Indonesia is staggering like a heavyweight boxer who has absorbed too
many blows in too many places. A faltering economy, a fractious and
feeble central government, communal war and secessionism could
culminate in the state's collapse and the country's fragmentation.
The result would be more than a local disturbance, for Indonesia is
no ordinary place.

With 224 million people Indonesia is the world's fourth most populous
state, a sprawling archipelago of 13,600 islands (3,000 of them
inhabited) nearly three times the size of Texas. While 87 percent of
its citizens are Islamic (no country has more Muslims), Indonesia is
a kaleidoscope of nationalities, tribes, languages and dialects. The
sea lanes that cut through this island constellation--the straits of
Malacca, Sunda and Lombok--connect the Asia-Pacific to Europe and the
Persian Gulf, bringing the lifeblood of energy and raw materials and
providing an outlet for its manufactured exports. Now that
globalization has diminished the distinction between "there" and
"here", the disruptions that East Asia's largest economies would
suffer if shipments are blocked or delayed will reverberate
worldwide. Indonesia is also a fragile democracy in trouble and a
humanitarian disaster-in-waiting that threatens to upend the
strategic circumstances of Southeast Asia. Obviously, then, the U.S.
stake in Indonesia's future is enormous.

The Political Economy of Chaos

The 1997 East Asian economic crisis illustrated globalization's power
as both opportunity and vulnerability--this everyone by now
understands. What remains unclear is why Indonesia alone has been
rocked to its foundations when every other Asian country hurt by the
1997-98 crisis has recovered its balance to one degree or another.
The basics of its economy were sound, and for nearly three decades
Indonesia experienced an economic and social transformation that
bettered the lives of most of its people. Between 1970 and 1997 the
percentage of those in poverty fell from 60 percent to 15 percent,
life expectancy and literacy increased significantly, and an urban
middle class arose. Revenue from oil exports enabled the expansion of
infrastructure and social services, and the share of GDP accounted
for by the production of natural resources then shrank as
industrialization advanced. Non-Javanese peoples in outlying areas
and students, workers, and democrats chafed, the disparities in
wealth and power among classes and regions were wide, and cronyism,
nepotism, and corruption were rife. But the "New Order" (the
authoritarian edifice Suharto built after taking power in 1965)
promoted growth and kept order.

The 1997 economic crisis was its death knell. Indonesia's GDP
plummeted from $250 billion to below $100 billion at the end of 1998,
and inflation rocketed to 60 percent. Capital fled abroad, millions
were pushed deeper into poverty, and the dreams of others whose lives
had improved during the decades of rapid growth were dashed. The
absence of democratic institutions led simmering dissatisfaction to
boil over onto the streets.

Political consequences soon followed. Suharto was forced out in May
1998, and his successor, B.J. Habibie--ineffectual and compromised by
his long association with Suharto--proved a political hiccup. In
October 1999, following parliamentary elections, Indonesia's highest
legislative body, the People's Consultative Assembly (MPR, the
Mejelis Permusyawaratan Rakyat, comprising the 500-member parliament
plus representatives from the military, the provinces, and civic
organizations) elected Abdurrahman Wahid president, and, after Wahid
nominated her, chose Megawati Sukarnoputri as vice president.

Something like a democracy emerged. But the change accelerated
instability. Indonesia's non-Javanese minority peoples saw an opening
to assert their rights. East Timor broke free, but not before being
brutalized by the Indonesian armed forces and its paramilitary
acolytes. Long-established separatist movements in Aceh and West
Papua (Irian Jaya) have gained confidence and new converts. Maluku
and Sulawesi are now venues for horrific violence between Muslims and
Christians. Kalimantan's Dayaks and Malays have set upon settlers
from Java and Bali, forcing survivors to flee. Lombok and Riau have
also experienced unrest. These upheavals have saddled Indonesia with
a million internal refugees that local governments struggle to house
and feed as the hospitality of permanent residents gives way to
resentment. Indonesia's descent into communal violence included
anti-Chinese riots (pogroms would not be too strong a term to
describe them), which accelerated the flight of capital, for ethnic
Chinese, while only three percent of the population, control almost
three-quarters of Indonesia's wealth.

