Ambitious new era of democracy looks to fresh horizons
PATIENCE IN ESTABLISHING THE NEW SYSTEM OF AUTONOMY WILL GO HAND-IN-HAND WITH ENTERPRISE IN SEEKING FOREIGN TRADE AGREEMENTS

FORMERLY KNOWN as the Dutch East Indies and colonized in the seventeenth century, the islands finally gained independence from Dutch rule as the Republic of Indonesia in 1949.

Ironically, it was under Dutch colonial rule, in 1903, that decentralization was first introduced in Indonesia in order to increase administrative effectiveness. The law was revised in 1921 and several times thereafter – the Dutch were still revising the legislation when the Japanese invaded in 1942.
The constitution of the new republic, established in 1945, made some concessions to demands for autonomy from some of the more remote islands by creating seven provinces. The anti-colonial struggle continued and the Federal Republic of Indonesia gained independence in 1949 – but within less than a year the federalist model was replaced by a centralized unitary republic.

Now that the country has entered a new era of regional autonomy, Hari Sabarno, Minister of Home Affairs, emphasizes that patience is the key to the establishment of a decentralized system. Mr. Sabarno, who supervises relations between central government and the provinces, points out: “Hari Sabar (in the national language Bahasa) means ‘patience’. This is one of the reasons why President Megawati has chosen me to be the Minister.”
He says that the the formalities of decentralization should be completed by the end of 2003, to be followed by a period of consolidation between 2004-2007.

Central government’s next move is to hand over 19 powers, currently held by the Ministry of Home Affairs, to provincial governors allowing them further regional control.
Among these new powers, the governors will be responsible for coordinating information in the respective regencies, supervising cooperation with foreign countries or third parties, and for city development.
Mr. Sabarno says the granting of the powers was based on the need to give governors a greater role in implementing autonomy.

However, as well as focusing on domestic matters, Indonesia is also looking to improve its trade partnerships and diplomatic standing in an increasingly competitive global economy.
As a member of the Association of South East Asian Nations (ASEAN) and an important trader with the United States and Japan, Indonesia has been offered an opportunity to take part in the US and Singapore Free Trade Agreement (FTA), so deepening the economic ties between the two ASEAN nations.

Singapore has proposed, with the backing of the US, that Indonesia should be helped to develop a manufacturing center for IT and electronic components. Under this plan, the Indonesian authorities would create a special administrative region, possibly on Bintan Island close to Singapore, and expect to attract overseas investment.
The proposal would allow Indonesia to enjoy duty-free access to the American market and would also encourage investors to view the archipelago as a manufacturing base. With the rupiah trading at about 8,750 to the dollar, Indonesia would be able to produce goods at very competitive prices.

Indonesia’s Trade Minister Rini Soewandi has suggested using Bintan by creating a simplified administration there with the cooperation of the local authority.
The island already has an industrial estate housing 28 Singaporean and foreign companies. It is considered an ideal site for manufacturing plants, and there is still plenty of room for expansion. The benefits would accrue not only to Indonesia but also to Singapore which would enjoy lower costs. If the scheme succeeds, it could be introduced elsewhere in Indonesia.

Another recent initiative by Japan, the largest foreign investor in Indonesia and the largest provider of official loans, has led to a decision to resume the construction of five giant industrial and power plants, worth $2.6 billion and backed by Japanese investment. These projects had temporarily been slowed to allow for a transitional period while power was devolved to the regions.
Bilateral ties were also discussed during April’s visit by Japan’s most powerful business lobby, the Japan Federation of Economic Organizations.

Meeting with President Megawati, the business leaders were able to gather first-hand information and asses the future outlook of their role in Indonesia. These moves by Japan are a vote of confidence in the autonomy process.
The introduction by ASEAN of its ASEAN Free Trade Area (AFTA), with the possibility of Chinese participation sometime in the future, should encourage Indonesia to continue to consolidate its political and economic reforms.