Indonesia
January 18, 2005
Will the Tsunami Bring a Wave of Instability to Asia?
By Sam Wilkin, Editor in Chief
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The tsunami, which left as many as 160,000 dead, hit countries with a tenuous hold on political stability – a province of Indonesia that is home to a violent separatist movement, a region in Sri Lanka that is currently at peace but has fought a long-running civil war. Crises, whether natural or man-made, tend to beget political instability. Will the political aftershocks of the tsunami be even stronger than the initial quake?
An earthquake of devastating magnitude struck, in 1976, not far from Beijing. As the survivors’ stories trickled out, the world rushed to China’s assistance. But the Chinese government refused all outside aid and claimed the situation was well in hand. Partly as a result, the casualty figures were, in the end, astronomical. At least 242,000 died – the official figure, released years later – and some reputable sources claim that over 700,000 perished.
The problem was the timing. It has been a basic tenet of Chinese political philosophy for more than two millennia that governments rule with the “mandate of heaven,” and that natural disasters – including floods, droughts and earthquakes – are a heaven-sent signal that this mandate has been revoked and the leadership had failed. In 1976, Mao was on his deathbed, and the unsteady Chinese government feared the political consequences of the quake. Lest anyone conclude their mandate was up, the government tried to cover up the earthquake’s magnitude, at the expense of Chinese lives.
But then, Confucian teachings aside, there is ample precedent that natural disasters beget instability. Simon Winchester popularized the argument that the volcanic explosion which destroyed the Indonesian island of Krakatoa in 1884 lead to a bloody peasant’s revolt against Dutch colonial rule, and fostered the growth of militant Islam in that country.
In 1954, following a devastating hurricane, the Haitian government’s outright theft of international relief aid was so blatant that the president was eventually driven from office. In 1970, following a devastating typhoon that killed perhaps 400,000 people, the Pakistani government’s perceived failure to respond helped fuel a civil war between eastern and western Pakistan. (The typhoon hit the east; the unresponsive government was based in the west.) This led to the secession of Bangladesh.
Just as famously, a 1972 earthquake fueled the growth of an opposition movement that eventually overthrew the government of Nicaragua. The bungled response of the US-backed government of Iran to a 1978 quake allowed the country’s Islamic revolutionaries to rally support. And “twin” earthquakes in Mexico City in 1985 assisted the rise of the leftist PRD, which gained power in local government and very nearly the presidency.
After the Asian tsunami, Indonesia is an obvious candidate for instability. The last major catastrophe to strike Indonesia was not natural, it was man-made – an economic collapse following the Asian financial crisis. This led to an orgy of political violence by Indonesian Muslims against the country’s ethnic Chinese that left over 1,000 dead.
Catastrophes, whatever their form, tend to leave people disoriented and in search of an explanation for their suffering – an explanation which will tell them how they can lessen their pain. Indonesian rabble-rousers blamed the country’s economic collapse, erroneously, on Indonesians of Chinese descent, and Indonesia’s ethnic Malays rose up to kill their Chinese countrymen.
The risk, of course, is that the trauma of the tsunami will give separatist rebels in Indonesia’s hard-hid Aceh province new political life. The rebels can blame the people’s suffering on the government’s failure to provide for them. And yet, given the events of the past year, this risk is limited. Under cover of the global war on terror, the Indonesian government has conducted a bloody, heavy-handed crackdown in Aceh that has weakened the rebels. This continues even now – the Indonesian government announced that all foreign aid workers in Aceh would be accompanied by the Indonesian army, for instance. In the near term at least, the greater danger is of an uncontrolled crackdown than an uncontrolled rebellion.
In Sri Lanka, the tsunami may well have a more profound impact. The Tamil Tiger rebels in northern Sri Lanka have waged a decades-long civil war against the Sri Lankan government that has killed over 64,000 people. The secret to the Tiger’s longevity has been tremendous external funding.
In past decades, over a hundred thousand ethnic Tamils have fled Sri Lanka, chiefly as a result of anti-Tamil violence by the country’s majority Sinhalese. These Tamils – now residents of the US, UK, Canada, and other rich countries – have sent tremendous sums of money to the Tamil rebels fighting at home. (At one time, Canada’s ethnic Tamils alone sent their countrymen over $20 million per year.) These funds have allowed the Tamil Tigers to buy the arms and supplies necessary to run a bloody guerilla war.
All this stopped after September 11th. Governments worldwide cracked down on terrorist funding, and ethnic Tamils overseas were no longer comfortable funding violence, even for a cause they believed in. (One of the Tigers’ main tactics is suicide bombing.) With their funds drying up, the Tigers laid down their arms and entered peace talks with the Sri Lankan government in 2002.