Indonesia's odds for survival would be increased by a broad economic
recovery that attracts capital back into the country and that gives
people in rebellious regions a stake in national unity. There are
some encouraging signs. The economy, which contracted by 15 percent
in 1998, stabilized in 1999 and grew by five percent in 2000.
Inflation, which stood at 60 percent in 1998, dropped to just below
seven percent in 2000. The flight of capital fell sharply, foreign
exchange reserves amounted to $22 billion in 2001, domestic
investment has picked up, and exports have grown. And the
International Monetary Fund is on hand with advice and $5 billion in
loans, though not a few Indonesians are leery of its standard
cures--and who can blame them?

But this sliver of a silver lining frames a large dark cloud.
Indonesia's banks and companies bear an external debt of $65 billion,
but corporate restructuring and reform proceed at a snail's pace. The
tepidity of reform explains why Indonesia ranks second worst in the
Asia-Pacific in the quality of corporate governance and third worst
in transparency. These dubious honors have hardly increased business
confidence: ING Barings has warned investors away from Indonesia (as
well as Malaysia and Thailand); Standard and Poor's revised
Indonesia's creditworthiness downward sharply.

Meanwhile, the steps that the Wahid government took to devolve power
to the provinces, essential to keep Indonesia whole, may heighten
investors' concerns. As of January 2001, provinces and districts keep
80 percent of mining, forestry and fishing revenues and 15 percent
and 30 percent respectively of natural gas and oil income and also
have rights to borrow independently. Western mining and energy
companies, already facing demands from provincial authorities for a
share of equity, worry about a profusion of power and corruption
unmatched by competence, conflicting lines of authority, increased
taxation by local authorities, and additional twists in an already
labyrinthine legal system. Mining companies are particularly loath to
make new investments, and their mood could influence other
corporations. For their part, the IMF and the World Bank fret that
provinces will be profligate with their newfound freedom to borrow.

Nor is Indonesia's outlook positive when gauged by the standard
economic indicators. The projected GDP growth rate for 2001 has been
revised down to 3.5 percent from 5 percent. Actual growth could be
even lower if political ferment continues. The national debt is about
as large as the size of the economy. The budget deficit is 6.5
percent of GDP, and the IMF wants it cut to 3.5 percent. The
government announced deep cuts in subsidies for electricity and oil
in 2001 to achieve the goal, but the frailty of the central
government may make further stringency infeasible. Without a smaller
budget deficit, inflation, 6.8 percent in 2000, is expected to reach
8.5 percent or worse by the end of 2001. The rupiah, which stood at
6,800 to the dollar in 1999 (about a third of its value in 1996),
fell to 11,000 in early 2001 and reached 12,000 in May, the lowest
level in almost three years. Its descent makes deficit reduction
harder still and could also stoke inflation. Indonesia's reserves of
$22 billion look impressive, but that sum is insufficient to defend
the faltering currency. Interest rates could be raised to support the
rupiah, but that would increase the government's interest payment on
the debt. These discouraging signs have not escaped investors.
Capital outflows, while far smaller than in 1998, were still $4
billion in 2000. New foreign direct investment, $10 billion in 1996,
has essentially ceased, as has portfolio investment.

Nor do global economic conditions augur well for Indonesia's
recovery. Economic growth in America, a major market for Indonesia's
exports, is slowing. Japan, another important customer and the key
source of direct and portfolio investment, is in far deeper trouble;
its corporations have canceled new investments in Southeast Asia and
laid off workers in Indonesian subsidiaries. Europe cannot take up
the slack, while China is a major competitor to Southeast Asia for
foreign investment and exports. If the global economic slowdown
reduces oil prices, Indonesia's treasury will lose $50 million for
every one-dollar drop; deficit reduction will then be harder still
and inflation could rise. Indonesia's convulsions cannot be reduced
to economic causes, but they will prove impossible to manage, let
alone cure, if the economy deteriorates further--and despite the
brave front of Indonesian officials, the economic outlook is bad.

