Beawiharta / Courtesy Reuters A child attends a campaign rally of the Great Indonesia Movement Party at a stadium in Jakarta, March 23, 2014.

Indonesia in Pieces

The Downside of Decentralization

In April, voters in Indonesia’s parliamentary elections shocked many observers, confounded most pollsters, and seemed to set back their own long-term interests by failing to deliver a massive victory to the main opposition party, the Indonesian Democratic Party of Struggle. Under the country’s complex electoral rules, a party must win 25 percent of the popular vote (or 20 percent of the seats in parliament) before it can formally nominate a presidential candidate. Polls had predicted that the Democratic Party of Struggle would win up to 30 percent of the vote, largely thanks to the massive popularity of the politician the party announced would represent it in the presidential election: Joko Widodo, the governor of Jakarta, who was expected to win that race handily. But his party managed to eke out only 19 percent -- more than any of the 11 other parties in the running, but not enough to cross the threshold. And so Jokowi, as he is widely known, will have to form a coalition to run for president, meaning that if he manages to take the helm of the world’s third-largest democracy in July, he’ll do so with little power and representing an alliance with no clear platform.

Indonesian voters have long been frustrated by the endless horse-trading and political compromise such deals inevitably involve. The current president, Susilo Bambang Yudhoyono, proved unable to deliver on his promised reforms because he had to hand out so many cabinet seats to other parties in order to build a coalition of his own in 2004. Since then, the Democratic Party, which came into being as a vehicle for electing Yudhoyono, has done little to develop local bases of support, and it has paid a heavy price: in the April elections, the party’s share of the vote collapsed, to ten percent, from 21 percent in 2009. 

Why has the Indonesian electorate forced the man they want to replace Yudhoyono into the same corner of constant compromise? The answer lies in a little-understood but critical aspect of the country’s political structure: rampant decentralization. When Indonesians voted in April, they were thinking not about the presidential election three months later but about hyperlocal issues. Although commentators in Jakarta’s air-conditioned bubble have been slow to recognize this fact, 13 years after Indonesia began devolving power from the federal government to hundreds of subprovincial units, the link between local and national political interests has become extremely tenuous. As a result, although locally elected politicians may be delivering things that people want in their own backyards, they are not, collectively, meeting the nation’s needs.

THINGS FALL APART

Indonesia is one of the most diverse nations on earth. Its 250 million people are scattered across some 7,000 inhabited islands, form over 300 ethnic groups, and speak 700 distinct languages. The vast majority are Muslim, but some 30 million profess other faiths. Suharto, the general who ruled Indonesia from 1967 to 1998, used two uniformed armies to tie this disparate country together. One was the military; the other was the Jakarta-based bureaucracy. It was not always easy to distinguish the two. Both were disproportionately staffed by natives of Java, the island that accounts for seven percent of Indonesia’s landmass but squeezes in 60 percent of its population. Ministries in the capital (located in Java) would make policy and hand it down through their regional hierarchies, where the center’s will would be done. 

After popular discontent triggered by the Asian financial crisis forced Suharto from office, his successor, B. J. Habibie, shattered the chains of command that Suharto had carefully wrought. That reversal happened almost by accident. Habibie often allowed extravagant promises to escape from his mouth in public that could not be retracted, and in 1999, without so much as mentioning it to his foreign minister, he declared that the people of the fractious province of East Timor could hold a referendum on independence. When Indonesia had marched troops into the former Portuguese colony in 1975, it had set about delivering development, Suharto-style: building roads, schools, and health centers. So Habibie, a Suharto loyalist to the core, seemed genuinely surprised when eight out of ten people in East Timor voted to break away from their Indonesian masters. 

Blind-sided by Jakarta’s crushing defeat, Habibie was forced to grapple with the implications of East Timor’s independence for the rest of the country. Many of Indonesia’s other islands are made of nickel and copper, sit above pools of oil and gas, or were once covered in precious hardwoods, and most of their inhabitants feel that Suharto and his cronies diverted the riches that properly belonged to the periphery and used them to develop the center. They have a point: at the end of Suharto’s tenure, 82 percent of all of Indonesia’s medium and heavy industry was concentrated in Java. At least two provinces -- oil-rich Aceh, in Indonesia’s far west, and mineral-rich Papua, in its far east -- had already sprouted low-grade separatist rebellions, and in other provinces, discontent was brewing.

