Islam in Indonesia's Political Economy with Wayne Forrest

Sep 6, 2017

Indonesia is enjoying economic growth and the reemergence of democracy, yet it is troubling that the influence of Islam in politics is also growing. "I'm still optimistic that Indonesia can weather these outside Islamic influences that come from the Middle East and that are not really from their culture," says Wayne Forrest, president of the American Indonesian Chamber of Commerce (AICC).

Podcast music: Blindhead and Mick Lexington.

DEVIN STEWART: Hi. I'm Devin Stewart here at Carnegie Council in New York City, and today I'm speaking with Wayne Forrest. He is president of the American Indonesian Chamber of Commerce (AICC) here in New York City. He has been looking at Indonesia since the 1970s, and he has been with the AICC since 1988.

Wayne, very good to see you here today.

WAYNE FORREST: Glad to be here, Devin.

DEVIN STEWART: Before we get into what's going on in Indonesia, just give us a quick overview of what is the AICC, what is the history, the background, and a quick introduction to the mission.

WAYNE FORREST: The history goes back to the 1940s when New York City was the central business location for all kinds of companies that were involved with, at the time, the Dutch East Indies. In the 1940s we had built a trade relationship based mostly on rubber, coffee, and spices with Indonesia. You go back a little further, you get the invention of the Model T Ford by Ford and the tremendous need for rubber in the 1920s. So we had two American companies that looked around the world for the best location to make a plantation, and they found it in the Dutch Indies. Those two companies were Goodyear and Uniroyal.

Those companies, plus rubber traders and others that were buying, formed the Chamber, knowing that Indonesia was going to become independent, and some of the early members were pushing the United States to formally recognize the declaration that had been made by Sukarno and Hatta, the revolutionary leaders of Indonesia. Out of all that—concern for decolonization and things like that, the end of World War II—came the Chamber, so that the members could have a vehicle to push their interests with Indonesia.

We were known at that time as the primary group that you went to if you were an Indonesian coming to the United States and trying to do business. You could get a lot of it done just by going down to Wall Street where all the commodity firms were and things like that. It has grown a lot since then, but that's the background. So it's a trade organization.

It also has Indonesian members who are trying to do business in the United States. We try to connect people very directly, and then we think about commercial policies that would help. We have worked closely with both governments over the years. A lot of our members are real experts in their particular fields, and some of them have been with the Chamber for many years, almost longer than me.

DEVIN STEWART: You've been with the Chamber since 1988, and a lot has happened in Indonesia since 1988, particularly around 1998 with the democratic transition. Can you give us a sense of what are the big changes you've seen in Indonesia during that time?

WAYNE FORREST: On the political front, you have the reemergence of electoral democracy, and not just at the national level, but now down in the regions. There are city mayors who are freely elected, there are governors of provinces. You have a free press, and you have the spirit of Indonesian people, as they can say anything at any time now, whereas before this transition it was a little harder sometimes to get people to say what they really thought about things. Now, I think, there is an emergence of all kinds of non-governmental organizations.

Economically, a lot of the policies that Indonesia was beginning to follow in the 1990s which brought a lot of growth—I think our decade of biggest two-way trade was the last decade of Suharto, actually. Now what you have is the emergence of a wonderful middle class and consumer class. Indonesians are much better educated, so a lot of the investments that were made in the past in education are starting to pay off, a growing group of consumers which holds the country together economically.

The freer democracy, in a sense, has brought a lot of different viewpoints out. Some of them are great, some of them are not so good. The arbitration of them, both within the country and outside the country, is much more difficult than it was before Suharto fell from power.

DEVIN STEWART: What's the current economic strategy that Indonesia is pursuing? How would you describe it?

WAYNE FORREST: I call Indonesia the "value-added state." They know that their future lies beyond just selling raw materials and commodities. They want more manufacturing; they want more jobs that can bring higher levels of employment. They would certainly love to have a bigger digital economy so that young people with digital skills can be employed, and to some extent this is happening.

Their strategy is to have some elements of protection for their own economy and trying to maintain an open investment regime. These two dynamics sometimes conflict with each other, but I think the major basis is that they want to be open to the world commercially for investment and other things and trade. At the same time, they want to do more themselves.

DEVIN STEWART: I know there is a lot of concern about corruption, the strength of institutions, the effectiveness of law enforcement and the police, trust in institutions, public trust, and it sometimes manifests in violence on the street. How would you describe the major challenges facing Indonesia today?

WAYNE FORREST: Indonesia has a lot of very strong laws on the books. Enforcement is always the question. The judicial system can be bought. Indonesians know this at the top levels. It is not news to them. The current president has gone on record several times.

