[nasional_list] [ppiindia] Indonesia's brewing power struggle

  • From: "Ambon" <sea@xxxxxxxxxx>
  • To: <"Undisclosed-Recipient:;"@freelists.org>
  • Date: Thu, 13 Jul 2006 02:12:48 +0200

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**http://www.atimes.com/atimes/Southeast_Asia/HG13Ae02.html


Jul 13, 2006 
  

Indonesia's brewing power struggle
By Bill Guerin 

JAKARTA - Just hours after the December 2004 tsunami battered Indonesia's 
coastal areas, Vice President Jusuf Kalla jumped into action. Kalla 
unilaterally summoned the relevant ministers and from the ground began 
delegating relief efforts from the worst-hit province of Aceh. 

Kalla signed an executive decree on December 30 authorizing the formation of a 
national disaster relief team. Extraordinary times called for extraordinary 
measures, and the Indonesian government was widely lauded for its response to 
the massive humanitarian crisis. But it was not lost on many political 
observers that Kalla had overstepped his constitutional authority by issuing a 
de facto vice presidential decree. 

The unusual power dynamic between President Susilio Bambang Yudhoyono and Kalla 
has since led to much speculation that Indonesia is effectively being guided by 
two leaders rather than one. Similar to the executive branch dynamic that has 
emerged in the United States between President George W Bush and Vice President 
Dick Cheney, Indonesia's charismatic vice president is single-handedly guiding 
many of the country's key policy decisions. 

Kalla, a highly successful entrepreneur, was one of the chief financiers of 
Yudhoyono's successful 2004 presidential election campaign. He is also now 
chairman of Indonesia's most powerful political party, Golkar, which 
underpinned former strongman Suharto's 32-year rule and continues to represent 
powerful vested interests in the military. Kalla has required a return from his 
investment in Yudhoyono's rise and has emerged as the country's most powerful 
vice president. 

Kalla's and Golkar's support gives Yudhoyono nominal control over the 
legislature, a majority his Democratic Party sorely lacked when he first 
assumed the presidency in October 2004. At the same time, there is a growing 
perception among government insiders that Kalla's huge influence has recently 
become more of a threat than a complement to Yudhoyono's authority, and that 
the second-most powerful man in Indonesia is busily building a political power 
base aimed at defeating his current boss at the next presidential polls, which 
must be called by 2009. 

The 64-year-old Kalla claims publicly that he has no ambition to become 
president, often saying that by 2009 he will be too old to run and that his 
ethnic background would hinder his ability to garner votes from the majority 
Javanese. Those denials, of course, look past Golkar's extensive political 
reach at the grassroots level and the fact the party is now heavily invested in 
Kalla's political ascent. 

From the outset of Yudhoyono's term, the two veteran politicians are said to 
have agreed to a division of labor. Kalla was tasked with managing the economy 
while Yudhoyono handled broad issues related to politics, security and national 
strategies. Kalla currently leads the government's infrastructure team and, 
according to local businessmen, has acted to accelerate several key 
construction projects. Kalla's authority over trade and industry projects 
allows him to make decisions without consulting the president, government 
insiders say. 

Also, Kalla has appeared to overstep those agreed boundaries - particularly in 
instances where a high-profile decision or appearance has acted to enhance his 
public image. For instance, he played a key role in brokering last year's peace 
deal in Aceh between rebels and the government, and he continues to actively 
monitor the implementation of that internationally watched accord. He had 
earlier played peacemaker in his home province of Sulawesi, though that pact 
between combative Christians and Muslims has not held up as well as expected. 

"In several policy formulations, the position of the president is inferior to 
the vice president," said Eko Budhihardjo, rector of Semarang's Diponegoro 
University. At times, "[Yudhoyono] is even subordinate to the vice president". 
Yudhoyono had initially decided to postpone fuel price hikes planned for last 
year until after the Muslim fasting month of Ramadan, but then abruptly raised 
them "when the vice president repeatedly stressed that the increase must be in 
October 2005", Budhihardjo said. 