Post-Suharto Indonesia was heading down the path to democracy, and Habibie knew that Java could not continue to dominate the rest of the nation so completely. But giving more power to the provinces (at the beginning of Habibie’s tenure, there were 27 of them) was risky, because the richest provinces might try to split from the motherland, just as East Timor had done. Habibie opted to minimize the risk by bypassing the provinces and handing power to the administrative units directly below them, the districts, reasoning that it was unlikely that any single district would ever grow strong enough to secede.

Habibie then made this devolution happen. In the space of just 18 months from 1999 to 2001, one of the world’s most centralized nations burst apart to become one of its most decentralized. Today, the center still takes care of defense, fiscal policy, foreign relations, religious affairs, justice, and economic planning. On paper at least, the provinces still have a coordinating and supervisory role. But what they don’t have is any money to speak of. Beginning in January 2001, Jakarta handed over 90 percent of the cash and 100 percent of the responsibility for delivering most government services -- health care, education, and a whole lot more -- to the district governments. These entities numbered close to 300 at the time, and the only experience they had in governing was following orders from Jakarta. 

The financial arrangements accompanying decentralization were complex. Most tax revenue (around $105 billion in 2013) continues to be collected by Jakarta, which then passes it on to the levels below. In 2014, the center plans to redistribute about $27 billion to the districts in the form of block grants weighted by, among other factors, each district’s population, number of civil servants, and income from natural resources. District governments can use this money as they see fit. Another $3 billion will go directly to the provinces. In addition, Jakarta plans to deliver another $22 billion to the provinces and districts to fund special development programs and to meet (largely political) commitments related to supporting regional autonomy.

Once decentralization got under way, Indonesia’s various local strongmen began using their contacts in Jakarta and the provincial capitals to lobby for new districts of their own. The result has resembled one of those fireworks that blossoms into a giant flower, and then bursts again, right and left, into a series of smaller showers. Since Suharto left office, the country has added ten new provinces, and the number of districts has increased by 70 percent. Although districts (and their urban counterpart, municipalities) now represent the most important level of government for most Indonesians, it is difficult to keep track of exactly how many exist. The most recent official figures from the Ministry of the Interior, from the end of 2013, give the number variously as 497 and 506. The count is not the only source of confusion; the original decentralization law of 1999, which was vague from the start, has been partially rewritten at least twice. The current version clashes with existing laws affecting such important sectors as mining and forestry, making it extremely difficult to ascertain who is in charge of what and creating a nightmare for investors hoping to draw up contracts.

DEMOCRACY BY DEMONSTRATION

Supporters of decentralization contend that it encourages subnational governments to provide services that meet local needs, even as they work within the confines of the broad policy outlines set in Jakarta. But sometimes, local and national interests clash. To see how, consider the tiny eastern Indonesian village of Lamalera, located on the desiccated southern coast of the tiny island of Lembata, some 1,200 miles east of Jakarta. For centuries, whale hunting represented virtually the only economic activity for the village. A decade ago, some hunters acquired secondhand outboard engines; with these, they’ve been able to pursue dolphins as well as whales.

Although the village catches an average of just nine sperm whales a year, that and the dolphin fishing have been enough to anger Western animal rights activists, who, in late 2011, posted YouTube videos demanding that people stop eating tuna canned in Indonesia in protest. The campaign spooked the central government, which may or may not care about dolphins but definitely cares about Indonesia’s $750-million-a-year tuna export business. So the Ministry of Marine Affairs and Fisheries rushed out a new regulation in response to the criticism, and because one whale snuff film mentioned Lamalera by name, Jakarta made a special effort to bring the ruling to the attention of the local government in the Lembata district.

