Indonesia’s Weak Institutions Spark Nostalgia for New Order; power abuse by elites and uneven growth has left people yearning for Suharto

Indonesia’s Weak Institutions Spark Nostalgia for New Order

A jurist and an economist say power abuse by elites and uneven growth has left people yearning for Suharto

By Ezra Sihite on 8:55 am May 27, 2013.

310313poster-soeharto2.jpg

President Suharto’s image can be found on posters around Indonesia in increasing numbers, as people seek the stability that his often-brutal leadership brought to the country. (JG Photo/Ali Lutfi)

Many Indonesians believe that life in the New Order era under President Suharto was better than today and that social elites dominate modern politics and law, according to a senior former jurist.

Speaking at a forum in Jakarta, former Constitutional Court chief justice Mahfud M.D. said that Indonesia is blighted by an oligarchy of elites that prioritize their interests over the public interest and do not abide by social rules, causing disillusionment and a lack of confidence in the law.

“Don’t be surprised to see people today wanting to see the military back [in power] because of oligarchic [conditions]. In Yogyakarta, you see stickers on cars with picture of a smiling Suharto reading, ‘Wasn’t it good during my time?’ ” Mahfud said.The retired judge said that economic conditions were good during Suharto’s era, but in the late 1990s Indonesia suffered a huge blow from the Asian financial crisis — which contributed to Suharto’s downfall — and took longer to recover than other countries in Southeast Asia.

He attributed Indonesia’s economic collapse to weak legal foundations and collusion in politics and the economy under Suharto.

“[The New Order] was vulnerable when the economic crisis hit. [The impact] is still being felt today. Malaysia and Philippines were able to recover in two years,” he said.

Mahfud said that conventional legal institutions such as the police and prosecutors were unable to uphold the law. Both institutions, he said, were held hostage by major cases from the past.

“The law enforcement bodies that are unable to improve are the conventional legal enforcers from the past, such as the prosecutors’ offices, police and the courts. The new ones are relatively good,” he said, citing the Corruption Eradication Commission (KPK), Constitutional Court (MK), Judicial Commission (KY) and Financial Transaction Reports and Analysis Center (PPATK).

Mahfud added that the legal instruments in Indonesia’s post-1998 reform era were substantial enough, but the system was poor and good people who entered its institutions were defeated.

Mahfud cited Hendarman Supandji as an example of someone unable to deal with the poor processes in the Attorney General’s Office.

The former attorney general was considered successful when he led the Corruption Eradication Team (Timtastipikor) before he entered the AGO.

“Hendarman succeeded at Timtastipikor but got defeated by the system at the Attorney General’s Office. So, the problem here is that the system is so bad. A good person would fall back, and it’s also difficult for someone from the inside to become good,” he said.

Faisal Basri, an economist who last year ran for the governorship of Jakarta, called on the public to not be deceived by government claims of high economic growth in recent few years.

He called on the public to be skeptical of irresponsible claims, especially of lower poverty and unemployment.

Faisal said the current economy depends heavily on capital intensive industries that disadvantage the poor.

“Yes, there is growth but with no quality. Those that post growth are in the elite sectors such as banking, insurance, modern services, which grew by 8 percent. But sectors such as the agriculture and manufacturing industries only posted 4 percent growth,” he said during a public discussion in Jakarta last week.

Faisal called the reform era a period of transition to a market-oriented system, but the market was “virtual,” because it failed to bring benefits to ordinary workers.

He said only a limited number of people were experiencing solid growth, such as those working in the formal sector. But jobs are of poor quality because the majority of workers are employed without contracts or under an outsourcing system.

“The impact it brings is that employment has no quality. Right now 54 percent of the population are informal workers with no contracts, while 38 percent are formal workers without a contract,” he said.

He attributed this as the cause for growth in the gap between the rich and poor amid high economic growth, adding that the wealth disparity in the reform era is worse than during the New Order.

But Faisal had some praise for the reform era, during which he said there are no more offshore loans. The economy in the New Order was vulnerable because the economy was founded on offshore loans, he explained.

Faisal said the key to building a strong economy is the design and the government’s willingness to side with the people. He urged the government to support domestic industries and create sustainable job opportunities in the formal sector.

“The weak economic [foundations] are due to the fact that there is no guidance from the state in the reform era,” he said.

Nurhayati Ali Assegaf, Democratic Party deputy chairwoman, called on the public to be selective about the elements of the New Order it was willing to embrace.

“We’re too traumatized with the New Order. Anything that was positive can be continued and anything that wasn’t should be thrown out,” she said.

A 2011 survey by Indo Barometer found that 41 percent of respondents agreed that Indonesia was better off under Suharto’s New Order than under former president Sukarno or the current reform era.

The New Order was deemed better in politics, economy, social affairs and security, according to the survey, while the reform era led in law enforcement.

With regard to favorite presidents, Suharto was most popular with 37 percent of respondents, ahead of incumbent Susilo Bambang Yudhoyono with 21 percent.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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