I don't think there has been enough attention paid to how to bring the kinds of judicial reforms that will be necessary to have a stronger rule of law. And this can manifest itself in that the people on the street don't always trust those institutions, and so they will take law into their own hands.

DEVIN STEWART: How common is that?

WAYNE FORREST: It's not uncommon. It can manifest itself just in a neighborhood rallying itself to beat up a thief that they know has been operating there. They may have asked the police to get involved, but they may also sense that, you know what? They're not going to really do anything.

DEVIN STEWART: And sometimes deadly force.

WAYNE FORREST: Yes, it can be.

But there is also mob violence that is manipulated for political purposes. We didn't see it totally in the election in February [editor's note: Forrest said January by mistake] of the governor of Jakarta, but we saw mobilizations, some of which had the possibility of turning violent, that were done by basically paying off people to do things.

There is always a large element of what we might call "racketeers" or people who have mafia-like tactics to enforce certain things. There are well-known groups that go around right during the time of the Muslim fasting period to enforce what they think are the codes regarding the sale of liquor. They will go to bar owners and others and basically say, "If you sell liquor, we're going to beat up your people, or we're going to attack your bar." So there is a lot of that intimidation factor all over Indonesia in the marketplaces, and people learn to live with this.

Some of those groups that are doing the intimidation are groups that have connections to lower ranks of the military, and so they're feeding off each other because the military and the police sometimes need income; they don't get all of their budget from central government. So it's a bit of an uneasy situation sometimes.

DEVIN STEWART: Where does their funding ultimately come from?

WAYNE FORREST: The funding of the security should come from the state, through taxation and budgeting. But perennially in Indonesia, that's not the case. The roots of it go back to the 1950s when the government had no money, and so individual military units would set up businesses or do other things to fund themselves. So you had a self-funding military in a revolutionary situation that has spun forward to the present, in maybe a slightly different way than it was back in the 1950s, but this is the roots of it.

DEVIN STEWART: But these sorts of enforcers who go around and check on people, where does that money ultimately come from?

WAYNE FORREST: It could come from an enabler within the private sector who has an agenda politically, yes. And there are always rumors about this. This is common. You go to Jakarta and you've heard about something and, "Oh, this is this guy trying to do this." The biggest rumors occurred around 1998 when there was all kinds of mob violence during a period in which Suharto was out of the country. It ultimately led in some way to Suharto's resignation. And it was not spontaneous, it was very clearly orchestrated.

DEVIN STEWART: It has become a kind of media, I wouldn't say a trope, but it has been reported in the media recently that the pace of the influence of Islam in politics is gaining speed in Indonesia. Do you agree with that? How would you describe the influence of religion in politics?

WAYNE FORREST: I think you're right. There is a connection. I would just point out that there are also many surveys that show that Indonesians are not necessarily going to the mosque any more than they did, and in some places going to the mosque less.

This does not mean that the trappings of Islam cannot have a political life of their own, and I think certainly they have, for not just the most recent few years, but even going back 10 or 15 years. You saw candidates for political office, they had to have their wives wear the hijab—and these women would never wear them otherwise—but they would appear in public so that they could show to the people at large of the country that they are observant in some way.

The last election of the governor of Jakarta saw a real case where religion was used for the first time really as a major weapon in a political campaign. This had not been done before. People are going to see if this is a one-off or if this is now a case for the future. I suspect it will become a litmus test that somebody is going to use in an election somewhere saying, "You're not Islamic enough," right?

Even this particular candidate—he was Chinese Christian, so he was a double minority, but even that wasn't going to actually do him in as a candidate because up until November of 2016, before a tape was released where he said something that people were construing as blasphemous—even though I don't think it was—he was leading in the polls in a major metropolitan area, Jakarta. Why? Because the general population in Jakarta is rather sophisticated, and they don't necessarily use religion as a litmus test.

This guy, Ahok, was an efficient administrator. He had his pros and cons. He was a little boisterous in his speech, a little more direct than a lot of Indonesians like, but yet he was doing very well in the polls. But then there was a campaign orchestrated by his opponents saying that this was such blasphemy and how could we ever elect a guy like that, even though it was a very idle comment he made.

I went to Jakarta. You saw signs out near mosques: "Do not vote for Ahok or you won't have a place in this mosque" or "You can't get buried with full Islamic ceremony." And this was crazy for many Indonesians, but it kind of worked. They got a million people out in the streets against Ahok. You can imagine that the president, Jokowi, was wondering, How could this happen? I thought I was the popular candidate. I had won with a very populist message, but yet here's a million people out there demonstrating basically against my guy.

So he has taken some steps, I think, now already to make sure that that may not happen in the next election, but we will see.

DEVIN STEWART: What types of steps?