The head of the Lembata district, in turn, sent an underling on the four-hour trek across the island to Lamalera to inform the villagers that the fishing must stop. The hunters responded in a way that is becoming routine throughout the country: they hit the streets and demonstrated against the new rule. And the tactic worked. As one of the hunters told me, “They tried to do that conservation thing here a few months back. But the whole village went to Lewoleba [the district capital] to demonstrate. The local government didn’t have the balls to enforce [the new rule], so nothing came of it.”

The episode is a trivial example, perhaps, but it illustrates a larger phenomenon. Resentment about the distribution of mining royalties or about increases in fuel prices, land disputes, the provision of local services, restrictions on whaling: today, Indonesians are airing all these grievances on the streets. The country has developed a thriving demonstration industry, with businesses that rent out trucks with loudspeakers, printing shops that give discounts on bulk purchases of T-shirts, and individuals who hire themselves out for $5–$10 a day to rant on the streets about the cause of the moment. 

And local governments have begun responding to protesters’ demands. Democracy by demonstration cannot be what the promoters of decentralization hoped for when they touted the idea of greater responsiveness to the electorate. But it is an inevitable byproduct of Indonesians’ increasingly sophisticated understanding of the way democracy functions in the age of über-decentralization. 

THE PRICE OF DEMOCRACY

Since 2005, Indonesians have been electing their district heads directly; it is one of seven trips they can make to the polls in every five-year electoral cycle. Voters know that today’s expensive election campaigns are entrenching a culture of patronage. They know that a prospective candidate first must pay a political party to allow him (or, very occasionally, her) to run as its candidate. Then there are the posters, the banners, the T-shirts, the fees for securing column inches in local newspapers. At rallies, candidates have to foot the bill for food vendors, singers, raffle prizes (fridges, cell phones, motorbikes), and buses to bring in supporters. A minibus driver working during one local election said he got paid three times for each campaign event: once when he put election banners on his bus for the day, again after he shipped in participants, and finally when he left his car near the rally to cause a traffic jam. “They want it to look like it’s really busy,” he told me. “All you have to do is park somewhere inconvenient and spend the afternoon smoking.” All told, a campaign for district head costs somewhere between $400,000 and $1.7 million -- peanuts for a U.S. campaign, but a mighty sum compared with the $500-a-month salary than an Indonesian district head earns. 

Candidates scrape together most of their campaign funds from people who expect something in return: a job, a contract, or a policy favorable to their business. Indonesia is not short on anticorruption regulations -- some types of pork-barrel spending that form part of the normal political process in the United States could get a legislator arrested in Indonesia -- and as president, Yudhoyono has supported an independent commission that has scored some high-profile victories against graft at the national level. But there is very little that the commission or the president can do about the deeply entrenched patronage that is undermining the delivery of services and wasting public money at the district level. 

A fascinating 2012 study by the economist Robin Burgess and his colleagues used satellite imagery to show that after new districts were created in forested regions of Indonesia, logging within their borders increased by an average of eight percent, even in supposedly protected areas. The uptick surely reflected the newly elected district heads’ power, as well as their election debts. Ideally, the head of the local forestry department would report illegal logging to the police, who would prepare a case for the courts. But thanks to Jakarta’s decentralization drive, all these actors are now appointed by the new district head. It will take a great deal more than clean-government rhetoric from the president to uproot that type of patronage, especially when it’s something most voters expect, and sometimes even demand.

Take Supiori, a district in the easternmost province of Papua that was formed in 2003. With just 17,000 residents, it ranks as the country’s smallest district. Yet like the other 500-odd districts, Supiori has its own departments of health, education, fisheries, and the environment, and dozens more, all of which need to be staffed. Civil service jobs are extremely sought after in the poorer parts of Indonesia, where high school graduates are rare and college graduates nonexistent. Last year, locals in Supiori, annoyed that the government was importing qualified staff from elsewhere, took to the streets to demand that they be hired for civil service jobs even if they couldn’t pass the entrance exams. Several of them have indeed been hired, many as teachers. Giving teaching jobs to underqualified locals creates a vicious circle. Indonesia’s education system is already failing; in internationally standardized tests conducted in 2012, over three-quarters of the Indonesian 15-year-olds tested were judged not to know enough math or science to function adequately in a modern economy.

