheading this campaign. More than a hundred corruptors, many of them high ranking public and corporate officials have been brought to justice and have been meted due punishment.

We have decentralized our system of government, transferring many of the powers of the central government to the local government units. In other words, we put it along the line of our national motto, “In diversity, united”- which was for so long too heavily stressed on unity, at the expense of our diversity. That move paid tribute to the wealth of our diversity and also helped ensure our political unity. With most government decisions being made close to the grassroots, there has been a marked improvement in the people’s sense of participation in the decision-making processes that directly affect their lives.

Indonesia’s democratic credentials were showcased in 2004, when we held a series of elections including, for the first time in our history, direct elections for President and Vice President. Some 145 million voters – out of 155 million registered voters - took part in an exceedingly complicated logistic exercise. And it was cited by international observers as very peaceful, fair and, most importantly, democratic.

Since then we have been conducting a series of local direct elections. Today we have held 292 local elections at municipal level to elect mayors and regents and their running mates, and 16 elections  to choose governors and vice-governors. About 150 local elections were scheduled this year. That is why the World Bank has cited Indonesia today as the world’s capital of elections !

By next year, all of Indonesia’s governors, regents and mayors will be directly elected by and accountable to the people. Also next year we will be holding our second direct presidential elections.

You may have heard news coverage reporting irregularities, claims, and even conflicts among the candidates and their supporters. What has been missing from our attention is the underlying trend that more and more of these problems are being settled in court through a fair legal process and in a peaceful manner.

This is one of the most promising and positive trends that, I am confident, will shape and feature the basic character of Indonesia’s democracy today.

Most importantly, our people have started to look at these elections as a regular, yet important, part of their livelihood. They have begun to see the ballot as the way to reward or punish public officials. In return, people have started to enjoy more and more improvements in public services. While we need still to carefully nurture and consolidate our democracy, there is no turning point here.

Of course, we have also had difficult challenges. We have even experienced tragedies. But every time a tragedy struck us down, we drew on our reserves of resilience and bounced back. Based on our own experience in addressing such difficult challenges, we are confident that in the era of reform, we can always count on the support and sympathetic gesture of the international community, for which we are very thankful.

We have always recovered from every terrorist attack such as the Bali bombing of 11 October 2002. Our response to the threat of terrorism has been a balance between the need of security and the promotion of democracy, human rights and the rule of law. And that is the key to our success in countering terrorism. We have always brought to justice the perpetrators of terrorist attacks. We have broken up their networks and put them on the run.

In doing so, we have also promoted international cooperation to strengthen our capacity and that of our neighbours. Moreover, we have been promoting international dialogues for cooperation between religions and cultures. We are of the view that, in the long run, our success in countering terrorism would depend on our success in empowering the moderates: both the moderate groups within our societies and the moderate countries. Because we live in a very diverse society, dialogue is an important part of our daily lives and therefore highly valued. Indonesia therefore has been an active promoter of various interfaith dialogues and cooperation in the Asia Pacific region and across regions in the framework of the Asia-Europe meetings as well as at the bilateral level with a number of countries, including the United Kingdom through the UK-Indonesia Islamic Advisory Group.

Another eloquent example is how quick and effectively the Indonesian Government – barely three months after it came into office - dealt with the tsunami that struck us on 26 December 2004.

In the wake of that tragedy, our friends from all over the world rushed to our aid and helped us in a massive rescue and relief operations. Then they helped us rebuild the lives of the survivors. We are now in the midst of the final stages of rehabilitation and reconstruction.

We have received many votes of confidence on the way we deal with the disaster, and there are amples of lessons learned that can be shared with other countries as well as the UN system. Everyone seems to agree that our success in dealing with Tsunami is largely due to the effective leadership of President Yudhoyono, and his trusted confidant, Mr. Kuntoro Mangkusubroto—Chairman of the Reconstruction and Rehabilitation Body of Aceh and  Nias.

This has been accomplished together with the success in bringing peace to Aceh. On 15 August 2005, the Government of Indonesia and the Free Aceh Movement (GAM) had finally reached a peaceful political settlement to a three-decade old separatist rebellion that had cost Indonesia thousands of lives. Despite many sceptic noises, this peace has proved to endure.  We are confident that this peace will endure in the years ahead; because peace is what the people wants.

The successful implementation of the Aceh Peace Agreement has strengthened our advocacy for dialogue and negotiation in conflict resolutions at home, and in our immediate regions as has shown in our role at the Cambodia and Southern Philippines conflict resolutions.

Ladies and Gentlemen,
In sum, “Reformasi” has brought about a balance between political and economic development. Something that was absent before: when economic growth was phenomenal while political development was stunted.