WAYNE FORREST: He is, I think, reaching out more to communities and people that he may not necessarily have had or wanted to have connections to, sort of just checking the box.


WAYNE FORREST: We don't know yet. It's hard to know if it's going to work or not.

DEVIN STEWART: I just remember Gus Dur, who was the leader during the democratic transition, was a bit of a philosopher.

WAYNE FORREST: Of course. Yes. A punster, everything.

DEVIN STEWART: He was a jokester as well, right? I feel like he was a promoter of pluralism, at least an Indonesian version of pluralism.

WAYNE FORREST: Oh, undoubtedly. His favorite author was a Jewish author, Isaac Bashevis Singer. He would regularly come to New York and meet with rabbis and priests and ministers. He was amazing.

DEVIN STEWART: Is that strain of thought still relevant in Indonesia today?

WAYNE FORREST: It's still very relevant. Indonesia has a code they call Pancasila. It's the five principles. All of them are principles that any democratic society would want—belief in one god but not mandated by religion, and all kinds of other things. I think this is what most Indonesians believe; this is what the government is trying to do more of, trying to promote Pancasila again.

It was promoted a lot under Suharto but sometimes in a very ideological way, and people were turned off by the Pancasila training courses they had to go through that were a little bit deadening intellectually. They're not doing that now, but they are saying: "Look, don't forget, we're a Pancasila nation. We believe in these things."

There are more Indonesians who are going to be somewhat swayed by ideologies that are more limiting, but it's not enough, I think, to really change the polity of the country. The Javanese, which are one of the largest ethnic groups, it's hard to sway them away from their own culture, their own beliefs, which is that, yes, they are nominally Muslim, but they care about many other things that are not just Muslim. So at night they're going to go out and watch the Wayang puppet plays, which are often based on Hindu stories, the Ramayana, the Mahabharata. So these things have been there for so long that they're not going to get knocked off.

But there is a concern about this definitely. I think there is probably a mixed opinion about this from many different quarters. Myself, I'm still a believer; I'm still optimistic that Indonesia can weather these outside Islamic influences that come from the Middle East that are not really from their culture.

Indonesia is a rich, diverse culture, fertile soil, everything grows, everything is out there, all different stripes and styles. It is not a culture of severity, a desert severity. So the Islam that is coming out of the Middle East, much more this Wahhabi thing, yes, it has its followers, but to me it's not going to overwhelm the country.

DEVIN STEWART: About how many followers of that sort of more harsh strain do you think there are in Indonesia?

WAYNE FORREST: I don't know, 10-15 percent, if I was going to guess. You would probably have to ask a professor of religion for a more accurate answer.

DEVIN STEWART: What do Indonesians make of our current president, President Trump?

WAYNE FORREST: I think their initial concern was that they were going to get targeted like other countries in the "Islamic ban," but now they're much more at ease because they weren't. So for one thing, if they travel to the Middle East, to Iran, Iraq, and it's stamped on their passport, they can still come into the United States.

But they're not happy about also being on the list of countries who have a trade surplus with the United States. However, my efforts—and I was there in April and went to see the trade minister and all the ministers—and I went to the American embassy, and I reminded everybody that the United States' trade deficit with Indonesia is congenital, based a lot on tropical commodities which we do not grow. We don't grow a lot of coffee, spices, rubber, and these are all big-ticket items that we buy from Indonesia.

Once the Commerce Department finishes its review, probably the natural thing is going to be, yes, it's a trade deficit, and we can try to fix it on the margins. And that's true, there are a lot of things that Indonesia could do: They could remove more non-tariff barriers, there are intellectual property protections, there are other policies that they could do. They could raise the caps that are on certain types of investments. There are lots of things they could do to make it more conducive for American companies. But on the whole I don't think they're going to get penalized a priori by the trade deficit.

DEVIN STEWART: I guess to sort of wrap up here, how do you see Indonesia as the largest economy in Southeast Asia, its role? Do you see it as a political leader of the Association of Southeast Asian Nations (ASEAN) or of Southeast Asia? How do you see the future of U.S.-Indonesia relations?

WAYNE FORREST: Indonesia is the largest economy. It has always tried to wield a level of influence slightly less than its size. That is the natural Indonesian-Javanese reticence. So I don't see them becoming a forceful leader; I think they'll be more of a quiet leader.

They have to manage a growing trade and investment relationship with China, but on the other hand, they're beginning to see that they can have a voice that counteracts some of what China is doing without jeopardizing that. That has been the strategy of our government and the private sector for a number of years now, to remind Indonesia that, "Look, you can say no to China."

DEVIN STEWART: On which issues?