With Yudhoyono's permission, Kalla recently became the first vice president to 
hold an official state ceremony for a high-ranking foreign guest. Indonesian 
diplomatic protocol requires that only presidents host such high-profile 
events, but Kalla in late April was allowed to borrow presidential guards and 
cannons to welcome a visiting South African deputy president. 

Ambitious businessman
As a businessman, Kalla has always been ambitious - at times apparently to the 
extreme. He turned around the family-owned business he inherited from near 
bankruptcy and over three decades transformed it into one of eastern 
Indonesia's biggest conglomerates. More recently, Kalla has come under the 
spotlight for recent projects in the power and construction sectors that 
members of his family are allegedly involved in, some of them even situated in 
his home territory of Sulawesi. 

Asked about a potential conflict of interest between his public office and his 
family's business interests, Kalla often explains he is not in a position to 
prevent people close to him from doing business. For Kalla, that line of 
defense hasn't always held up. In April 2000, then-president Abdurrahman Wahid 
fired Kalla from his post as industry and trade minister, allegedly for 
"corruption, collusion and nepotism" in a US$75 million Japanese-funded 
contract to connect with power lines the Central Java town of Klaten to the 
West Java town of Tasikmalaya. 

The claims were never substantiated, but in June that year Wahid cancelled the 
project and demanded a new bidding round on the grounds the company that had 
won the December 1998 tender had a "poor track record". The company was the 
Bukaka Group, an engineering group then headed by Kalla, but now managed by his 
younger brother, Achmad Kalla. 

Nowadays, the company is back in government business. Together with two small, 
state-owned enterprises and Siemens Technology Inc, Bukaka recently won a 
tender for a $498 million project to develop technology for the 
soon-to-be-built Jakarta monorail. The engineering company also won a 
multimillion-dollar construction project to build a seven-kilometer stretch of 
a planned 114-kilometer toll road connecting the towns of Cikampek and 
Palimanan. 

Bukaka has also recently won an estimated Rp1.6 trillion ($176 million) project 
to build a 200 megawatt steam-powered, electricity-generating power plant in 
south Sulawesi, where the electricity produced will be sold to the State 
Electricity Company (PLN) in south and central Sulawesi at a generous set price 
of between 4.3 and 4.4 cents per megawatt. 

The Bosowa Group is owned by Kalla's brother-in-law Aksa Mahmud, who is also 
deputy speaker of the Peoples' Consultative Assembly (MPR). In April, Kalla 
headed up a delegation to China to oversee the signing of a cooperation 
agreement between the Bosowa Group and a Chinese company to develop Jakarta's 
new mass rapid transportation system (MRT). One of the 14 companies involved in 
that project is PT Bukaka Trans System, which is part of the Bukaka Group 

Kalla-linked companies have also won projects for the construction of 11 
kilometers of the Makassar toll road in Sulawesi, a contract worth an estimated 
$49 million. Sources with knowledge of several meetings to evaluate a $94 
million project to expand Hasanuddin Airport in Makassar, Sulawesi, say Kalla 
has stressed the importance of giving priority to local contractors. 

Muted nationalism
Kalla has largely refrained from publicly airing nationalistic sentiments. But 
foreign investors and economic analysts believe that he favors more economic 
nationalism than the foreigner-friendly Yudhoyono. 

Kalla has been more public in his opposition to privatization for 
privatization's sake. And in February he unilaterally called upon US mining 
giant Freeport McMoRan Cooper & Gold to triple the amount of revenue it is 
currently contractually obliged to share with the government to accommodate 
spiking global commodity prices. 

