Localising Power in Post-Authoritarian Indonesia

A Southeast Asia Perspective

Vedi Hadiz

• Publisher: Stanford University Press
• Year: 2010
• ISBN:
  9780804773522
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: American Government
• Index: Politics & International Relations

This book is about how the design of institutional change results in unintended consequences. Many post-authoritarian societies have adopted decentralization—effectively localizing power—as part and parcel of democratization, but also in their efforts to entrench "good governance." Vedi Hadiz shifts the attention to the accompanying tensions and contradictions that define the terms under which the localization of power actually takes place. In the process, he develops a compelling analysis that ties social and institutional change to the outcomes of social conflict in local arenas of power.

Using the case of Indonesia, and comparing it with Thailand and the Philippines, Hadiz seeks to understand the seeming puzzle of how local predatory systems of power remain resilient in the face of international and domestic pressures. Forcefully persuasive and characteristically passionate, Hadiz challenges readers while arguing convincingly that local power and politics still matter greatly in our globalized world.

Chapter One

Decentralisation, Development and Democracy Theoretical Issues and Debates

The main objective of this chapter is to examine the way in which the localisation of power has been understood in the contemporary literature on the developing world, especially as it pertains to Indonesia and other post-authoritarian Southeast Asian cases. The focus is particularly on the contradiction-laden relationship among decentralisation, economic development and democracy. As mentioned previously, decentralisation policy has been the institutional form in which the localisation of power has taken place (Harriss, Stokke and Torn quist 2004: 3).

This chapter questions why a particular kind of understanding, mainly associated with neo-liberal and neo-institutionalist schools of thought—and primarily originating from within the discipline of economics—has come to predominate in both the academic literature and that produced by international development agencies, while also appealing to many civil society organisations in the region.¹

The intention is not to suggest a process by which developing societies merely swallow whole the framework of thinking predominantly advanced by technocrats perched in the offices of international development organisations. In fact, the agenda of neo-liberal governance reform, including the aspect of decentralisation can be appropriated by a range of local interests with little regard for upholding ‘good governance’ principles. These interests may even be strenuously opposed to the incursion of demands for accountability and transparency while fighting for greater local autonomy over a range of social, economic and political fields. At the same time, such interests seek to negotiate the terms of local engagement with the forces of economic globalisation, as the expansion of markets potentially produces new rent-seeking opportunities. Thus the neo-liberal reform agenda can morph into something completely different when the aspect of concrete political struggle is inserted into it.

Central Themes

ADVANCING DECENTRALISATION

In agreement with Bardhan and Mookherjee (2006), the World Bank has observed that decentralisation is ‘a global and regional phenomenon’, and that ‘most developing and transitional countries have experimented with it to varying degrees’ (World Bank n.d. a). Writing before the end of the twentieth century, Crook and Manor (1998: 83) specify in a highly influential work that ‘more than sixty governments, mainly in developing countries’ have experimented with decentralisation in some form since the mid-1980s. Observing Latin America in the late 1990s after a decade of decentralisation policy, Willis, Garman and Haggard (1999:7) noted that decentralisation has been ‘championed’ as the ‘route to greater accountability and transparency in governance’, as well as to other objectives like ‘increased participation by ethnic minorities and social groups excluded under semidemocratic and authoritarian rule’. Writing on China, Montinola, Qian and Weingast (1995) argue that decentralisation protects pro-market reforms undertaken by local governments from central government intervention, and induces healthy economic competition within countries that leads to economic efficiency. Concomitantly, the link between decentralisation and corruption eradication is also often proposed.

Authors writing for the World Bank have put forward the case for decentralisation most confidently in relation to Asia. White and Smoke (2005: 1) thus declare:

A fundamental transformation in the structure of government has been taking place across East Asia. Before 1990 most East Asian countries were highly centralized; today subnational governments have emerged as the fulcrum for much of the region’s development... Though East Asia’s decentralization has come later than in some other parts of the world, it is now here to stay.

Since 2001, Indonesia too has been pursuing policies of decentralisation that have profoundly transformed the institutional framework of governance in a country that was ruled for more than three decades in a highly authoritarian and centralised fashion, to the extent that Indonesia’s decentralisation approach has been described as a ‘Big Bang’ (World Bank 2003b; Bunte 2004). Thus, according to a document produced by the United States Agency for International Development (USAID) (2000:17), ‘Indonesia is moving rapidly from years of tight central control to a far more decentralized and autonomous system of local government’, which will help ‘create the basis for national and local democratic governance’ (USAID 2000: 17).