Family Feud

In Indonesia, as elsewhere, communal conflict accompanied the state's
attempt to create national unity from ethno-linguistic diversity.
Heterogeneity typifies Indonesia, even when it comes to Islam.
Indonesian Islam has many doctrinal and regional variations, so it
both unites and divides. Buddhists, Christians, Hindus and
animists--and a mosaic of languages and dialects, tribes and
nationalities--add to the multiformity, which sharpens its political
edge on the stones of geography. The separation imposed by a
scattered multitude of islands has fostered separateness and has been
the ally of exterior areas to whom the central government in Jakarta
is the distant symbol of Javanese dominance. This is well illustrated
by the case of Aceh, on the northern tip of Sumatra, which now
presents the biggest challenge to Indonesia's territorial integrity.

The Dutch gained Aceh under the 1824 Treaty of London by agreeing to
abandon their imperial dreams in India and to vacate Singapore in
exchange for Britain's acceptance of Dutch control of regions to the
south. Under the accord, Aceh, with its long history as a maritime
sultanate, was to remain independent. When the Dutch decided to put
an end to its rising power in 1873, war broke out. The Dutch did not
prevail until 1903, and resistance lingered for years thereafter. Nor
were Acehnese disposed to join Indonesia (molded into its current
shape by the conquests and cunning of Dutch colonialism) when it
became independent in 1949. For Javanese elites at the helm of
post-colonial Indonesia, territorial consolidation was part of
national liberation; to the Acehnese it was another hostile takeover.
Nor did Aceh share the secular aspirations of the Javanese elite; the
support it lent to the Dar ul-Islam ("House of Islam") rebellion
(which originated in western Java and sought an Islamic state in
Indonesia) was proof of that.

Ironically, Islam, Indonesia's greatest common denominator,
contributes to the estrangement between Aceh and Jakarta. The
Acehnese embraced Islam in the 13th century, long before the
populations in the rest of what is now Indonesia did so. Acehnese
Islam lacks the Hindu, Buddhist and animist strains of Islam
elsewhere in Indonesia; it is distinct and more central to community
and identity, and secularism's mark in Aceh is fainter. Aceh's
distinctive language and literary tradition reinforce feelings of
separateness. Although diversity can in principle be managed by
devolution, the central government did not honor a 1959 agreement
making Aceh a "special territory" with extensive cultural autonomy.
State-sponsored migration by Javanese and others into Aceh and the
belief of the Acehnese, now four million in number, that their energy
revenues are diverted to benefit outsiders, helped turned alienation
into nationalism. Independence has become a panacea of mythic
proportions for these grievances.

Gerakan Aceh Merdeka (GAM or Free Aceh Movement), formed in 1976,
arose against this background and was quick to declare Aceh
independent. Yet proclamations require power to become reality; by
the late 1970s, Indonesian military offensives and mass arrests of
suspected members and sympathizers decimated GAM. Yet Suharto's New
Order never addressed the sources of Acehnese disaffection and, by
the late 1980s, GAM was back. Jakarta launched "Operation Red Net" to
destroy it; the armed forces received carte blanche and two thousand
people had been killed by 1992. Others disappeared or were tortured.
Red Net only increased GAM's popularity, however, and became another
milestone in the consolidation of Acehnese nationalism. Memories of
the depredation, and the conviction that the military must be held
accountable for it, remain strong.

The fall of Suharto and the subsequent independence of East Timor
boosted GAM's spirits. Many of its leaders returned from abroad and
started recruiting fighters. The number of GAM's forces is uncertain
(estimates range between 850 and 5,000) as is the source of its
weapons and training. Its arms appear to come from Cambodia through
Thai and Malay ports to Sumatra's coast, and from the Islamist
Pattani Liberation Organization (PULO) in southern Thailand. Some GAM
guerrillas were apparently trained in Libya in the 1980s.

What is clear is that GAM now controls much of Aceh. At night, Banda
Aceh, the capital, is desolate: civilians fear getting caught in the
crossfire between GAM and the security forces and interrogation and
abuse by the latter. With GAM omnipresent in the countryside,
Jakarta's government bureaucrats have joined the many non-Acehnese
escaping the region. GAM's influence has grown in southern Aceh as
well, where its roots have been weaker. Some 70,000 Acehnese have
moved north and now live in makeshift refugee shelters, their
migration prompted by a combination of loyalty to GAM, worry that
disobedience could bring retribution, and fear of Indonesian security
forces.