Kalla's somewhat unorthodox economic views have at times brought his 
macroeconomic management into question. Pressed recently on the government's 
slow pace of privatization - proceeds from which could help cover the budget 
deficit rather than seeking new short-term loans from the Consultative Group on 
Indonesia (CGI) - he replied: "All our assets have been sold by the previous 
government. What are left now are the bad ones." Kalla has steadfastly defended 
the controversial appointment of State Enterprises Minister Sugiharto, who has 
been more antagonistic to foreigners when voicing his blatant resistance to 
privatization. 

International economists maintain that Indonesia desperately needs new foreign 
capital to help develop the country's abundant natural resources, which if more 
efficiently drilled and mined would earn the government badly needed foreign 
currency-denominated revenues. At the same time, Kalla, who generally still has 
the support of local and foreign business groups, pressed for and won changes 
to the national investment law that has opened the way for more foreign 
investment in certain extractive industries. 

He has been notably less aggressive in pursuing changes to the 2003 labor law, 
which provides strong protection to labor considerations, including provisions 
making it difficult to sack workers. Earlier in the year a draft revision of 
the law that allowed for the use of more temporary workers and cut severance 
payments stirred angry nationwide street protests and paralyzed many business 
activities. 

Yudhoyono at first publicly backed the controversial amendments as a way to 
promote more foreign investment, while Kalla remained notably silent on the hot 
button proposal. House of Representatives speaker Agung Laksono, who also 
notably serves as deputy chairman of Golkar, officially asked the government to 
drop the proposal and by association put Kalla on the popular side of the 
debate without ruffling Yudhoyono's feathers. 

Almost two years into Yudhoyono's five-year term, many political analysts 
believe Kalla has effectively outmaneuvered the president in dealing with 
potentially sticky domestic issues, particularly ones that pitch foreign and 
domestic interests. Yudhoyono's soft-spoken style, a big part of his electoral 
appeal in 2004, is now adversely compared to Kalla's perceived entrepreneurial, 
risk-taking brand of leadership. 

Yudhoyono and Kalla both served as senior ministers under the previous Megawati 
Sukarnoputri administration, but resigned their posts ahead of the 2004 
presidential election. Kalla recalls that when Yudhoyono stepped down the two 
made a personal pact that whoever made it as president would give the other a 
chance in his administration. "Then we hugged each other," Kalla said. 

Kalla later left the Golkar party, led then by the embattled Akbar Tandjung who 
was trailing badly in the polls, so that he could become Yudhoyono's running 
mate. The pair won a landslide executive mandate in 2004 in the country's 
first-ever direct presidential and vice presidential elections. Despite their 
resounding presidential and vice presidential electoral victories, Yudhoyono's 
small Democratic Party overall won a mere 10% of the popular vote, and even 
aggressive coalition building could not cobble together a legislative majority. 

Golkar party chief Tandjung, who commanded 23% of legislative seats, set up a 
formidable opposition coalition that included Megawati's Indonesian Democratic 
Party of Struggle (PDI-P), the National Awakening Party and a number of smaller 
parties, and even before the newly elected legislature was convened he 
threatened to bring Yudhoyono's promised reform agenda to a standstill. 

Two months after the new administration took over, and just two days before the 
tsunami disaster on December 26, 2004, Kalla was overwhelmingly elected as 
Golkar's new leader, sidelining Tandjung who had led the party for more than 
six years. With Kalla as Golkar's leader, Yudhoyono was suddenly assured of a 
parliamentary majority and a strong mandate to press ahead with his reform 
agenda. 

Friend or foe?
Kalla is on record as admitting that the strategy to target Golkar's leadership 
was actually directed by Yudhoyono. "If that was the president's wish, I 
accept. I took it as a responsibility." 

However, Jakarta-based political analysts note that as leader of parliament's 
largest faction, Kalla has from behind-the-scenes slowly but surely chipped 
away at Yudhoyono's authority. Mohammad Qodari, of the Indonesia Survey 
Institute (LSI), described Kalla's victory as "a double-edged sword" for 
Yudhoyono, saying the move effectively acted to "accumulate all the power in 
Kalla's hands". 

