Subject: USGOV: U.S. Interests and Policy Priorities in Southeast Asia

[Indonesia/Timor excerpts]

U.S. Interests and Policy Priorities in Southeast Asia

Matthew P. Daley, Deputy Assistant Secretary of State for East Asian and Pacific Affairs

Statement to House International Relations Committee

Washington, DC

March 26, 2003

Mr. Chairman, I would like to take this opportunity to thank you and the members of the Subcommittee on East Asia and the Pacific, for inviting me to discuss our interests and policy priorities in Southeast Asia.

Chairman Hyde's invitation requested our assessment of U.S.-Indonesian relations, regional counterterrorism efforts, the situation in Burma, possible troop deployments in the Philippines, the political climate and election preparation in Cambodia, and human rights conditions in Vietnam. I will cover all these topics in the course of my presentation as well as other Southeast Asian issues of special concern.

Southeast Asia is a region in which democratization has proceeded at a mixed pace. In the past decade, the Philippines and Thailand have consolidated relatively young democracies. Indonesia, under authoritarian rule for thirty years, continues to make strides in its democratic transformation. In Laos, Cambodia, and Vietnam, we are promoting more open societies and democratic government. In Burma, although we were heartened by the release of Daw Aung San Suu Kyi last May, we have subsequently been disappointed by a lack of progress toward democratic change.

At the same time, Southeast Asia is a region that is largely coming to grips with terrorism, again with some countries moving to take effective action more rapidly than others. The common threat of terrorism has actually strengthened cooperation and our ties with key Southeast Asian countries. One need think only of October 12 in Bali. That attack shows that terrorism threatens us all and it can happen anywhere.


Indonesia's status as the world's fourth most populous nation gives it an intrinsic importance. In addition, Indonesia has the world's largest Muslim population, thus making it a key player in our engagement with the Islamic world. Indonesia's importance to U.S. interests is further enhanced by the nation's ongoing transformation into a vibrant democracy following decades of authoritarian rule. We also have substantial commercial and environmental interests in Indonesia, a nation with significant natural, energy, and mineral resources, and a storehouse of biodiversity, home to some of the world's largest tracts of tropical rainforest and expanses of coral reef.

We view the Indonesian example of tolerance and democracy as a model for other Muslim countries. It is imperative that we support the democratic transition in Indonesia, not only because of Indonesia's intrinsic importance, but because its experience gives the lie to those who would claim that Islam and democracy are mutually incompatible. The outcome of Indonesia's experiment with democracy has profound implications for our strategic interests in fighting terrorism, preserving regional stability, promoting human rights and the rule of law, expanding access for U.S. exports and investment, and preserving the global environment.

The risks of Indonesia's failure to consolidate its democratic gains are sobering to contemplate. A breakdown in law and order would accelerate the spread of terrorism, crime, illegal drugs, infectious disease, and trafficking in persons. A dissolution of central authority and rising separatist movements would risk destabilizing the region, raise the menace of substantial humanitarian emergencies, accelerate regional environmental degradation, and invite the growth of militarism and violence. To avoid such daunting outcomes, we must assist Indonesia with its effort to create a just and democratic society.

Combating Terrorism/Police Assistance

The terrorist threat that endangers Indonesia and its neighbors was graphically illustrated by the bombings in Bali in October of last year that killed more than 200 people, including seven Americans. Indonesia responded to this bombing by conducting a professional and competent police investigation that made remarkable progress in solving the Bali attacks and in disrupting the Jemaah Islamiyah terror network behind them. The Indonesian Government has pressed ahead with domestic counterterrorism legislation and increased cooperation and consultation with its neighbors. With newfound determination, the mainstream Muslim groups that represent the vast majority of Indonesians are speaking out against the extremist fringe that are involved in acts of terrorism and other violence.

