Indonesia’s reform priorities: Change of pace ahead after the SBY stasis

Susilo Bambang Yudhoyono’s presidency will come to an end in 2014. Lauded internationally as a reformer and moderniser, at home SBY (as he is popularly known) is largely viewed as a disappointment. Heavy on rhetoric and obsessed with his personal dignity, he has been reluctant to offend powerful economic actors or the parties that make up his governing coalition. As a result, it is difficult to identify any major reform agenda that Yudhoyono set out to achieve at the outset of his presidency in 2004 and successfully pursued to completion in the years that followed

Despite this record, his tenure will probably largely be viewed positively as a period of stabilisation after the years of economic crisis and turbulent political transition that preceded it. Riding high on a commodity boom, GDP growth has averaged just under 6 per cent during his time in office. Moreover, though SBY initiated no major political reforms, he was also not destructive of past achievements. Most importantly, he did not buckle to pressure from other members of the political elite to cripple Indonesia’s Corruption Eradication Commission even as it claimed a series of scalps of high-profile politicians and bureaucrats in sting investigations and prosecutions.

Yet if Indonesia is to become the successful and dynamic society its leaders dream of, SBY’s successor — whoever he or she will be — will need to attend to several pressing reforms that proceeded only haltingly during the SBY years. In fact, one could say that drift needs to be arrested and urgent action taken in almost any area of public policy, but there are three, below, that are especially pressing.

Healthcare and welfare reform is a major priority. One of the least remarked-upon but also most profound transformations of the SBY years is that issues of social welfare — education, pensions and, especially, healthcare — moved to the centre of political debate. To a large extent provincial and district governments have been driving this trend, with image-savvy politicians introducing local health insurance schemes to appeal to voters in local elections. But in 2011 Indonesia’s national parliament also passed a new law establishing the framework for a national social security system that will, among many other things, provide universal health insurance for Indonesian citizens. The Economist describes this new system as ‘building the biggest “single-payer” national health scheme — where one government outfit collects the contributions and foots the bills — in the world’. In a country with notoriously bad-quality public health services, and public health spending that is low even by Southeast Asian standards, this is an enormous challenge, but one that promises to spread some of the benefits of Indonesia’s middle-income status to its legions of poor.

Formally, the new system will begin to come into effect in 2014, but huge administrative, financial and other challenges remain. A basic task is to ensure that reality matches the rhetoric: Indonesia’s public health centres and hospitals often lack the facilities, medicines and staff they are officially assigned. In the longer term, if the country really wants to provide high-quality healthcare to all its citizens, the national government will need to devote much greater expenditure to the sector, something that only a few policymakers are starting to wake up to. Indonesians, especially wealthier ones, may find they need to pay higher taxes. Collecting more taxes will in turn require reform — not least, cleaning out the corrupt taxation bureaucracy — and put pressure on the government to perform much better in service delivery.

Anticorruption and public service reform is also essential. Almost every reform issue in Indonesia comes back to corruption. For several years, as a result of the Corruption Eradication Commission’s sting investigations, Indonesians have been alternately scandalised and titillated by the stream of dramatic exposés of corrupt activity at the very top. One of the latest involved the arrest of the chief judge of the country’s highest court, accused not only of receiving enormous bribes but also of possessing crystal methamphetamine. Patronage is the lubricant of the entire political system, but many of the problems can be traced back to the civil service and the arcane regulations that govern it. The problems have been well-known for years: complex and non-transparent remuneration systems, a rigid system of promotions and barriers to hiring people from outside the system, to name just a couple. Yet reforming the system has been likened by Professor Sofian Effendi, one of Indonesia’s chief advocates of bureaucratic reform, to an Indonesian version of Waiting for Godot.

After many years of drafts and preparation, the national parliament seems to be ready to pass a reform bill into law. It looks likely to bring significant change, though the record of the legislature indicates there are risks that the law could be riddled with inconsistencies and imprecision. Whatever happens, a new president will need to bring this issue back into focus: several experiments at reform began during SBY’s tenure, but petered out.

Finally, infrastructure development is necessary. In recent years Indonesia has been swept by a wave of workers’ strikes in its industrial zones. Employers have complained that the resulting wage rises are making Indonesia less attractive as an investment destination. But what rarely makes it into the media is that it’s primarily Indonesia’s poor infrastructure that is making the country uncompetitive. Transporting goods to ports and shipping them out of the country is far more costly — and far more subject to delay — than in comparable Asian nations. Fixing infrastructure was meant to be a major priority of SBY’s government right from the start, and big international conferences were held to kick-start investment. While progress has been made in some areas, such as electricity generation, anyone who has braved Jakarta’s traffic, or sat through hours of electricity blackouts in any number of towns, knows this is still a crippling problem.

Months of political manoeuvring lie ahead before it becomes clear who exactly the candidates in next July’s presidential election will be. At this stage there are two favourites. The strongest candidate is Joko Widodo, Jakarta’s governor and the former mayor of Solo in Central Java. Interestingly, he cut his political teeth on two of the reform issues mentioned above: he introduced a popular healthcare card scheme in Solo and subsequently brought it to Jakarta, and streamlined government processes and made efforts to improve public services.

Prabowo Subianto, the second-strongest candidate, is a very different man. A former general — and former son-in-law of President Suharto — he is from the heart of Indonesia’s oligarchic elite, but someone who has rebranded himself as a fiery economic nationalist and champion of the poor. He has little to say about technical matters of reform but instead postures as a strong man who will sweep aside whatever obstacles are stopping Indonesia from working better.

Gentle reform or a crash-through approach: whatever happens, at this stage it looks unlikely that Indonesia will be in for more of the long stasis of the SBY years.

Edward Aspinall is a professor of politics at the School of International, Political and Strategic Studies, ANU College of Asia & the Pacific. He is the author of Opposing Suharto: Compromise, Resistance and Regime Change in Indonesia (2005) and Islam and Nation: Separatist Rebellion in Aceh, Indonesia (2009).
This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Indonesia’s choices’.