The danger is that the tsunami could overturn this arrangement, first because the quake’s trauma provides the Tigers with new recruits, and second because the funds have come back. Seeing the disaster on television, overseas Tamils are once again sending huge sums home – some of which will doubtless be misappropriated by the Tigers.
To be sure, in both Indonesia and Sri Lanka, there is reason for hope. Consider the quake that struck Turkey in 1999 – it threatened to cause instability, but in the end, did much more to improve relations between Greece and Turkey by causing an outpouring of international sympathy. Natural disasters bring out the best in people as well as the worst. Especially if the international community stays closely involved, there is at least a chance that the political aftershocks of the tsunami, even in Indonesia and Sri Lanka, will be manageable.
[printer-friendly version]
The tsunami, which left as many as 160,000 dead, hit countries with a tenuous hold on political stability – a province of Indonesia that is home to a violent separatist movement, a region in Sri Lanka that is currently at peace but has fought a long-running civil war. Crises, whether natural or man-made, tend to beget political instability. Will the political aftershocks of the tsunami be even stronger than the initial quake?
An earthquake of devastating magnitude struck, in 1976, not far from Beijing. As the survivors’ stories trickled out, the world rushed to China’s assistance. But the Chinese government refused all outside aid and claimed the situation was well in hand. Partly as a result, the casualty figures were, in the end, astronomical. At least 242,000 died – the official figure, released years later – and some reputable sources claim that over 700,000 perished.
The problem was the timing. It has been a basic tenet of Chinese political philosophy for more than two millennia that governments rule with the “mandate of heaven,” and that natural disasters – including floods, droughts and earthquakes – are a heaven-sent signal that this mandate has been revoked and the leadership had failed. In 1976, Mao was on his deathbed, and the unsteady Chinese government feared the political consequences of the quake. Lest anyone conclude their mandate was up, the government tried to cover up the earthquake’s magnitude, at the expense of Chinese lives.
But then, Confucian teachings aside, there is ample precedent that natural disasters beget instability. Simon Winchester popularized the argument that the volcanic explosion which destroyed the Indonesian island of Krakatoa in 1884 lead to a bloody peasant’s revolt against Dutch colonial rule, and fostered the growth of militant Islam in that country.
In 1954, following a devastating hurricane, the Haitian government’s outright theft of international relief aid was so blatant that the president was eventually driven from office. In 1970, following a devastating typhoon that killed perhaps 400,000 people, the Pakistani government’s perceived failure to respond helped fuel a civil war between eastern and western Pakistan. (The typhoon hit the east; the unresponsive government was based in the west.) This led to the secession of Bangladesh.
Just as famously, a 1972 earthquake fueled the growth of an opposition movement that eventually overthrew the government of Nicaragua. The bungled response of the US-backed government of Iran to a 1978 quake allowed the country’s Islamic revolutionaries to rally support. And “twin” earthquakes in Mexico City in 1985 assisted the rise of the leftist PRD, which gained power in local government and very nearly the presidency.
After the Asian tsunami, Indonesia is an obvious candidate for instability. The last major catastrophe to strike Indonesia was not natural, it was man-made – an economic collapse following the Asian financial crisis. This led to an orgy of political violence by Indonesian Muslims against the country’s ethnic Chinese that left over 1,000 dead.
Catastrophes, whatever their form, tend to leave people disoriented and in search of an explanation for their suffering – an explanation which will tell them how they can lessen their pain. Indonesian rabble-rousers blamed the country’s economic collapse, erroneously, on Indonesians of Chinese descent, and Indonesia’s ethnic Malays rose up to kill their Chinese countrymen.
The risk, of course, is that the trauma of the tsunami will give separatist rebels in Indonesia’s hard-hid Aceh province new political life. The rebels can blame the people’s suffering on the government’s failure to provide for them. And yet, given the events of the past year, this risk is limited. Under cover of the global war on terror, the Indonesian government has conducted a bloody, heavy-handed crackdown in Aceh that has weakened the rebels. This continues even now – the Indonesian government announced that all foreign aid workers in Aceh would be accompanied by the Indonesian army, for instance. In the near term at least, the greater danger is of an uncontrolled crackdown than an uncontrolled rebellion.
In Sri Lanka, the tsunami may well have a more profound impact. The Tamil Tiger rebels in northern Sri Lanka have waged a decades-long civil war against the Sri Lankan government that has killed over 64,000 people. The secret to the Tiger’s longevity has been tremendous external funding.
In past decades, over a hundred thousand ethnic Tamils have fled Sri Lanka, chiefly as a result of anti-Tamil violence by the country’s majority Sinhalese. These Tamils – now residents of the US, UK, Canada, and other rich countries – have sent tremendous sums of money to the Tamil rebels fighting at home. (At one time, Canada’s ethnic Tamils alone sent their countrymen over $20 million per year.) These funds have allowed the Tamil Tigers to buy the arms and supplies necessary to run a bloody guerilla war.