As part of our Anti-Terrorism Training Assistance Program, funded through the Non-Proliferation, Anti-Terrorism, Demining, and Related Programs (NADR) account, we are assisting the Indonesian National Police (INP) in the formation of a counterterrorism unit. Once established, this unit will substantially enhance the Indonesian Government's capability to neutralize terrorist cells and conduct terrorism-related criminal investigations.

Military-to-Military Relations

There is no question that the military-to-military relationship is one of the most controversial aspects of our bilateral partnership. Reforms in the Indonesian military have not kept pace with Indonesia's broader democratic development. The lack of a track record on accountability for human rights abuses is of particular concern.

Nevertheless, it is in the U.S. national interest to engage with the Indonesian armed forces. For good or ill, the Indonesian armed forces will play an extremely influential role not only in the future of the Indonesian state, but also in the survival of that state. To influence the behavior and attitudes of the members of the Indonesian armed forces, and to ensure adequate protection of American and American interests in Indonesia, we must interact with them.

While military reform is lagging, there have been some signs of progress. The military has accepted more changes in its status and role in the national life over the past four years than at any other time in its history. It did not intervene in the 1999 elections, and it resisted political pressure to violate constitutional norms during the turbulent period of President Wahid's impeachment and the succession to President Megawati. The military has formally relinquished its special, parallel function in government, and accepted a sharp reduction in appointed parliamentary seats and the end of appointed representation in legislative bodies by 2004. The conviction on March 12, 2003 of an Army General officer for East Timor human rights abuses represents a tangible step on the path to accountability.

Fundamental problems remain, however. Progress on accountability has been slow; the military has grudgingly gone along with trials for a small number of officers for human rights abuses. Discipline remains a problem. The military also deals with inadequate central government funding through running unofficial businesses and foundations, and sometimes engaging in illicit activities.


One of the most important issues of concern in our bilateral relationship with Indonesia is the case of the murder of American citizens in Papua in August 2002. This ambush by unknown gunmen took the lives of three teachers, two Americans and one Indonesian, and wounded many others. According to public statements by the officer in charge of the initial Indonesian police investigation, the evidence pointed to possible involvement by members of the Indonesian military, rather than members of the separatist movement known as OPM. The Indonesian and international media have reported various comments by sources suggesting that members of the Indonesian Army Special Forces, known as KOPASSUS, were responsible for the attack. Other reports or theories have blamed members of the Indonesian Army Strategic Reserve, known as KOSTRAD. While the preponderance of evidence appears to indicate that elements of the Indonesian Army were responsible for the crime, we cannot make any definitive judgments until the investigative process is complete. Until we have a better understanding of this terrible crime, we must be careful not to assign blame to institutions.

We have made clear to the Government of Indonesia that those responsible must be identified and punished. Anything short of a full accounting and punishment for those responsible will hurt our entire relationship. In response to our concerns, the Indonesian Government formed a joint Police/Armed Forces investigative team to conduct a new investigation, and accepted participation by the FBI. In mid-January, FBI agents traveled to Papua to conduct interviews of persons connected to this tragedy. The FBI agents recently finished their trip to Papua, but given the complexities of this investigation, they will have to return before they can conclude their investigation.

Political Developments

In the political field, 2004 will be a momentous year for Indonesia's government due to the upcoming landmark elections. Indonesia will hold its first ever direct Presidential election, in addition to nationwide parliamentary elections. We have provided extensive assistance to help these elections proceed smoothly, and we are also assisting the Indonesian Government in its implementation of a regional autonomy program. Indonesia's transition to democracy has been a turbulent process, but it is progressing in a very positive and dramatic manner.

Despite continued problems with impunity, corruption, and weak institutions, Indonesian democracy is characterized by a dynamic and burgeoning civil society. The trends are very positive, but require the patience of the Indonesian people, as well as interested international observers, as change is always uneven and often unpredictable. However, real change is only lasting when it comes from within rather than being imposed from outside.