WAYNE FORREST: On, say, the South China Sea. Indonesia has recently renamed a part of the South China Sea the North Natuna Sea. And that is basically sending a message to China that: "Look, we don't acknowledge your Nine-Dash Line. We have our own borders there, and in fact we're going to change the name of the sea to recognize that." So they've done that.

They also have a policy—as you know, they're trying to get a lot of investment and infrastructure, and ports are very important to this country. There are ports everywhere. Connecting an archipelago is impossible almost, but they've told a lot of countries, "Please, we want your investment for port management," but they're not going to do it with China.

So there are limits. In other words, they're showing their limit. I think there are lots of people who would like them to be even firmer. I don't think they're on the same page as President Duterte of the Philippines on how he's managing the China relationship. But it's important, and they're going to straddle it.

DEVIN STEWART: Duterte's a little bit more leaning toward China.

WAYNE FORREST: Pro, yes, I think so.

DEVIN STEWART: Do you think Indonesia is a little bit more in the middle?

WAYNE FORREST: I think more in the middle. When you talk to their ministers and many of the important business people, you get that sensibility.

Our challenge, Devin, is Indonesia would love to have more American technology, more American investment, but we don't have the vehicles to bring the level of investment that a China can do, or even in the past that a Japan could do. We don't have the consortiums that can be put together to do a major investment, and we don't necessarily always have the focus. So I'm often having to defend that, "Hey, you guys are always complaining about things here in Indonesia, but look at these other guys coming in with money and big delegations." But in their hearts they want the United States.


WAYNE FORREST: So many of them have roots here. So many of their people, their ministers, have been educated. They love American products. They love the culture of the United States, the innovation. They use it all the time. So many Indonesians are on Facebook, on Twitter, and in the past they were the first, that if they could get an Apple iPhone they would get it; if they could get a computer from the United States, they would get it in a previous generation, the software. All of that is American. The music, the pop music, the jazz that is now all over the country, it's American.

So this country really has a great future with the United States. But we're not necessarily always on the same wavelength. I think one of our jobs is to try to get that managed better. It is not easy, but we keep at it.

DEVIN STEWART: Thank you so much, Wayne. Very informative discussion.

Before we go, I know that your organization is putting together a Women's CEO Summit. Tell us a little bit about that and what you're trying to do.

WAYNE FORREST: If you follow Indonesia, you know that the president last year brought back Sri Mulyani. Dr. Sri Mulyani is a U.S.-educated economist who had been finance minister of Indonesia in the past and then went to the World Bank, where she became the number-two person.

Seeing her and seeing within our own organization women moving up the ranks and in Indonesia, we decided to put the women together and have a summit that could demonstrate the importance of women in the economy. You can see it in the leadership, and you can also see it economically, how important that is. We think that the summit will be a chance to have a great dialogue on that and show people who don't know the country quite well that, although Indonesia is the largest Muslim country, women have a very different role there than they do in a Middle Eastern Muslim country. They are in the economy, they are consumers, they are spending the household income, and some of them are now starting to run businesses.

For instance, we're bringing the founding partner of a law firm in Indonesia that was founded by four women who left other law firms in Indonesia because they were bumping up to the glass ceiling, and they said: "Okay, we're going to do what women do even in the United States: We're going to form our own law firm." It has now been rated several times as the best Indonesian law firm.

DEVIN STEWART: For our listeners, if you want to participate or get involved with that summit, how does one do that?

WAYNE FORREST: Just Google "Women's CEO Summit Indonesia," you'll find us. You can contact the American Indonesian Chamber of Commerce either online or call the office. Come down to Washington. It's during the week that the World Bank is meeting in Washington. That's why we can get the finance minister.

One of our moderators was President Obama's ambassador-at-large for global women's issues, Melanne Verveer. We're working closely with her. Senior people from Citibank, Freeport, Chevron, and other companies are participating, and then some smaller companies that many people will not know but which are very indicative of what's going on. Good networking sessions, people get to know each other, maybe some business will come out of this.

There is a group called WEConnect International which is going to be involved. They are a sourcing platform, so if you're a company like Chevron or AIG and you've committed to WEConnect, you will buy products from women-owned businesses. It's that kind of way to help breed this kind of entrepreneurial culture.

In Indonesia many women get loans to do small-scale, like one-or-two-person businesses. What is not yet done enough of is to scale up into larger businesses. That's going to be something moving ahead that Indonesia will want to see happen more.

DEVIN STEWART: Great. Thank you, Wayne. Wayne Forrest is president of the American Indonesian Chamber of Commerce based here in New York City. Great to have you here today, Wayne. Thank you.

WAYNE FORREST: Thank you. Thanks for looking at Indonesia through this podcast. I appreciate it a lot.

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