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STARS OF ASIA -- AGENDA SETTERS
Indonesia's Crisis Manager
Susilo Bambang Yudhoyono, President, Indonesia
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Susilo Bambang Yudhoyono knew he faced awesome challenges when he became Indonesia's first directly elected President last October. The ethnically diverse, fledgling democracy he leads spans 17,000 islands, and is a key terrorism staging ground, a corruption mecca, and an economic underachiever. Some 16% of the mostly Islamic population of 224 million lives in abject poverty. About 40 million are unemployed or labor in insecure temporary jobs.
Then, just two months into his term, the Dec. 26 tsunami slammed into Aceh Province and other sections of Northern Sumatra island, killing 128,000 and leaving half a million homeless. "The tsunami for Indonesia was kind of a wake-up call and also a test -- a test for our solidarity," Yudhoyono recalled in a recent interview with BusinessWeek (see BW Online, 7/4/05, "Yudhoyono's "Triple-Track Strategy" ). "It was a powerful unifying event."
The 55-year-old Yudhoyono deserves a special place on this year's Stars of Asia list for the crisis management skills he displayed in marshaling the Indonesian military, police, and other agencies in the weeks after the disaster. He resisted calls from nationalist leaders and conservative religious clerics to keep foreign aid operations and media out of Aceh, a politically sensitive region where the government and separatist groups have clashed for decades. Quick response times and decisive leadership saved lives by keeping survivors fed and roads open and by getting medical teams in place to prevent the post-tsunami epidemics of cholera and dysentery many had feared would kill thousands. Some $1.2 billion has been distributed to victims and spent on new infrastructure in Aceh.
Of course, Yudhoyono will ultimately be judged on how well he manages long-term reconstruction. The price tag for 2,000 schools, 200,000 new homes, and new roads is expected to top $5 billion by the end of the decade. Former President Clinton has praised Indonesian efforts so far, but local critics such as ex-President Abdurrahman Wahid question how much aid will actually reach those in need. "Corruption is still rampant," he contends. Yet it is hard to deny that Yudhoyono, a retired general-turned-political reformer, is a standout among Indonesian Presidents in the post-Suharto era. He is far more articulate and focused than his immediate predecessor, the aloof Megawati Sukarnoputri. And in his few months in office, he has achieved more reform than Megawati or two other presidents, Wahid and B.J. Habibie, who took over after the fall of Suharto in 1998, ending decades of authoritarian rule.
Yudhoyono is cracking down on corruption and on al Qaeda-inspired terrorist cells lurking on the archipelago -- factors that scared off crucial foreign investment. On top of that, the $225 billion-plus economy is showing signs of life. After averaging subpar 4.5% annual growth between 2000 and 2004, gross domestic product grew at a 6.4% annual rate in the first quarter. Foreign investment doubled, to more than $5 billion, through April.
A fluent English speaker who comes across more as a policy wonk than a rough-hewn military man, Yudhoyono grew up in humble circumstances in East Java. An officer's son, he proved a quick study at the Indonesian Military Academy and later picked up an MBA at Webster University in St. Louis. He also earned a doctorate in economics from Indonesia's Bogor Institute of Agriculture. Hence his nickname: The Thinking General. But make no mistake, Yudhoyono can crack heads if need be. As Minister for Security & Political Affairs under Megawati, he hunted and arrested terrorists connected to the 2002 terrorist bombing of a popular nightclub in Bali that left nearly 200 dead, many of them Australian tourists. Yudhoyono's government has jailed local politicians, including mayors and a provincial governor, on corruption charges. Even his harshest critics concede this is no political shadow play. "We can see he is serious," says Rama Pratama, a former student protester and Parliament member with the opposition Islamic Justice & Prosperity Party.
Instead of a feared enforcer, however, Yudhoyono makes it clear that he would much rather be remembered as the leader who had the right stuff to lead Indonesia to prosperity. He has reached out to separatist groups in Aceh to end the long-running, bloody conflict there. And Yudhoyono is keen to keep Indonesia's Islamic parties and religious leaders on a moderate track. He also knows that much hangs in the balance within the developing world and among the Arab states, should the Indonesia experiment with democracy end in tears. "The Indonesian people have a dream that we can someday show the world that Islam and democracy can live together," says Yudhoyono. For the first time since the overthrow of Suharto, Indonesia has a leader who just might pull it off.
By Brian Bremner and Assif Shameen
JULY 4, 2005
ASIAN BUSINESS
Online Extra: Yudhoyono's "Triple-Track Strategy" Indonesia's President talks about raising growth, creating jobs, and alleviating poverty. Plus: His take on corruption and terrorism
Last October, Indonesian President Susilo Bambang Yudhoyono took control of the world's most populous Islamic nation -- and one that has had its share of challenges. The Dec. 26 tsunami took roughly 128,000 Indonesian lives in Aceh Provinces and other sections of Northern Sumatra Island. This sprawling archipelago of 224 million has also been a staging ground for al Qaeda-inspired terrorist attacks, including the bombing of a Bali nightclub in 2002. There's also the ongoing problem of separatist groups in Aceh and elsewhere.
Yet for the first time in years Indonesia has reason for some optimism. Since winning the country's first direct-election presidential campaign in September, Yudhoyono has won international praise for his crisis-management following the tsunami and his efforts to fight terrorism and the corruption that's rampant in Indonesia's political and business circles.
