The end of cronyism in Indonesia?

MIGHT it just be that after President Susilo Bambang Yudhoyono’s sweeping re-election, the era of Indonesia’s grasping cronies is coming to an end?

These free-wheeling cronies have been a lawless cancer on the Indonesian economy for too long; the reason why so much of Indonesia doesn’t work properly — why its roads are pot-holed, why badly built bridges, buildings and dams collapse, why its technological backbone is dysfunctional, why consumers are abused, why its justice system is corrupt, why the oxygen-sustaining Borneo rainforests are logged to within an inch of their lives.

Cronies are to Indonesia what politically connected oligarchs are to Russia, except they’ve been around longer. Their fathers were to some extent commercial pioneers in the newly independent Indonesia, and there was then a role for them, because the new nation needed to be built, and built fast.

Their contracts and businesses were largely based on proximity to the military and the ruling family, which, save for the last decade of “reformasi”, has been largely the same thing, be it the Soehartos or the Soekarnos before them. Foreign investors quickly figured it out — joint-venture partners were chosen because they were well connected with the palace, not because they were great operators.

Too much was never enough for the cronies, who became some of Asia’s richest men, displaying almost obscene wealth in a country as poor as Indonesia. They should have been banished after the 1997-98 “Asian Contagion” crisis when the Indonesian economy collapsed and Soeharto was ousted. Some did — the Salim/Liem food-to-banking empire for one is a shadow of its former self — but the system was sufficiently politically malleable that many survived, and even prospered.

In many cases, huge debts and wrong-way bets on the market were simply ignored as part of the $US50 billion IMF-led rescue package, part-funded by Australia.

But as Indonesia has evolved and genuine new entrepreneurs have emerged, the cronies and their heirs are fighting hard to maintain their advantage.

One reason a $US1 billion media joint venture between tycoon James Riady — notorious for his funding of the Clintons’ political career — and the legendary Malaysian billionaire Ananda Krishnan ended in tears last year was that the Malaysian side felt Riady no longer had sufficient political pull in Jakarta.

That wouldn’t have been the case in the Soeharto era, when Riady’s father, Mochtar, built the business. Nor would Riady’s right-hand man, Billy Sindoro, have gone to jail for corruption, as he did last year after being filmed giving $US53,000 to a senior government official deliberating a business dispute between Riady and Krishnan.

As Indonesians embrace genuine reform, there is more transparency; the media is feisty, and so are the anti-corruption warriors. Bad businesses are being called to account. Consumers have discovered a voice, and quite like airing it. Reform has meant less crony monopolies, so the long-abused market is voting with its feet.

Now, having won a huge presidential mandate last week in his own right, Yudhoyono has a real chance to rid Indonesia’s economy of these grafters.

In Yudhoyono’s first term, the anti-corruption agency went after dodgy government officials and bent parliamentarians. Now, in his second and final term, he can afford to target miscreants in the private sector, because he doesn’t need them after politics. He doesn’t need so much to be what analysts politely describe as “pragmatic”, which really means give lucrative cabinet slots to political allies. He can stock his new cabinet with capable technocratic cleanskins — and Indonesia has plenty — instead of horse-trading portfolios for erstwhile political allies.

Perhaps the most searing example is the businessman Aburizal Bakrie, whose political power is built around his enormous telecoms-to-mining wealth, which in turn lubricates the old Soeharto fiefdom, Golkar, and the powerful national chamber of commerce, Kadin.

The Bakrie family seemed to have been ruined in the Asian financial crisis but somehow wriggled free and emerged richer than ever, thanks largely to their wresting control of one of the world’s biggest coal miners, Bumi Resources.

Bakrie got into financial difficulties last year but again seems to have wriggled clear, despite frequent calls by investors for Indonesian regulators to take a closer look at company dealings. Yudhoyono needed Golkar’s support in Parliament and in the palace and gave Bakrie a cabinet slot, first as economics minister and then for people’s welfare, aka the minister for the poor. But the contempt for him was almost palpable.

In the still-to-be-filled second-term Yudhoyono cabinet, people like Bakrie might struggle to find a job, because the emboldened President needs them less than he did even just last week.

There are millions of long-suffering Indonesians who would welcome that.

Eric Ellis writes for Forbes magazine from South-East Asia.