GAM has demonstrated its power in dramatic ways. In March it forced
Exxon-Mobil to close three gas fields in Aceh following kidnappings
of a senior employee, grenade attacks on pumping stations, sabotage
of pipelines, bombings, and gunfire directed at its buses and at a
company aircraft. The closure cut supplies to the nearby Arun
liquefied natural gas plant and halted shipments from there to Japan
and South Korea that net Indonesia over $1.2 billion a year.
Exxon-Mobil prepared to resume production in July, and Indonesia
supplied Japan and South Korea with gas from sources in Kalimantan.
But GAM had made its point.

The prospects for a settlement in Aceh are poor for several reasons.
Talks in Geneva between Indonesian and GAM representatives since June
2000 have produced only ineffectual ceasefires. War rages; 2,000
people have died since 1998. Sensing victory, GAM insists on
independence. From his Stockholm exile, its leader, Hasan di Toro,
condemns the Javanese as "barbarians", while Abdullah Syafie, its
military commander, sniffs that Indonesia "no longer exists." Each
side accuses the other of manipulating ceasefires to infiltrate
forces into Aceh. GAM is divided among militant fight-to-the-finish
nationalists, those who see war as a means to a negotiated agreement,
and others who use it for extortion and protection rackets. Nor can
its political leaders count on field commanders accepting an
agreement that falls short of total independence.

Separatism has also advanced in West Papua, a vast expanse with two
million inhabitants, 2,000 miles east of Jakarta. West Papua's
indigenous people, Melanesian and predominantly Christian or animist,
have been reduced to 50 percent of the population by the influx of
mainly Muslim immigrants from elsewhere in Indonesia, with 700,000
arriving from Java and Sulawesi during the first 25 years of the New
Order alone. West Papua has stronger ethnic and cultural ties with
neighboring Papua New Guinea (where there ismuch support for West
Papuan independence) and the other Melanesian islands of the South
Pacific than with other Indonesians. The demographic transformation,
therefore, has fed Papuan nationalism, the more so because of the
Javanese elite's tendency to regard Papuans as an inferior lot to be
governed from afar. Like the Acehnese, Papuans want control over
their resources: gold, copper, oil, land and forests. These
resources, they believe, are exploited by American, British,
Australian, European and South African companies and their Javanese
partners in ways that provide little employment but disrupt Papua's
tribal societies and despoil its landscape. As in Aceh, these
grievances have generated a robust nationalism, albeit one that is
less cohesive and organized. Its symbol is the Organisasi Papua
Merdeka (OPM or Free Papua Organization), which has fought for a West
Papuan state since 1965.

Like many Papuans, OPM regards the 1963 Dutch transfer of West Papua
to Indonesia as invalid, insisting that Papua declared independence
in 1961 while under Dutch rule. It also deems illegitimate West
Papua's formal incorporation into Indonesia in 1969, following a
referendum whose terms--local leaders were handpicked by the central
government to cast the vote--produced the outcome sought by the
Suharto regime. This path to incorporation and Jakarta's heavy-handed
rule in West Papua ensured OPM a ready supply of recruits. During the
military's counterinsurgency campaigns (which involved forays into
Papua New Guinea) suspected OPM sympathizers were arrested, with some
dying in custody, and civilians suffered various forms of abuse. As
in Aceh, the political disarray in Indonesia after 1997 enabled OPM
and other groups, such as Satgas Papua, to intensify the struggle,
and battle lines are being drawn. A Papuan nationalist conclave
declared the territory independent in June 2000. Jakarta then
increased the number of military and police personnel in West Papua
from 8,000 to 12,000, and hard-liners among them set about organizing
militias opposed to independence. East Timor's past could be West
Papua's prologue.