All this stopped after September 11th. Governments worldwide cracked down on terrorist funding, and ethnic Tamils overseas were no longer comfortable funding violence, even for a cause they believed in. (One of the Tigers’ main tactics is suicide bombing.) With their funds drying up, the Tigers laid down their arms and entered peace talks with the Sri Lankan government in 2002.
The danger is that the tsunami could overturn this arrangement, first because the quake’s trauma provides the Tigers with new recruits, and second because the funds have come back. Seeing the disaster on television, overseas Tamils are once again sending huge sums home – some of which will doubtless be misappropriated by the Tigers.
To be sure, in both Indonesia and Sri Lanka, there is reason for hope. Consider the quake that struck Turkey in 1999 – it threatened to cause instability, but in the end, did much more to improve relations between Greece and Turkey by causing an outpouring of international sympathy. Natural disasters bring out the best in people as well as the worst. Especially if the international community stays closely involved, there is at least a chance that the political aftershocks of the tsunami, even in Indonesia and Sri Lanka, will be manageable.
October 05, 2004
Can Indonesia Bounce Back?
By Sam Wilkin, Editor in Chief
[printer-friendly version]
Of the Asian crisis economies, Indonesia has suffered the longest and rebounded most slowly. Last month’s free and peaceful elections firmly established the country – the world’s largest majority-Muslim state – as a functioning democracy. But can it bounce back to its pre-crisis performance?
Indonesia was always different. Most of the Asian crisis victims – Thailand, Malaysia, South Korea – suffered sharp cutoffs in foreign lending, but investment dollars generally stayed put. Indonesia, by contrast, experienced spectacular capital flight.
Not at first. In the first two quarters of the crisis, inflows continued. And then, in three disastrous months in 1998, over $5 billion in equity capital fled the country. And in following months, more of the same.
What happened? The answer is that in May 1998, Indonesians set upon their ethnic Chinese countrymen in an orgy of violence that claimed over 1,000 lives. The Chinese were hated for their wealth. Though four percent of the population, they controlled an estimated sixty percent of the country’s assets.
And at that point, all these assets were sent offshore. Estimates of total capital flight top $20 billion. This triggered an economic meltdown far messier than anywhere else in Asia. South Korea, Malaysia and Thailand bounced back. But foreign direct investment into Indonesia actually turned negative and stayed that way into the new millennium.
So will Indonesia rebound? The odds are long. To be sure, Indonesia has just accomplished something extraordinary. The world’s largest majority-Muslim country has become a genuine democracy. The incumbent candidate, competent but uninspiring, lost to a secular challenger with a reform agenda. The Islamic parties that did best in the vote uniformly stuck to a moderate, clean-government agenda. Radical Islam was on offer but unpopular. And the campaign itself was peaceful. The voting carried off without a hitch; the results not seriously disputed.
On top of this, Indonesia turned a decades-long tradition of dictatorial presidency on its head. Not only did the incumbent lose, but between 1999 and 2003 a series of constitutional amendments introduced genuine checks and balances into the system. Including the devolution of power to the provinces, legislative reform, and a new – and evidently quite functional – electoral process.
Still, democracy is one thing. A rebound to previous performance – growth of over seven percent per year between 1970 and 1996 – is quite another. Thailand, South Korea and Malaysia have gotten close. But Indonesia is unlikely to join them.
The reason is that the bargains which made Indonesia work died in those riots, along with hundreds of Chinese. Suharto’s dictatorial authority was crucial to enforce the policies of his “Berkley Mafia,” the University of California-trained technocrats who made Indonesia safe for investment. Without this, Indonesia’s 6,000 islands have each gone their own way. Most notably, local courts, susceptible to local influence, have attacked investors. The most notorious case is that of the Indonesian arm of the multinational insurer Prudential, absurdly forced into bankruptcy.
Also crucial was Suharto’s relationship to the ethnic Chinese. Suharto cultivated ethnic Chinese businessmen as allies, enriching them with state favoritism, and they reciprocated with political support. They were ideal cronies: captains of industry who – because of their status as a hated minority – could never develop political ambitions of their own, and relied on Suharto for protection. (Suharto, who had deposed his mentor in a military coup, knew the difficulty of finding reliable allies.)
These crucial conditions of Indonesia’s boom years will never be restored. Some of the ethnic Chinese capital will return but – with the Chinese leery and no dictatorial protections on offer – Indonesian industry will need new leaders. The just-elected president, Susilo Bambang Yudhoyono, has won a substantial mandate, but he will be no Suharto-style dictator. His party has only 57 seats in the 550-seat parliament, and the two largest parties backed his opponent.