The parlous state of Indonesia’s infrastructure poses another major obstacle to economic growth. Even though Indonesia is the most populous country on the planet made up entirely of islands, the World Economic Forum ranks its port infrastructure 104th out of 139 countries; even landlocked Botswana, Switzerland, and Zimbabwe report better access to ports. Indonesia scored nearly as badly on roads, air transport, and electricity, and local studies show that things are worst in the areas where the proliferation of new districts has been greatest. A 2011 study of over 12,000 businesses found that in eastern Indonesia, companies coped with an average of four power outages a week, and water service dried up twice a week. The Holy Grail of decentralization -- the idea that previously marginalized areas would be able to compete for private-sector investment that would then promote local economic growth -- has not been realized. The percentage of the country’s medium-sized and large industries that are located in Java actually increased from 2000 to 2012, to 83 percent.

Decentralization is making it more difficult to reverse years of underinvestment in infrastructure, because most investment decisions are now made at the district level. Very few districts have the wherewithal to build a major container port or a high-volume airport, for example, and it would be singularly inefficient for them to even try. What Indonesia needs is a coherent, centrally designed plan that channels investments to key areas where they will benefit the hinterlands.

Jakarta has developed just such a plan, but it can’t get it off the drawing board without the active support of district governments, which now control the bulk of public funds for nonmilitary spending. District heads derive much of their legitimacy from a new sense of local pride, which they take advantage of to build gargantuan palaces to house their offices. Meanwhile, few officials are willing to subsidize major investments in neighboring areas even if their own residents would profit from them as well, because the symbolic benefits, along with the photo opportunities, would accrue to some other district head. This is where provincial governments ought to come in, forcing or encouraging districts to cooperate. But the provinces have so few financial or political resources of their own to bring to the table that they find it hard to push districts toward agreement.

The districts thus have little trouble escaping oversight from the emasculated provinces, and an even easier time batting away mandates from the national level. In the April elections, for example, the head of Papua’s Jayawijaya district openly defied a ruling from the National Election Commission that forbade a type of voting system that allowed local leaders to decide which candidates would win. He suffered no consequences. The remaining check on a district head, the local parliament, is just as notional. These bodies are often dominated by political allies or by local contractors who have grown relatively rich from building substandard roads or schools; it is not unusual for a district head to prepare a budget that includes generous benefits for the parliamentarians who then approve it. No wonder people take their political demands directly to the streets.

PYRAMID SCHEME

Even in the most out-of-the-way places, among fishermen, farmers, and small traders, Indonesians understand the compromises that riddle their democracy. Although they complain constantly about corruption, poor services, and the arrogance of politicians, they are generally content to live with the system as it is. When confronted with egregiously bad behavior -- say, a local leader caught spending the district’s money on drugs and prostitutes during a weekend in Singapore -- voters are quick to boot that individual out of office. But they rarely punish politicians for the run-of-the-mill nepotism, the selective distribution of contracts, and the casual largess distributed from the public purse that define democracy in Indonesia today.

This disconnect likely arises because the current political landscape closely follows the contours of many of Indonesia’s cultures. Collectivism is a deeply embedded norm throughout Indonesia, even if it takes different forms in different parts of the country. Most Indonesians expect to draw on the resources of a broad network to which they are sometimes only rather tenuously linked. But they also expect to contribute back to that network. 

Under Suharto, the Indonesian political system formed a single pyramid with a very wide base. He was careful to dole out monopolies and other benefits to people who would give something back: national stability in the case of the military and industrialization, investment, and jobs in the case of the conglomerates. It was not until his children grew up and became greedy that Suharto began to give away something for nothing; it was then that patronage in return for services turned into plain old graft. It was then, too, that Indonesians grew fed up with him, which led to his downfall. 