Other sites of instability in Indonesia often differ from Aceh and
West Papua in that they display communal violence born of a more
inchoate nationalism. Maluku, the archipelago comprising the fabled
Spice Islands, is an example. Unlike Indonesia as a whole, Maluku,
with a population of two million, has a roughly equal proportion of
Christians and Muslims. (This, as in West Papua, reflects
colonial-era missionary zeal, but also the prior legacy of Arab,
Portuguese, British, and Dutch traders.) The demographic balance is
the result of immigration, which has taken on deadly consequences.
Maluku's Christians resent Muslims who have streamed in from
elsewhere in Indonesia under the state-directed resettlement policy.
An economic and social divide has emerged and increased discontent:
the Muslims, more prosperous, worked in commerce and favored the
north; Christians, farmers and fishermen, tended to concentrate in
the south.

Unrest erupted in early 1999 and Maluku is now awash in clashes and
bombings. Christians have attacked Muslims, local Muslim militias
have formed, and others, such as the Laskar Jihad, have arrived from
Java to defend their co-religionists, adding to the mayhem. The
military and local police are unable to suppress the paramilitary
groups; worse, the army appears partial to Muslims, the police
sympathetic to Christians. Consequently, no neutral force exists to
bring order. The melée of sectarian carnage has been particularly
gruesome in Ambon (the capital) and on Halmahera and Seram islands.
As many as 10,000 have died, and some 500,000 others have been chased
from their homes, many becoming refugees in north Sulawesi (where the
local population is growing resentful). Maluku's Muslims and
Christians now conduct life's quotidian routines in segregation;
those from one faith who venture into areas inhabited by the other
risk death. Mundane arguments spark rampages in which confessional
affiliation becomes the sole distinction between friend and foe.

Indonesia's now-familiar piles of corpses and streams of refugees
are also visible in Kalimantan. Encouraged as in other instances by
government programs to relieve Indonesia's most crowded islands and
to provide labor for foreign investment projects, Madurese migrants
poured in, some 100,000 in the 1980s alone. Kalimantan's Dayaks and
Malays saw the arrivistes make economic gains and take government
jobs. Jakarta's efforts to develop Kalimantan might have gained Dayak
and Malay support, but insensitivity to property rights, the
environment, and established social arrangements focused local
attention on the unequal distribution of gains and the loss of
control to outsiders. When the New Order began to teeter, spasms of
violence gripped central and west Kalimantan. The latest episode of
bloodletting occurred in the town of Sampit in February and March.
Dayaks decapitated Madurese, displayed their heads on staves, and
burned their homes and businesses to the ground. Tens of thousands of
Madurese fled to other parts of Kalimantan; 60,000 others escaped the
island aboard Indonesian navy vessels.

Kalimantan's orgy of bloodletting is not a simple product of
religious and ethnic hatred, although that emotion is certainly
present. As in Aceh and West Papua, social transformations with
internal and external origins and the fall of Suharto's regime
provided the context. Moreover, Christian and Muslim Dayaks joined
Muslim Malays to attack Muslim Madurese. Although the unrest in
Kalimantan and in Lombok and Sulawesi (also scenes of clashes between
Muslims and Christians) highlights the central government's
feebleness and could speed Indonesia's collapse, secessionism is not
the main motif in these areas. But the nascent nationalism in Riau
province, Indonesia's Malay heartland, is more worrisome in that
regard.

Riau is Indonesia's largest oil producing area and a major site of
Singaporean investment, yet it is one of Indonesia's poorest regions,
with 40 percent of its four million people living in poverty. The
familiar combination of cultural distinctiveness and the feeling that
local wealth does not benefit local people is incubating an angry
nationalism in Riau. The implications of secession spreading to Riau
are enormous--and not just for Indonesia. Unrest in Riau has already
led to a sharp reduction in oil production by Caltex Pacifica
Indonesia, owned by Chevron and Texaco. Furthermore, Riau covers a
large swath of Sumatra's littoral that overlooks the Malacca Strait,
the world's most important shipping channel, which is made narrower
by thousands of Riau's islands that clutter its southern end.

The State of Failure

A state capable of knitting concord from discord, implementing (not
merely proclaiming) reform, and restoring order is what Indonesia has
needed to stanch the economic crisis, secessionism and communal
butchery that increasingly threaten to undo it. Alas, such a state is
precisely what Indonesia has lacked. What it had from October 1999 to
July of this year was a tragicomic government personified by
President Abdurrahman Wahid. Virtually blind, frail and given to
inconsistent Delphic utterances, he became the feckless leader of an
entropic government.