This is, in a sense, a great achievement. That the largest parties lost to an independent candidate reveals a determination to move on from the cronyism of the Suharto years. Throwing out an incumbent, peacefully, is the true test of a democracy – even Japan did not achieve this until the 1990s, fully forty years after it became “democratic” following World War II.
On the other hand, the system for protecting capital and nurturing growth that made Indonesia a star emerging market has also collapsed. Achieving that level of performance in the new Indonesia will not be easy. With power decentralized, the system itself must be made to work – the rule of law, protection of property, control of corruption. Indonesia is a true democracy now, but it is a long, hard, and, odds are, slow road that lies ahead.
[The Editor is on leave to finish a new book. Editorials will resume in mid-November.]
[printer-friendly version]
Of the Asian crisis economies, Indonesia has suffered the longest and rebounded most slowly. Last month’s free and peaceful elections firmly established the country – the world’s largest majority-Muslim state – as a functioning democracy. But can it bounce back to its pre-crisis performance?
Indonesia was always different. Most of the Asian crisis victims – Thailand, Malaysia, South Korea – suffered sharp cutoffs in foreign lending, but investment dollars generally stayed put. Indonesia, by contrast, experienced spectacular capital flight.
Not at first. In the first two quarters of the crisis, inflows continued. And then, in three disastrous months in 1998, over $5 billion in equity capital fled the country. And in following months, more of the same.
What happened? The answer is that in May 1998, Indonesians set upon their ethnic Chinese countrymen in an orgy of violence that claimed over 1,000 lives. The Chinese were hated for their wealth. Though four percent of the population, they controlled an estimated sixty percent of the country’s assets.
And at that point, all these assets were sent offshore. Estimates of total capital flight top $20 billion. This triggered an economic meltdown far messier than anywhere else in Asia. South Korea, Malaysia and Thailand bounced back. But foreign direct investment into Indonesia actually turned negative and stayed that way into the new millennium.
So will Indonesia rebound? The odds are long. To be sure, Indonesia has just accomplished something extraordinary. The world’s largest majority-Muslim country has become a genuine democracy. The incumbent candidate, competent but uninspiring, lost to a secular challenger with a reform agenda. The Islamic parties that did best in the vote uniformly stuck to a moderate, clean-government agenda. Radical Islam was on offer but unpopular. And the campaign itself was peaceful. The voting carried off without a hitch; the results not seriously disputed.
On top of this, Indonesia turned a decades-long tradition of dictatorial presidency on its head. Not only did the incumbent lose, but between 1999 and 2003 a series of constitutional amendments introduced genuine checks and balances into the system. Including the devolution of power to the provinces, legislative reform, and a new – and evidently quite functional – electoral process.
Still, democracy is one thing. A rebound to previous performance – growth of over seven percent per year between 1970 and 1996 – is quite another. Thailand, South Korea and Malaysia have gotten close. But Indonesia is unlikely to join them.
The reason is that the bargains which made Indonesia work died in those riots, along with hundreds of Chinese. Suharto’s dictatorial authority was crucial to enforce the policies of his “Berkley Mafia,” the University of California-trained technocrats who made Indonesia safe for investment. Without this, Indonesia’s 6,000 islands have each gone their own way. Most notably, local courts, susceptible to local influence, have attacked investors. The most notorious case is that of the Indonesian arm of the multinational insurer Prudential, absurdly forced into bankruptcy.
Also crucial was Suharto’s relationship to the ethnic Chinese. Suharto cultivated ethnic Chinese businessmen as allies, enriching them with state favoritism, and they reciprocated with political support. They were ideal cronies: captains of industry who – because of their status as a hated minority – could never develop political ambitions of their own, and relied on Suharto for protection. (Suharto, who had deposed his mentor in a military coup, knew the difficulty of finding reliable allies.)
These crucial conditions of Indonesia’s boom years will never be restored. Some of the ethnic Chinese capital will return but – with the Chinese leery and no dictatorial protections on offer – Indonesian industry will need new leaders. The just-elected president, Susilo Bambang Yudhoyono, has won a substantial mandate, but he will be no Suharto-style dictator. His party has only 57 seats in the 550-seat parliament, and the two largest parties backed his opponent.
This is, in a sense, a great achievement. That the largest parties lost to an independent candidate reveals a determination to move on from the cronyism of the Suharto years. Throwing out an incumbent, peacefully, is the true test of a democracy – even Japan did not achieve this until the 1990s, fully forty years after it became “democratic” following World War II.
On the other hand, the system for protecting capital and nurturing growth that made Indonesia a star emerging market has also collapsed. Achieving that level of performance in the new Indonesia will not be easy. With power decentralized, the system itself must be made to work – the rule of law, protection of property, control of corruption. Indonesia is a true democracy now, but it is a long, hard, and, odds are, slow road that lies ahead.
[The Editor is on leave to finish a new book. Editorials will resume in mid-November.]