Political chaos in previous post-Suharto administrations, particularly during 
the short-lived tenure of former president Wahid, cost Indonesia dearly in 
terms of market perception and foreign investor sentiment and in some domestic 
quarters cast democracy in a bad light. Yudhoyono and Kalla have together 
regained some of that lost confidence, but conservative forces in the House of 
Representatives, which under the amended constitution is not restrained by 
executive veto power, have recently piqued new investor concerns. 

Kalla has played both sides of the legislature and to his credit has pushed 
through some controversial and arguably necessary economic measures. He was 
pivotal in lobbying legislators to enlist support for the politically unpopular 
fuel subsidy reductions last year and also for hammering out terms for the 
internationally praised Aceh peace accord. 

At the same time, the MPR has stalled in debating and passing legislation 
central to Yudhoyono's reform drive. In 2005, the MPR had agreed to a target of 
passing 55 new laws, but by the end of the year only 12 bills made it through 
the legislative morass. This year the target is 43 new bills, but so far no 
significant reforms have been passed. In fact, Yudhoyono has on occasion played 
his trump card and issued presidential decrees to speed up the pace of his more 
urgent reform initiatives. 

If Kalla is indeed a future presidential contender, his views toward democracy 
are significantly different from Yudhoyono's. After years of military service, 
including controversial tours in East Timor while under Indonesian military 
occupation, and later stints as a low-profile cabinet minister, Yudhoyono was 
throughout loyal to Suharto's authoritarian government. Yudhoyono won his 
liberal stripes in 2001 when as top security minister he declined to invoke a 
state of emergency when requested by Wahid, who at the time was facing 
impeachment proceedings. 

In contrast, perhaps, Kalla has recently called for a more "efficient 
democracy", arguing that Indonesia's brand of democracy is marred by lingering 
widespread perceptions that the government is corrupt and inefficient and in 
the new democratic era must face constant criticism from the media and 
detractors. "This is not democracy. Let's just make democracy more efficient 
and ... support what we agree upon." 

Kalla has since backed a Golkar-led move to create a simplified two-tier 
election system, which it claims would cut costs and improve efficiencies. "The 
public will have less headaches and the government will spend less money on 
concurrent elections and thus things are expected to be more efficient," Kalla 
has said. 

Some political analysts fear that with Golkar's well-established political and 
business machinery, a new electoral system could be designed to the party's 
favor and potentially give Kalla a big edge at the next presidential polls. 

If such polls were held today, political analysts predict that Kalla would 
likely win. A recent survey by the Indonesian Survey Circle (LSI) disclosed 
growing resentment about unpopular policies made by Yudhoyono's government, 
including the recent scrapping of fuel price subsidies and planned amendments 
to the labor law. Only 37% of survey respondents said they approved of 
Yudhoyono's job performance, his lowest rating yet. 

Yudhoyono rose to power by promoting himself as "a man of the people", thus 
capitalizing on Megawati's perceived failure to improve living standards for 
the country's massive poor population. Now, inflation is edging up at 
double-digit rates and unemployment is rising again. Increasingly, the same 
complaints that marred Megawati's administration are being leveled at 
Yudhoyono's government. As the political temperature rises, a politically 
ambitious Kalla could be tempted to more publicly distance himself from 
Yudhoyono's more controversial policies. 

If so, it is possible that the Yudhoyono-Kalla power dynamic could in the 
coming months intensify into a full-blown executive power struggle. 

Bill Guerin, a Jakarta correspondent for Asia Times Online since 2000, has 
worked in Indonesia for 20 years, mostly in journalism and editorial positions. 
He has been published by the BBC on East Timor and specializes in 
business/economic and political analysis related to Indonesia. He can be 
reached at softsell@xxxxxxxxxxxx 

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us 
about sales, syndication and republishing .)



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