 Good morning. I'm Ernie Bauer, the Senior Advisor and Director of the Southeast Asia Program here at CSIS. And we're very honored this morning to have Doug Rammage visiting from Indonesia. Doug is a governance advisor for Australian aid in Indonesia. He's lived in Indonesia for the last two decades as a representative of the Asia Foundation and head of World Bank governance programs. Doug, welcome to Washington. Thanks very much, Ernie. I'd like to ask, if I could, about your perceptions of governance in Indonesia. It's what you've been doing for a couple decades. You've seen enormous amounts of change. And our president, President Obama, is about to head to Indonesia. What should people think about when they think about governance trends in Indonesia? Well, I think that we increasingly are familiar with the story of Indonesia as a successful democracy. And it is. And it's the story that we're probably late to understanding, but certainly have embraced now. And we see Indonesia as one of the big democracy success stories of the past 15 or 20 years. However, it also has some growing pains. And I think that particularly in the context of the U.S.-Indonesia comprehensive partnership that has a partner and equal and friend of Indonesia is that we're able to address some of the areas where Indonesia might still be having some challenges or some problems in terms of its democratic stabilization. What do you mean by that? What are the challenges that Indonesia would face in terms of democracy? I think the hardest thing for Indonesians today is to ensure that their institutions consistently uphold the rule of law. I think it's by far and away the toughest thing is to ensure that they have a reformed judiciary, Attorney General's office, and police. These are probably the three institutions which still need significant strengthening and stabilizing. President Udiano won on his last election with a great, a pretty good majority, I would say over 60%. Running as a reformer. Is that reform narrative with the president continuing? Do you see... And he can't run again in 2014 when the next election takes place. Term limits. What do you see in terms of that? Where is that reform narrative in Indonesian politics right now? Well, I think that the sobering thing for Indonesian, the Indonesian democracy movement now is that looking on the horizon, it's hard to identify any reform-oriented candidates or reform-oriented political parties as Indonesia approaches its next national elections in 2014. There's no question that President Udiano himself has been a reformer, but I think there is some question as to the competing priorities that he also has to juggle as president. What about corruption? It's obviously an important issue that Indonesians themselves have identified. Where is the fight against corruption in Indonesia? The fight against corruption has stagnated. I think there's no question that Indonesia made enormous progress in the first burst of reform from, say, 1998 to 2005. But since then, I think we have a classic case of corruptors fighting back. Corrupt elements in the Indonesian system have learned essentially how to gain the system and have fought back very hard against the counter-corruption agencies and in some cases, working to weaken the counter-corruption agencies. So you have sort of undermining of institutions underway. Absolutely. Absolutely. But corruption in Indonesia, you've talked about this before. You said it wasn't the same as it used to be under an authoritarian regime. What is the nature of corruption in Indonesia today, and why is that such a hard fight to sustain? Well, I think that in the authoritarian era, corruption was centralized, corruption, political power was centralized, and corruption was centralized, and people knew where it happened and who was responsible. In the new democratic and extremely decentralized Indonesia, corruption is now evenly spread throughout the entire system. So there are points of corrupt activities and opportunities, not just for corruption, but collusion. The other dimension is Indonesia is just much richer today. There's a lot more money fueling the system. Corporate earnings are at all time highs. The country is growing robustly, economically, foreign investment is up, and all this simply makes a lot more money sloshing around the system, and that in turn fuels the political party system in Indonesia. So a lot of money is needed to run the political party system. How has Indonesian governance affected Indonesian foreign policy and its presence on the world stage? Well, I think one of the most dramatic changes in Indonesia's orientation to the world is that Indonesia now trades heavily on its credentials as a democratic country, and it's extraordinary. As we look at Indonesia as a partner of the United States and a friend, Indonesia has a democracy promotion element in its foreign policy. Who could have imagined this 15 years ago? Exactly. Does governance impact business and economics in Indonesia? Do you see a correlation between the two? I think it hugely does. I think in the early part of the post-Suharto era, we saw that businesses were very concerned about whether it's particularly foreign business, but also Indonesian businesses alike were concerned whether contracts would be enforced and whether the rule of law would pertain to business contracts. I think today the concern is much more on the services the government needs to provide to provide a healthy business environment, and the big obstacles in Indonesia remain what we've known for years. One is infrastructure, which is choking. It's not choking, but it's certainly slowing the rate of growth, the lack of infrastructure, and the other is the regulatory environment, which remains particularly complex and burdensome, both for Indonesian as well as foreign businesses. I see a lot of American companies looking at Indonesia as the next new frontier. They're having trouble getting into China now. It seems like the doors are starting to close there a little more. India's complex. What would you tell an American investor who's looking at Indonesia maybe for the first time? If you're big in Asia, if you're an American company, you're big in Asia. You're surely in India and China, but you've got to now, I think, have a two-plus-one strategy. In earlier years, the plus-ones were breaking in favor of Thailand. I think in the past five years, we've seen clearly the plus-ones breaking in favor of Indonesia. It's a backup. We also know now, and American businesses know now, it's also challenging to do business in India and China, and that by comparison, Indonesia, particularly driven by strong domestic consumption, is an attractive additional market for a China-India focus. Yesterday, the Pew Research Group issued a report saying that perceptions of American power around the world are that American power has diminished, particularly relative to China. What do Indonesians think of the United States now, and how do they think about the United States and China? I think attitudes towards the United States have certainly improved in the past few years. I think as the further away we get from 9-11 and the early dimensions of the war on terror, the better the people-to-people relationships. I think a few things have helped a lot on the part of the United States government. We've done a much better job of speeding up the issuance of visas, so Indonesian students now are having an easier time getting to the United States. This makes a huge difference. Perceptions of American popular culture, science, and technology are hugely popular. But China is the model. China is seen as the country which is readily investing more than American companies. It's seen as a reliable trading partner. And it's a country which is buying Indonesia's natural resources and commodities. But it's not a political model. The Indonesians are proud of democracy. It's not like they're aspiring to... In fact, one of the most interesting discussions in the past year was when the former Vice President Yusuf Kala came back from China and he criticized his fellow countrymen for not building infrastructure as fast as the Chinese. And instantly Yusuf Kala was criticized by the Indonesians for saying, yeah, but we're a democracy and we need to compensate people for their land. We need to make certain communities benefit from the infrastructure. We're not going to trade that model for what Indonesia has developed. If you were asked to go over to the White House and talk to President Obama before he visits Indonesia this November and he asked, you know, Doug, what are the three things I need to know before I make this trip? What would be the sort of the three pieces of advice you'd give the President as he heads to Indonesia? I think the first would be that in Indonesia democracy is extraordinary and popular with ordinary Indonesians. There's not been any slippage the past decade. We've seen Indonesians vote overwhelmingly. They like their democracy and they want to stick with it, even though they might not be getting good services from government. So democracy is very popular with Indonesians. Number two, they also, voters seem not to have too many champions of reform anymore in Indonesia. And that's reflecting a concern that there might be some stalling in Indonesia's democratic consolidation process. So in spite of President's recognition, President Obama's recognition in Indonesia has done very well as a democracy. There are a few worrisome areas, weak democratic institutions and some concerns relating to minority rights. And certainly something the United States can relate to as well in our partnership with Indonesia. And the third point? Is he popular there? President Obama is insanely popular in Indonesia. He's a rock star. So you tell him he's a rock star. That's good advice to any President. I'd like to thank you for joining us and thank Doug Rammage for spending a little time here at CSIS. Thanks very much.