Nowadays, the patronage model has splintered into a multiplicity of smaller pyramids. But the principle remains the same. People are, if not happy, then at least resigned to allowing those at the apex to skim off the benefits of political office, as long as they take care of the majority of those below. Although they grumble about “KKN” -- the catchall abbreviation for “korupsi, kolusi, and nepotisme” -- most Indonesians would be horrified by a world in which there were no mutually binding ties of loyalty and obligation.

“I’d say 90 percent of Indonesian politics is transactional,” a parliamentarian in a relatively wealthy district in western Indonesia told me bluntly. Today’s transactional politics, evident throughout Indonesia’s ever-expanding number of districts, has created fertile ground for corruption, expanded patronage, bloated the bureaucracy, undermined the quality of basic services, and made essential investment in infrastructure virtually impossible. But it has also given previously excluded communities a place at the trough, created the rapid-response culture of street protests, and trickled a sense of entitlement down to people who had never before demanded anything.

“If you’re clever and ask for the right things, you can turn [transactional politics] into a plus,” the district parliamentarian said. “At least it means that politicians have to deliver.” And they do deliver, more or less, on the things that voters demand. The problem is that when demonstrators hit the streets, they are usually asking for something local: fix the potholes in the road to the health center, give more jobs to the dominant ethnic group, discriminate against an unpopular religious minority, protect the right to hunt whales. Few wave placards demanding coherent investment in infrastructure, a reduction in the overreliance on commodity exports, curbs on consumer credit, or more loans for entrepreneurs -- the bigger-picture things Indonesia needs.

JAKARTA DRIFT

April’s election results highlighted what Indonesian voters care about, and it’s not the platform of any single political party, all of which are decidedly ill defined. Although voters told pollsters they wanted to see Jokowi as president come July, they knew that most of the decisions that will affect their everyday lives, before and after July, will be made in their own districts, by an individual who paid a political party to be allowed to run on the party’s slate. Any loyalties that bleed upward from the all-important local politicians do so incidentally; there’s virtually no sense among most Indonesians that representation in Jakarta affects local well-being. As for the presidential election, no one seems to have given much thought to the fact that denying votes at the parliamentary level to the party backing Jokowi may render him impotent as president.

From the point of view of most Indonesians, the current political model is working just fine. During the early years of Yudhoyono’s second term, from 2010 to 2012, high prices for palm oil, rubber, coffee, nickel, and other commodities that Indonesia produces fueled growth rates averaging 6.3 percent. Cheap consumer credit and an overvalued currency led Indonesians to buy masses of agreeable but unproductive imports -- everything from cell phones and motorbikes to blenders and refrigerators. But the boom times may be coming to an end. As China’s appetite for commodities waned in 2012, Indonesia ran a trade deficit for the first time since 1996. Growth is predicted to be at 5.3 percent this year, but Indonesia can only reach this, the World Bank has warned, if the government stops squandering opportunities for reform. Consumed with keeping his various partners in the government happy, Yudhoyono has failed to knock heads together to force through vital investment in infrastructure, industry, or high-end services. As a result, Jakarta’s ability to continue extending bounty to the regions (and thus its ability to allow district heads to satisfy voters) still depends largely on China’s continued demand for Indonesian commodities.

The paradox of decentralization is that it requires strong central leadership to work properly. But Indonesia’s current electoral arrangements are making that harder to come by. Jakarta needs to become far more involved in setting investment priorities, creating legal certainty, and giving the districts an incentive to cooperate. Yet because voters in April spread their votes broadly across parties with no shared policy platforms, a strong center that remains tolerant of local diversity seems unlikely to emerge. 

Less likely still is any major move on Indonesia’s part to assume a higher profile in international affairs; the country has consistently punched below its weight in this arena, in large part because its leaders are so consumed with holding the islands together. Whereas Suharto expended energy on balancing military, religious, and commercial interests, his successors have had to focus on building coalitions in Jakarta. This preoccupation has distracted Indonesia’s leaders from the gravest challenge they now face: protecting the national interest from the profusion of locally elected politicians, each delivering largess that is pleasing to his own small pool of voters but damaging to the country as a whole.

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