Erudite, a proponent of tolerance and long a respected religious and
political leader, Wahid personified the aphorism that the road to
hell is paved with good intentions. To preserve Indonesia, he offered
ceasefires and autonomy to rebellious regions. The offerings failed
to appease separatists, but they did convince the military and both
Islamist and nationalist parties that he was destroying the country
on the installment plan. Indeed, Wahid's political instincts were
peculiar, and sowed confusion. To end Aceh's war, he proposed a
referendum, but later depicted the idea as a personal opinion. He
decreed that the Morning Star, West Papua's long-illegal banner of
independence, could be flown, but only below the Indonesian flag. He
continued visiting the Middle East and North Africa as Madurese were
being slaughtered in Kalimantan, saying that the chaos was under
control and had been exaggerated.

The popular support Wahid enjoyed upon taking up the presidency was
eventually shredded by the weakness of Indonesia's economy and the
pandemonium that is its politics. Charges of incompetence and
allegations of corruption led to censure by the parliament, which
summoned a session of the MPR in 2001 to remove him, advancing the
conclave from August to July once Wahid threatened extreme measures.
With the armed forces and the police refusing to support him, Wahid's
threats to declare an emergency, suspend parliament and call new
elections proved mere bluster. He stood friendless in Jakarta's
political arena and was replaced by Megawati Sukarnoputri, with whom
his relationship can most charitably be described as having been
frosty. Wahid's political demise was a foregone conclusion--to
everyone but himself--and his efforts to cling to office by
threatening martial law and hinting at demonstrations by his
supporters combined pathos with political psychosis.

But Indonesia's summer struggles were far more than petty intrigue.
They could have turned violent, making Indonesia a war zone at both
its periphery and its center. All of the principals had (and still
have) zealous followers ready to mobilize on their behalf and
paramilitary units willing to fight. Neither Megawati nor her
Indonesian Democratic Party of Struggle (PDI-P), had forgotten that
the MPR made Wahid president even though his National Awakening Party
(PKB) won only ten percent of the seats in parliament in the 1999
elections, compared to the PDI-P's 30 percent. Megawati also has a
paramilitary group, Satgas pdi-p, the Red Bulls. The 35 million
members of Wahid's Muslim organization, Nahdlatul Ulama (NU) saw him
as an icon under assault and those within Banser, NU's paramilitary
arm, had pledged to die for him. In East Java, Wahid's home region,
his supporters attacked the offices of rival parties and threatened
their leaders while parliament convened for its censure motions. The
country was on edge, and Wahid's defense minister warned of the
dangers of a military coup. It is one thing to have Indonesia's
far-flung provinces in rebellion; one can imagine a truncated, yet
still substantial Indonesia enduring minus some of its most
rebellious provinces. But civil war in Jakarta could well have
finished off the country, as it nearly did in 1965-66, Indonesia's
infamous year of living dangerously.

With Wahid's peaceful departure at the end of July, Indonesia dodged
a bullet. Wahid was finished once the military leaders condemned his
plan to declare an emergency. But their conduct sprung less from
democratic punctiliousness than from the cold-eyed calculation that
Wahid was doomed. The military had little reason to rescue him. They
blamed him for aggravating separatism. They considered his
willingness to discuss investigations into past military misconduct
in Aceh and West Papua as both insulting and dangerous, not least
because a dragnet could ensnare many senior officers. They regarded
his plan to allow the provinces greater control over revenues as
tantamount to emasculating the state.

Yet the military leadership bears much responsibility for Wahid's
inability to control the armed forces. They joined senior police
officers and rallied behind Indonesia's police chief when he refused
to quit after Wahid fired him. They worked through Megawati to
scuttle Wahid's choice for army commander. The security forces in
general are widely thought to be organizing or supporting
paramilitary groups, and Laskar Jihad's ability to sail to Maluku
fully armed, despite presidential directives to prevent its passage,
fed such speculation. Many Indonesians believe that the military has
failed, as in Kalimantan, to stop violence with dispatch in order to
promote clamor for a strong hand. Such speculation is testimony both
to the aura of crisis in Indonesia and to the enormous political
power the military has long held. That power has derived from its
reserved bloc of parliamentary seats, Suharto's practice of assigning
officers to top posts in the provinces, and the territorial command
system that makes the army central to the governance of outlying
provinces and districts. These practices were slated to end, and thus
the military had much to lose--and much to protect.