Moreover, in ‘opting for a decentralised model of government’, Indonesia appeared to be sensibly ‘following a global trend’ (Turner and Podger 2003: 2), which was in any case ‘well suited to the particular geography of Indonesia’ (Turner and Podger 2003: 1; also see Bunte 2004: 379). The observation about Indonesia’s geography is unsurprising given the sprawling, archipelagic form of the country, which is inhabited by hundreds of ethnic groups with distinct languages and customs.²

Geographical and ethno-linguistic factors notwithstanding, Indonesia’s abrupt decentralisation turn would not have been possible without the fall from power of Soeharto in May 1998 and the consequent demise of the New Order. This occurred amidst a deep economic crisis that led to a harrowing political one—eventually leaving the entire institutional framework of the New Order largely unviable. The fall of Soeharto thus in many ways truly marked the beginning of a new chapter in the social and political history of Indonesia. This vast country—with over 220 million people of diverse ethnicity and belief systems, spread irregularly across an archipelago comprising some 17,000 islands—was to embark on a massive experiment in forging new, more democratic, transparent and participatory political and economic regimes. A cornerstone of the experiment was the much heralded programme of decentralisation that devolved considerable powers, resources and responsibilities to the local level.

The end of the Soeharto era therefore commenced an exciting, albeit short-lived, period of high expectation in Indonesia; this was in sharp contrast to the preceding long era of highly stifling, centralised and authoritarian rule. Some believed that decentralisation in particular would pave the way for a more genuine participatory form of democracy, especially if enough of the right kind of ‘human capital’ was produced to institute ‘policies for the interests of the public’ (Pratikno 2005: 33). Others saw great opportunities for the development of an empowering form of politics at the grassroots level (e.g. Antlov 2003a)—in spite of many structural and cultural impediments left over from the New Order—as communities in towns and villages re-learn the art of politics after decades of living in a starkly depoliticised environment. For the Indonesian bureaucrat-academic Ryaas Rasyid (2002), moreover, decentralisation was indisputably the natural extension of democratisation.

But a theme also running through the discussion on post-Soeharto Indonesia, especially during the early years, was of the possibility of national disintegration (Tadjoeddin, Suharyo and Mishra 2003;³ also see Berger and Aspinall 2001). This accounts partially for the rise of interest both within academia and international development organisations in Indonesian decentralisation. According to the World Bank-led Consultative Group on Indonesia (CGI), decentralisation ‘continues to be one of Indonesia’s most significant reform initiatives’ after the end of the New Order, and its successful implementation is ‘crucial for Indonesia as a nation’ (CGI 2003).

It should be recalled that following the fall of Soeharto in 1998, demands for greater local autonomy emerged from many parts of the Indonesian archipelago against a background of evidently rising violent ethnic or religious conflict, especially in such places as Maluku and parts of Kalimantan (e.g. Bertrand 2003; Kingsbury and Aveling 2003; van Klinken 2007). The fear commonly expressed was of Acehnese or Papuan secession, no doubt sparked in part by the successful attainment of independence by East Timor in 1999 after years of insurgency. In both natural resource-rich Aceh and Papua, the Indonesian military had also been long embroiled in armed conflict with local pro-independence forces. Other natural resource-rich provinces such as Riau soon also clamoured for greater local autonomy. It is worth noting that in the Philippines decentralisation was partly a response to the chronic instability in Mindanao and the communist insurgency in Cordillera;⁴ in Thailand, more substantive decentralisation has been put forward as a partial solution to the renewed violence in the predominantly Muslim South from 2004 (National Reconciliation Commission 2006).⁵ In other words, a stated commitment to decentralisation policy has repeatedly been an avenue pursued to hold together nation-states in the region troubled by threats of secession and rebellion. Indeed some of the literature produced by international development organisations suggests how decentralisation can enhance political stability as well as strengthen national unity in troubled polities.⁶

But the concerns about the disintegration of Indonesia following the abrupt departure of its Cold War-era strongman have far outweighed worries about threats to the integrity of post-authoritarian Thailand or the Philippines. This is an irony given the more successful centralisation of state power that the New Order achieved in Indonesia. Neither Thailand under Cold War military dictators Sarit or Thanom and Praphat, nor the Philippines during the martial-law period under Marcos, quite displayed the kind of centralised authoritarianism as existed in Soeharto’s Indonesia, where officials ‘at all levels of the state hierarchy were highly responsive to demands and directives from “above” ’ Sidel 2004: 61),⁷ and where policy-making and implementation was the undisputed purview of Jakarta, only to be followed compliantly by the regions.

It would not be an exaggeration to place concerns about Indonesia’s break-up in the context of the international security environment that emerged following the promulgation of the American ‘War on Terror’, for which the political disintegration of this largest nation-state in Southeast Asia constitutes a major source of distress. If Indonesia truly became a dreaded ‘failed state’ (Mallaby 2002), then there would have been some major consequences for American and Western security and economic interests in the Southeast Asian region, which has been presented as the ‘second front’ in the ‘War on Terror’. As a former U.S. Ambassador to Jakarta once observed with some trepidation: ‘Strategically, the security of most of Southeast Asia rests on a stable Indonesia and would be seriously threatened if a number of mini-states emerged from a political collapse here’ (Gelbard 2001). A USAID (2005) document thus proclaims:

As the world’s largest Muslim-majority country, Indonesia is too important to fail. The outcome of Indonesia’s democratic transition has profound implications for U.S. strategic interests in fighting terrorism; preserving regional stability in Asia; strengthening democratic principles, the rule of law and respect for human rights; and expanding access for U.S. exports and investment in the fourth largest country in the world. Indonesia’s importance also stems from its substantial natural resources, rich biodiversity, and strategic location across key shipping lanes linking Europe, the Middle East, and Asia.