The eve of an election year is bringing predictable political struggles to Indonesia. Political leaders have an eye on their campaigns to promote their respective parties' own interests. Bureaucratic infighting increases, and the public seeks avenues to voice its discontent with government policies, including through demonstrations. This is all part and parcel of the democratic process, and should be seen as evidence of continued growth rather than portents of instability.

Economic Issues

2002 saw a number of positive macroeconomic developments, including steady economic growth, moderating inflation, and a strengthening balance of payments. However, the Bali bombings dealt a blow to Indonesia s tourism sector and investment climate, thus weakening Indonesia's long struggle to recover from the devastating 1997 financial crisis. As a result, economists forecast Indonesia s 2003 economic growth rate at 3.5%. While macroeconomic stability has been achieved, Indonesia cannot attract the investment it needs to grow and employ its people because of the uncertainty due to corruption, security concerns, opaque regulations, and a lack of legal clarity. The terrorist threat needs to be reduced to improve the investment climate, and the newly created "National Investment Protection Team must be accompanied by reforms to the tax and customs system and the cumbersome bureaucracy. In addition, the practice of treating commercial disputes as criminal cases, a chilling factor on foreign investment, must cease.

Indonesia s long-term economic health also depends on the government tackling tough issues such as the sale of excessive state assets, civil service reform, and corruption in the judicial sector. Indonesia s $5 billion IMF program will terminate at the end of the year and the government is not expected to request an extension. While completion of the IMF program demonstrates the success of Indonesia s macroeconomic management in the short-term, the challenge the government now faces is maintaining market confidence in the absence of a donor-approved plan of action. To do so, Indonesia will need to announce and stick to a credible economic program.

Trafficking in Persons (TIP)

Indonesia is a major source, destination, and transit country for trafficking in persons for sexual and labor exploitation. Although Indonesia does not yet comply with the minimum standards outlined in the Trafficking Victims Protection Act, Indonesia has made notable efforts to bring itself closer to compliance. Some concrete results in combating TIP include a commitment of increased resources, and the attainment of some benchmarks that are in line with U.S. recommendations. These benchmarks include the establishment of a national action plan and passage of a child protection bill. Police have also become more engaged, freeing approximately 600 victims in 17 known cases in 2002, and our police training programs are contributing to this success. Despite these advances, Indonesian efforts remain weak in the area of investigation and prosecution of traffickers. Many officials and security force members continue to be complicit in TIP. Indonesia's full compliance with minimum standards will require sustained commitment over the long-term, and we will continue to urge Indonesia's government to work toward full compliance with U.S. standards.

Religious Freedom

The Government of Indonesia generally respects the religious freedom provisions of the constitution, but there continues to be religiously motivated violence and tension. We monitor these developments closely, and are encouraged by recent evidence that there is growing religious tolerance since the Bali bombings. In particular, mainstream Muslim groups and leaders have improved dialogue with their Christian counterparts. The terrorist acts did not, as intended, drive Muslims and Christians apart, but rather brought them together to condemn the attacks and work against the spread of radicalism. We saw this most publicly over the Christmas-New Year's period, when Muslim groups committed their security staff to guard places of worship. This positive development follows the sustained successes of the Malino Accords signed in Maluku and Sulawesi, and the reported dissolution of the Muslim extremist group, Laskar Jihad, in October 2002. In Bali, although Muslims are under greater scrutiny from local Hindus, the harsher backlash that some feared did not take place.

Human Rights

The Indonesian military's human rights record remains poor, and serious abuses continue to be committed, particularly by Indonesian security forces in outer provinces. Our embassy reported in depth on this issue, and we actively promote respect for human rights and accountability for violations. We have seen some positive trends in Maluku and Sulawesi with the sharp decline of serious abuses last year and a reduced death toll in most conflict zones. In Aceh, the Cessation of Hostilities Agreement (COHA) has succeeded in almost halting the violence.


Released on March 26, 2003

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