Muhammad A.S. Hikam describes constitutional and governance reforms and efforts to build a civil society in Indonesia since 1998. A member of the Hanura (People’s Conscience) political party, a former member of the Indonesian Parliament, and a former state minister for research and technology, he explains that prior to Indonesia’s financial crisis in 1988 and the collapse of the Suharto government, civil society in Indonesia was “corporatist”; that is, that except for the Nahdlatul Ulama (Islamic Scholars Awakening) Party, all civil society organizations and political parties were controlled by the state. In 1998, it was recognized that a strengthened civil society was the only avenue to challenge the overwhelming power of the state. The result was a flowering of as many as 100,000 civil society organizations and 38 political parties. However, nearly all came into being without the capacity or understanding to pursue their roles effectively. Many were based on ethnic or identity interests and did not know how to relate to the political life of the country. The challenge was to train civil and political society to find synergies between interests and needs. Without that, governmental reform has been, and will continue to be, a patchwork, he says. He discusses the successes and shortcomings of reforms in four principal areas: changing the constitution to reduce state domination, opening the political process to opposition parties, removing the military from politics and placing civilian control over the police and armed forces, and decentralizing government and ceding some autonomy to the regions. These efforts have proceeded without regard for capacity building, he says. As a result, poorer regions simply establish regional governments funded by the central government without developing their own capabilities. Hikam stresses that economic development is essential if regional autonomy is to work.    

Erry Firmansyah, former president of the Jakarta Stock Exchange, describes business and public responses to reforms in the Ministry of Finance, Tax Court, Securities and Exchange Commission, and Customs by the government of Indonesia. He says that, though it is not possible to eliminate all bribery or illegal payments, employees in the Ministry of Finance were acting professionally and focusing on making Indonesia’s markets more attractive and liquid for both local and foreign investors and surveillance of illegal financial activities. Taxpayers and businesses find that they are treated much more impartially and fairly as “customers,” he says. It is no longer assumed automatically that everyone is cheating on taxes. When there are disagreements, disputes can be taken to the Tax Court, which gained a reputation for being fair and impartial. He says these changes were the result of a new mindset brought about through a system of performance rewards, incentives and improved compensation of employees to more closely match the private sector. These reforms were reinforced by the Komisi Pemberantasan Korupsi, an agency that can arrest and prosecute both government officials and citizens for corrupt activities. In addition, he says, the budget process was reformed so that vendors and contractors found the system fairer and easier to work with. He says there still was room for improvement in the tax system because many small businesses were not registered and corrupt practices persisted. Some court procedures also needed to be improved, he says. Nonetheless, the country weathered the recent world economic recession fairly well because of these reforms and the increased trust of both local and foreign investors in the country’s improved financial integrity. He expects the reforms will be sustained for the foreseeable future.    

Juwono Sudarsono reflects on lessons learned from nation building and governance reform in Indonesia. He states that when he was named minister of defense in 2004 by the president, his instructions were to neutralize the political role of the military and its dominance of the government, to require the military to support national democratization, and to scrutinize the defense acquisition process in order to reduce corruption. He found it was not difficult to convince the military to withdraw from the political process, because the military had come to see its political role as a liability jeopardizing its credibility with the population. The police were removed from military control and placed under separate civilian control. Military-operated businesses were either eliminated or placed under control of a new agency. He says it was more difficult to reduce the number of police-operated businesses because the salaries of members of the police were low, so they inevitably seek ways to make the additional income they needed. He says that corruption cannot be eliminated, but it can be reduced step by step. He describes initiatives to reduce bribes and kickbacks in the defense acquisition process. He points out that the government was starved for revenue because $25 billion a year was being lost to illegal smuggling and organized crime. To advance the process of democratization, the military began to provide training and technical assistance to help build the capacities for democracy and development in other sectors of society. He points out that while there were individuals capable of assuming top positions, the country was very short of capabilities at the second and third levels. The military helped to train accountants, managers, specialized lawyers and other specialists at these levels, particularly in the marginal regions. He believes that while merit systems are essential to build the competence of the civil services, affirmative action needs to be taken to help marginalized people feel that they are part of the national society. This means that merit sometimes should not be the only standard taken into account. Democratization and development depend upon building up a trained middle class, he says.

Ramesh Chand (R.C.) Jain, deputy commissioner of Kamrup for Guwahati, India, describes his efforts to revive and reform the Assam State Transport Corp. during his tenure as managing director beginning in the year 2000. At the time he assumed his position, ASTC was on the verge of being closed down after 100 years of existence. It had about 5,400 employees who had not been paid for 14 months, a substantial debt, and only 72 vehicles in operating condition, earnings from which were almost nothing. The employees had been agitating and protesting since 1988. He discusses how he convened meetings of top employees and slowly persuaded them that they would benefit from significant changes. He had political support from the transport minister to undertake reform at any cost. Jain talks about reducing the number of employees through a voluntary retirement plan, requesting voluntary assistance from Tata Motors to train ASTC mechanics and improve repair shops, and starting an innovative public-private partnership by offering ASTC stations to private operators who would use ASTC vehicles and share income. He then convinced the private operators to recruit drivers and conductors from ASTC’s surplus workforce on financial terms favorable to both the operators and ASTC, and started a system under which each vehicle had an owner who was responsible for operating, maintaining and repairing it. He also talks about a zero-based inventory system under which parts were purchased from dealers only when needed. He also negotiated bulk purchases of tires, batteries, lubricants, and fuel, which were then sold to the operators at market rates.  He also discusses other measures taken by the Minister of Transport.