Megawati's advent offers Indonesia a chance for a fresh start. But it
would be foolhardy to assume that Wahid was the nub of the problem.
The economy remains in a parlous state, separatism is rampant,
bombings are a daily occurrence, the state's inability to provide
order has spawned vigilantism in places like Lombok, and the military
has emerged politically stronger from Wahid's ouster. The world must
wish Megawati well, but her background provides little basis for
confidence that she can end the plotting, create consensus, implement
economic reforms or avert fragmentation. She entered the Indonesian
political arena only in 1993, with her lineage as Sukarno's daughter
being her greatest asset. She is short on hands-on experience and has
articulated no clear plan of action. She has a large popular
following and, because of that, more support in parliament than
Wahid, from whose blunders she has presumably learned. But the
kingmakers who sacked Wahid are the very ones who maneuvered to
choose him over her in October 1999.

Megawati's popularity among poor Indonesians may make economic austerity harder to enact. Nor is it clear that she can break the back of the vested interests that are powerful, wealthy, entrenched and hostile to reform. A staunch nationalist, heir to the creation of her father and a critic of far-reaching autonomy, she may unleash the army against separatists. But that would only hasten disaster and probably kill Indonesia's democracy in the process. Moreover, Wahid's fate shows that the military remains politically potent. What it did to Wahid, it could do to Megawati. No matter who is at the helm, the problems eating away at Indonesia have a long history and defy quick solutions. Megawati is not destined to fail, and her first major speech to the country on August 16 was surprisingly strong and well received. But the euphoria and relief accompanying her accession to the presidency, while understandable, are no excuse to let wishes father thoughts.

Shock Waves

INDONESIA MAY survive the combined assault of an ailing economy, deepening separatism, and a failing state. Such an outcome is certainly desirable, but it is not likely. American leaders must therefore brace for the possibility that Indonesia could still collapse in chaos and disintegrate in violence. Alternatively, the current instability could continue until economic recovery and political compromise give rise to a country of a rather different shape and size. With Wahid gone and Megawati in place, this is now somewhat more likely. Even the loss of Aceh and West Papua need not spell national disintegration; without such provinces Indonesia would still retain the critical mass to endure as a state. The second of these denouements is preferable to the first, but both will create strong shock waves.

Indonesia's size and location are the reasons why. The three major straits that slice through it are pivotal passages for the global economy. Malacca is by far the most important, particularly for energy shipments. Some 450 vessels and about 10 million barrels of oil pass through daily, and East Asian demand, driven by China, is expected to rise from 12 million barrels a day in 2000 to over 20 million barrels in twenty years. Japan, China, Taiwan and South Korea would suffer severely and soon if fallout from turmoil in Aceh (at its northern end) or Riau (at its southern end) blocked this passage. Its narrowness, 1.5 miles in the Phillips Channel in the Singapore Strait, and ten miles between Singapore and the Riau archipelago, adds to the danger. The Lombok Strait, which ships use to sail to northeast Asia through the Strait of Makasar between Borneo and Sulawesi, is next in importance, although it handles a far smaller volume of traffic than Malacca and is of negligible importance for energy shipments. The L ombok-Makasar route is, however, a critical corridor for Australia's coal and iron ore exports to northeast Asia and for manufactured exports moving south from there. It is also the most likely detour were Malacca rendered impassable or hazardous. By comparison, Sunda is a minor shipping channel; the consequences of its closure would be minimal for transcontinental trade.

Rerouting Malacca traffic through Lombok would strain the capacity of the world's merchant fleet, increase transportation costs, and create severe bottlenecks. The problems would be even worse if all three straits were unusable and ships had to transit northeast Asia by skirting Australia's northern coast. Market signals would eventually add other carrying capacity but the question is how quickly and smoothly the adjustment occurs, and what the economic and political consequences would be in the meantime. The ramifications of blocked or delayed maritime traffic, or even just panic over the possibility, would spread speedily throughout globalization's many circuits. Insurance rates would rise; coverage may even be denied if underwriters deem the risks excessive. The effects of obstructed energy, machinery and manufactured goods would register in capital markets, short-term investors would be scared off, and the flow of much-needed foreign direct investment into a region still convalescing from the blows of 1997 would slow.

