A Land of Promise: the Wealth of a Troubled Paradise

It was, as one amazed European journalist noted, "an organization miracle." For a country where snafus are accepted miseries of everyday life, last week's national elections in Indonesia -- following a tense campaign in which a dozen were killed and hundreds were arrested -- went off with remarkable smoothness. Almost all of Indonesia's 70 million eligible voters trooped uneventffully to the polls to elect 360 members of a new parliament -- in addition to 100 members appointed by President Suharto.* At week's end, the ballots were still being counted, but Suharto's military-backed Golkar, a "functional group" of professionals and bureaucrats, had apparently won about 62% of the vote and at least 236 seats in the new house. Golkar's popular vote almost equaled its total in the 1971 elections -- the only prior test of the government's popularity since Suharto ousted the late, pro-Communist Sukarno in the bloody aftermath of an abortive leftist coup in 1965.

The election results came as no great surprise. In Indonesia, the military is omnipresent if not quite omnipotent, and the two main opposition groups -- the Muslim United Development Party (P.P.P.) and the Democratic Party of Indonesia (P.D.I.) -- had to endorse Suharto for President as a precondition for fielding any candidates at all. "There is no question that Suharto is in charge," said one foreign diplomat shortly before balloting began. "The military is united and they support him. The great mass of people think that things are as they are, and that's that."

Or is it? Despite Suharto's triumph at the polls, Indonesia still suffers from the same endemic corruption, the same extremes of wealth and poverty that led, in part, to Sukarno's downfall. One clue to the potential depth of discontent: in the capital of Jakarta, a teeming (pop. about 6 million) city of shopping centers and new high-rise hotels that overlook crumbling shanty towns, the Muslim party, which had campaigned against the regime's abuse of power, won 46.7% of the vote, while Golkar got only 34.8%. Cabled TIME Correspondent Richard Bernstein, who spent ten days touring Indonesia just before the election: "The powerful odor of corruption that emanates from government buildings detracted from Suharto's appeal, at least in the area where the citizenry is most politically aware."

Arab Traders. It is questionable whether anyone else could do much better than Suharto at governing Indonesia --a diverse (more than 300 ethnic groups, dozens of languages) archipelago of 3,000 mineral-rich islands scattered over 3,000 miles of ocean. Just as it lured Arab traders and Dutch colonialists in centuries past, Indonesia today entices Western and Japanese businessmen interested in a financial killing. The sight of safari-suited foreigners sitting by the pools of Jakarta's luxury hotels, drinking Bintang beer and talking about pipelines, drill sites and tax laws, is testimony to the seductive pull of Indonesia's untapped natural resources.

Indonesia, in fact, has become a last frontier of the Pacific. The boom is now a decade old, and Suharto can claim much of the credit for it: shortly after Sukarno's ouster, the government passed laws encouraging foreign investment. Since then, vast sections of a breathtakingly beautiful country have been transformed--though not always in a flattering way. Huge development projects have brought roads, electricity, hospitals and schools to the hinterlands. Nonetheless most of Indonesia remains as it always was: a verdant wilderness populated by agrarian peoples.

More than $10 billion worth of projects has been approved since 1967. Yet, with an annual per capita income of only $185, Indonesia's 140 million people rank among the world's poorest. Roughly 6 million people are unemployed. The influx of foreign funds was led by an oil boom that has made Indonesia, with a daily output of 1.7 million bbl., Asia's only main exporter of crude. Corruption and haphazard government policies, however, have slowed further oil exploration to a crawl, and Indonesia may lose its exporting position within a decade.

Foreign confidence was shaken by the disastrous financial crisis undergone two years ago by the country's national oil company, Pertamina. Afflicted by gross mismanagement and blatant corruption, the company could not repay several billion dollars in loan obligations and had to be bailed out by the government. To help raise the money, the government assessed Caltex--producer of 63% of Indonesian oil--an extra $1 per bbl. in royalties and arbitrarily cut the earnings of other foreign oil companies by about $2.50 per bbl. Admits Indonesian Minister of Mining Affairs

Mohammad Sadli: "We recognize that confidence was broken when we altered the contracts in a unilateral way." While some companies have expressed interest in renewing exploration, experts agree that the government will have a hard time returning the search for oil to the same fever pitch as before the Pertamina scandal.

High Grades. The bribery and bureaucratic malfeasance that nearly drove Pertamina under is far from rare in Indonesia. Says a Jakarta schoolteacher who is accustomed to rewarding the children of officers and bureaucrats with high grades in return for gifts from their fathers: "If you can get into the government, you can get rich." Unless they pay off, merchants find it all but impossible to get papers signed, exports loaded aboard ships or vital spare parts released from customs sheds. "The official just sits behind his desk and opens up a drawer," says the regional manager of an American company. "You start dropping in 10,000-rupiah [$24] notes until he says that's enough and closes the drawer." Suharto, to his credit, has regularly denounced komersial-isasi jabatan (abuse of office). But the sight of generals and poorly paid bureaucrats riding about Jakarta in chauffeur-driven Mercedes limousines indicates that the warnings are not heeded.

In light of the frustrations, why do businessmen still bother with Indonesia? "Because," answers one, "everyone still thinks that this place has tremendous potential. Nobody wants to be left out." Despite payoffs, the rewards to be gained in exploiting Indonesia's mineral wealth are great. The physical problems, though, can be awesome. TIME's Bernstein last month visited a new $850 million International Nickel Co. mine at Saroako on the island of Sulawesi. "Saroako is one of the wettest spots on earth, getting well over 200 inches of rainfall a year," he reported. "The hills containing the nickel are soft and sodden. Roads dredged out of the earth up to the ore sites quickly become quagmires negotiable only by balloon-tired trucks and, with difficulty, tough little Land Rovers and Land Cruisers. The mud is everywhere except on those rare occasions when it is dry--and then a fine, jagged, stinging dust is everywhere instead."

To reach the site of the nickel ore, Inco had to build a 33-mile, twisting all-weather road. Said Operations Manager Sandy Bell: "Every single piece of equipment, every nut, bolt, pen and pencil has come up that road." The company also built hundreds of houses for its employees and is constructing a hydroelectric power dam. The village of Saroako, once inhabited by 700 farmers and fisherfolk, has grown to several thousand people as word spread of the possibility of jobs and easy money. Stores are now stocked with canned foods, toothpaste and plastic toys, and a bevy of prostitutes has arrived from the coast. It is a frontier environment in which men occasionally lose control. Earlier this year, one worker deliberately plowed his Land Rover into the project manager's office. As the man had hoped, he was given a free, one-way ticket home.

Debt Service. The nickel of Saroako is only a fraction of Indonesia's unexplored wealth. There are huge copper deposits on remote, primitive Irian Jaya, bauxite in Kalimantan, coal on Sumatra, virgin forests of tropical timber on most of the major islands. Whether these resources can or will be exploited in time to save Indonesia from a major financial crisis is still in question. The country last year paid about $1.1 billion in debt service--about 16% of its total foreign-exchange earnings--which absorbed more than half of the total of new loans granted from abroad. The problems of corruption and mismanagement and the high costs of building an infrastructure of roads, airfields, power plants and the like have increased the risks of big raw-material ventures at a time when Indonesia needs them most.

"These people are their own worst enemies," says a top executive of a U.S. firm heavily involved in the archipelago. "If we were offered the same opportunity now that we took a few years ago, I would counsel against it. I would put the money some place else." That may not be the majority opinion now, but if enough other investors come to share the view, a paradise to be gained could easily become a paradise lost.

*As is the custom on his native Java, Indonesia's main island, Suharto uses only his given name.

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