Indonesian policy-makers no less presented decentralisation as the ostensible answer to the dreaded prospect of the disintegration of the country as we know it (Rasyid 2005: 17). Decentralisation also appeared to be the expedient political compromise between the idea of a highly central, unitary republic as existed under Soeharto’s rule and the contending idea of a much looser federal republic of Indonesia, with the latter idea winning supporters among sections of the intelligentsia (see Mangunwijaya 2003; Sukma 2003). One major post–New Order political party, the National Mandate Party (PAN)—at the time led by the Muslim politician Amien Rais—had even placed the establishment of federalism in its official platform for the 1999 elections.⁸

It was under these circumstances that a ‘team of experts’ led by bureaucrat-academic Ryaas Rasyid was charged by the Habibie government, which immediately took over following Soeharto’s resignation on 21 May 1998, with developing a blueprint for decentralisation. Habibie’s enthusiasm for decentralisation was partly attributable to his intent to cling to power; he needed to distance himself from the New Order’s centralised authoritarianism, while at the same time find ways of garnering political support from the outer regions (Hofman and Kaiser 2006: 83) for his precarious rule. The final product of the Habbie-appointed team’s work comprised Laws no. 22/1999 on Regional Governance and no. 25/1999 on the Financial Balance Between Central and Regional Government.⁹ These laws have been characterised by international development observers as no less than ‘radical’ (Betts 2003; Rohdewohld 2004) in their aims.

NEO-INSTITUTIONALISM AS A VARIANT OF NEO-LIBERALISM

What might be called the ‘neo-institutionalist’ variant in the neo-liberal development literature, in which decentralisation emerged as a crucial theme, has been most prominently, though not exclusively, represented in the work of international development organisations. A great deal of the literature on decentralisation thus originates from within the prolific intellectual production lines of the World Bank, USAID, the Asia Foundation, the Asian Development Bank (ADB), the German Organisation for Technical Cooperation (GTZ), as well as such private grant-making institutions as the Ford Foundation. These have a significant presence in much of the developing world and, because of their financial as well as intellectual resources and clout,¹⁰ have profoundly affected development planning and internal policy debates in a range of countries. For example, decentralisation featured in a number of the ‘Letters of Intent’ signed between the IMF and the Indonesian government after the Asian Economic Crisis of 1997/98 as a condition of a long-term programme of assistance and loans, although the IMF was always concerned that revenue sharing with the regions did not create an unsustainable central budget (Buentjen 2000: 14). Turner and Podger (2003: 15), among others, note how various advisers and consultants from GTZ and USAID provided significant input to the design of Indonesia’s decentralisation framework.

Some authoritative accounts suggest that input from international development organisations played a major role in forging the decentralising agenda in the Philippines during the period of reforms that immediately followed the fall of Marcos in 1986.¹¹ This is the case even though prominent domestic spokesmen for decentralisation, such as the politician Aquilino Pimentel, Jr., were to also emerge, as did Ryaas Rasyid in Indonesia. However, international organisations played a less significant role in the case of Thailand, where a group of domestic technocrats were the prime movers in getting decentralisation clauses prominently placed in the now defunct 1997 Constitution, and in drafting the 1999 Decentralisation Act.¹² The latter was facilitated by the support of the Democrat Party of then Prime Minister Chuan Lekpai,¹³ who led a government that was already very much in sync with the economic reform agenda promoted in the region by the IMF and the World Bank after the Asian Crisis. Nevertheless, here too, synchronicity with the international good governance reform agenda was married to domestic political exigencies: the then ascendant Democrat Party had geared elections for local executive bodies as a means through which it could establish a stronger local base of voter support and bolster its local machineries (Nelson 2003: 8).

However, whether or not the localisation of state power through decentralisation policy was primarily driven by external or domestic technocrats in Southeast Asia is not really a key issue. Both kinds of technocrat share common assumptions about the largely mutually reinforcing relationship between decentralisation, good governance and the advancement of market economies. On this basis alone, neo-liberal and neo-institutional development thinking has left an indelible mark on the localisation of power in post-authoritarian Southeast Asia.

It is therefore appropriate now to consider more fully the ramifications of neo-institutionalist thought, as a variant of economic neo-liberalism, on decentralisation policy. It is first necessary to specify the kind of neo-institutionalism that is the subject of discussion here.

The term neo-institutionalism has been associated with a variety of actually quite disparate intellectual traditions of scholarship (Zysman 1994; Hall and Taylor 1996; Steinmo 2001; Sangmpam 2007), in spite of there being some common forebears and overlapping interests among them. It should be especially clear that a distinction is being made between the primarily economic neo-institutionalism (which, however, has made major incursions into sociology and political science) and the ‘historical institutionalism’ that was revived in sociology and political science by the work ...