The retired general turned political reformer, who holds a PhD in economics, is also overseeing a long-sought-after economic recovery. The economy shot up 6.4% year-over-year in the first quarter, the best showing since 1996. And foreign investment is starting to stream back into this $255 billion economy, after slowing to a trickle since the mid-1990s.
Yudhoyono is clearly the most accomplished President Indonesia has had since the end of the authoritative Suharto regime in 1998. On June 17, a fit-looking and relaxed Yudhoyono discussed his economic plans for Indonesia, the scourges of terrorism and corruption, and other matters with BusinessWeek Hong Kong-based Asian Regional Editor Brian Bremner and Singapore-based correspondent Assif Shameen at the Presidential Palace in Jakarta. Edited excerpts from the interview follow:
Q: How is Indonesia coping with the aftermath of last December's tsunami?
A: The tsunami was kind of a wake-up call and also a test -- a test for our solidarity, and a test for our ability to deal with disasters. I flew directly to Banda Aceh on Day 2. Everything was paralyzed. I realized we had to build from zero.
The tsunami was certainly the greatest challenge of my entire public-service career. It wasn't difficult for me to mobilize the nation, because the whole nation mobilized itself. It was a powerful unifying event for Indonesia, and also for the world.
Looking back on our emergency relief operations, I think the most important things were speed and coordination. We were able to synchronize operations among the military, NGOS [nongovernmental organizations], government agencies, and so on. I promised I would appoint a man of competence and integrity to oversee Aceh's reconstruction -- and I did that with the appointment of Dr. Kuntoro Mangkusubroto as director of the Rehabilitation & Reconstruction Executing Agency. We want to rebuild Aceh speedily, but also effectively and accountably. So far, $1.2 billion in funds has been disbursed.
Q: Was the tsunami also an opportunity to end the separatist violence in Aceh?
A: Well, one month after my inauguration last October, I went to Aceh. I called upon all brothers and sisters involved in the separatist movement to unite and join us to build Aceh based on special autonomous standards.
After the tsunami hit, I once again called on them to terminate the conflict. I also instructed the military to change the mode of operations. In my view, the response has been positive. I'm optimistic that if this trend continues, we will be able to terminate the conflict.
Q: How do you propose to bring Indonesia back onto the prosperity track?
A: I have set up economic objectives to be achieved in the next five years. We have to have 6% to 7% growth over the next five years just to create jobs. My government's development strategy is based on what I call the Triple Track Strategy.
The first track is to achieve sustainable higher growth through a combination of strong exports and increased investment, both domestic and foreign. The second track is to stimulate the performance of the economic sectors to create employment. And the third track is to promote the development of the rural economy and agriculture to alleviate poverty.
By 2009, we aim to reduce the unemployment rate from 9.5% to 5.1%, and we seek to cut the poverty rate in half, to 8.1%. We also seek to increase growth on average of 6.6% per annum during the next five years. But we want to do more than pump up numbers. We intend to create quality growth that creates good jobs for around 2 million new job seekers each year. We also aim to improve the climate of doing business within Indonesia.
Q: To achieve any of that Indonesia needs to address its widespread problems with corruption, considered the worst in Asia. How do you plan to achieve that?
A: Fighting corruption is very, very important to our competitiveness. If we fail, we will lose the battle to attract foreign capital and stimulate our domestic economy. In many provinces, we have put corrupt local bureaucrats, political leaders and parliamentarians, majors, and even a governor in jail for their wrongdoings. Many government officials now have to think twice. The people really support my effort to combat corruption.
I have also listened to foreign and domestic businesspeople about the need for a sound legal framework and economic policies and less regulation. It takes about six months just to establish business in Indonesia. I have instructed my government to get that down to no more than two months.
Q: How can Indonesia attract foreign capital when so many business executives are fixated on growth in China and India?
A: I will do my best to fix many things in Indonesia, and I want to improve the climate to invest. We have to put our house in order. But actually, if you look at the existing trade between Indonesia and China, it's actually in a surplus for Indonesia. We realize that China and India are emerging, but that creates new markets. I'm a true believer that economic exchanges benefit both parties.
Q: The Australian government recently issued a warning about a possible new terrorist outrage in Indonesia. Is your government on top of this threat?
A: Indonesia is a large country, and the threat of terrorism is real. But this is true of other developing countries. The fight against terrorism, like corruption, is never-ending.
What I'm doing is launching a two-track strategy. We're conducting massive intelligence and police operations to find the terrorist cells and harass them. But there is a misunderstanding among some that terrorism is connected to Islam.
I say to my people again and again there is no relationship between the two. So -- and this is very important for Indonesia -- I want to strengthen the role of moderate Islam. We need moderate religious leaders who won't let their people be taken hostage by the radicals, by the terrorists. In doing so, I have to improve our education and communication to tell people that terrorism destroys everything economically, [as well as] the image of Indonesia.
Q: As the world's most populous Islamic society and a fledgling democracy, could Indonesia serve as a model for the developing world and the Arab states of the Middle East?
A: I have a dream and the Indonesian people have a dream also that we can someday show the world that Islam and democracy can live together. We proved it in our past elections last fall, which went smoothly, democratically, and peacefully. I want people to look at Indonesia as moderate, Islamic, and peaceful.
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