Today, with the rise of our democracy, our economic growth is a bit more than modest. Last year we achieved a growth rate of 6.3% and we are going to equal or surpass that this year. Our export earnings are rising on the back of good prices for our commodities. Inflation is well under control and the Rupiah is gaining modestly against the dollar. Our foreign currency reserves, which stand at about US$ 57 billion, is the highest in our history.  We have lowered our debt to GDP ratio to 33 percent.  As of August last year, we are able to reduce the number of unemployed by one million, from more than eleven million the previous year.

We realize that our young democracy is under pressure to deliver on development—meaning it must create jobs. We must be able to prove that democracy works for the welfare of the people.

That is easier said than done for the simple reason that we live in very challenging times. We are facing an imminent global economic slowdown, featured by spiraling oil prices in the world market, of a subprime mortgage crisis, and of problems of food security. And yet, the East Asian economies remain strong and continue to become the engine of world’s economy. Within East Asia, at around 6.4 % of economic growth, Indonesia is doing quite well.

It is true that we are now a net importer of oil but we are still a net exporter of coal and gas. Moreover, we have taken measures to enhance our oil and gas production. We have intensified exploration and enhanced oil recovery, while reducing the share of oil in our energy mix and increasing share of gas, coal, geothermal and renewable energy sources.

As an agricultural country, we produce most of the food that we consume. From time to time, we may need to import but we are pretty close to self-sufficiency.
In the face of those economic pressures, we have revised our national budget to reduce spending on non-priority projects and to channel the savings to measures that will help the poor cope with high fuel and food prices. However, there will be no reduction of spending on the building of infrastructures, such as power plants, roads and toll roads, as well as communications facilities, especially in the rural areas.
And since the Indonesian economy is increasingly integrated with the regional economy, we expect to benefit from—and to contribute to—the East Asian dynamics characterised by the high growth of China and India and the steady performance of the Japanese and South Korean economies. We have begun to talk about an East Asia free trade area in the future – and in fact an East Asia community – a group involving an aggregate population of 3.9 billion, and of combined economic powerhouses in Asia. We can foresee that an East Asia-wide free trade area could be in place by 2012 or 2015 at the latest.

At the same time, we also reap the benefit from ASEAN regional and subregional economic integration as we move forward, riding on the newly formulated ASEAN Charter, toward the establishment of an ASEAN Community in 2015. In addition, an ASEAN Economic Blueprint, which was signed last November, provides a roadmap for attaining full economic integration of ASEAN, whereby ASEAN will be a single market, and a single production base, in which there will be free flow of goods, services, capital and labour.

We are thus confident and optimistic about the outlook for economic and political integration not only of ASEAN but also of East Asia. Indonesia has been and is committed to always be the prime mover of the processes.

And as we make progress both as an individual nation and as a founding member of ASEAN, we also get into a better position to contribute to the resolution of vitally important global issues.

We are committed to pursue our independent and active foreign policy as the guidelines to create an enabling environment and maintain peace and stability in our immediate neighborhood, the region, and the world. This is part and parcel of our national interest.
When conflicts in other regions such as that of in the Middle East and Africa continue to persist, the Southeast Asian region has managed in the past 40 years to maintain relative peace and stability in the sub-region and beyond. This is certainly not a gift falling from the sky into our laps. Instead, this has come as a logical consequence of deliberate efforts through consultation and dialogue to develop Southeast Asia as a region of peace, stability, and prosperity. This is the true value of ASEAN as the driving force.
At the same time, Indonesia continues to play an active role in addressing global issues. That is why we are reaching out to Palestine, Lebanon and the Middle East to contribute in any way we can to the revival of the peace process and to the maintenance of peace in that region. And that is why we are now serving as a non-permanent member on the UN Security Council.
In that same spirit of service to humankind, we hosted last December the UN Conference on Climate Change. It was not an easy process but with the international community responding to the appeals of Indonesia, it produced the Bali Roadmap toward a post-Kyoto Protocol climate regime. And we hosted last January the UN Conference on Anti-Corruption that considerably advanced the cause of good governance all over the world.
We will therefore be, as much as we can and as well as we can, an active bridge builder and network builder not only in our ASEAN region and the larger East Asian and Asia-Pacific regions but also between regions.
By being faithful to our constitutional mandate to contribute to the shaping of a better world, we are also helping ensure the growth of stable and prosperous Indonesia. An Indonesia that is a worthy and reliable partner to all.
Today, with the rise of Indonesia’s democracy, what needs to be done is ensuring that that democracy works for the welfare of our people. In this regard, we look at our friends : the United Kindom and fellow democracies, not for charity or loans, but for more trade and investment cooperation. For every pound of our bilateral trade and investment – five pences of them mean a lot in strengthening our democracy. Indonesia is a living proof that democracy,  Islam and modernization can work in harmony. We are proud to be credited with the achievement of such a highly valuable, unique and strategic reality in the world of today.  
I thank you.