Piracy in the seas around Indonesia would also worsen if the Jakarta government either ceased functioning or were so busy holding the country together that it could not police its waters. The hijacking of ships has increased since Indonesia's upheavals began. There were 113 incidents in its waters in 1999 compared to 60 the year before, and between January and March of 2001 alone, pirates attacked ships in Indonesian waters 29 times and on nine occasions in the Malacca Strait. The vessels victimized near Malaysia, Singapore and Indonesia included several oil tankers and ships carrying aluminum and palm oil. The three countries began to coordinate operations against the menace in 1992, and in 2000 Japan proposed that its coast guard join the effort along with China and South Korea. Yet how serious piracy becomes, and how effective any joint solution is, depends primarily on the extent of Indonesia's stability.

Refugee flows will also accelerate if Indonesia starts to break apart. The refugee population of one million already within its borders will soar, dragging the economy down further and aggravating communal violence. Refugees could also be driven beyond Indonesia into neighboring countries that are neither prepared to receive them nor able to bear the burden of caring for them. Malaysia, which lies across the water from Aceh, has already seen rising illegal immigration from Indonesia, and its officials worry about the social tensions that could result. The refugee problem also figures prominently in Australian and Singaporean discussions of Indonesia.

Indonesia's neighbors have other worries, as well, as they watch this wobbly behemoth. For Malaysia, one is that the Malaysian Islamic Party, already powerful in northern Malaysia, could receive a fillip were militant Islam to become more significant in Indonesia's politics as a result of the turmoil-or were it to dominate its successor states. Thailand and the Philippines, which have breakaway Islamist groups in their southern regions, fear that Indonesia's collapse could produce an undesirable demonstration effect. Papua New Guinea, which borders West Papua, could be swamped by refugees and also face an older problem: incursions from the Indonesian military in hot pursuit of Papuan guerrillas. Singapore and Malaysia have invested in pipelines carrying energy from Riau and from Indonesia's Natuna gas fields (located in the South China Sea between peninsular Malaysia and Sarawak) and are watching nervously. ASEAN, whose economic and political clout has fallen short of members' hopes, will be reduced to a sal on if Indonesia, its keystone, crumbles.

Neither is it clear how Japan, China and Australia would react to various scenarios in Indonesia. Few convergent interests unite them, and history has done much to divide them. This augurs ill for cooperation on economic assistance, refugee relief, piracy, or peacekeeping to stem Indonesia's unraveling or to deal with the consequences if that proves impossible. Indeed, anarchy in Indonesia could start a scramble among these states that is driven more by fear, uncertainty and worst-case thinking than by the opportunistic pursuit of advantage. A process leading to sponsorship of competitive proxy proto-statelets that rise from Indonesia's wreckage is an extreme scenario, but cannot be ruled out.

Beyond the general tendency of states divided by suspicion to jockey for position when uncertainty or opportunity prevails, there are other specific motives for intervention. China could be drawn into the fray if Indonesia's seven-million-strong Chinese population, which has often been a scapegoat in times of trouble, were to be victimized. Beijing's increasing concern for secure energy supplies since becoming a net importer in 1993 has already made it more assertive in the South China Sea, and could provide another motive. Given Indonesia's uncertain future, Chinese maps depicting Beijing's jurisdiction over Indonesia's Natuna gas fields are a worrisome portent, particularly for Malaysia and Singapore, who envision energy pipelines from this site.

Japan would move cautiously if Indonesia begins to resemble a lost cause, but it depends on Indonesia's straits and owns most of the ships that ply them. Tokyo cannot remain utterly passive if Indonesia's crisis disrupts the Japanese economy, or if others states assert their interests in ways that could do so.

Indonesia's importance for Australia goes beyond the significance of the Lombok-Makasar passage. In a region being shaped by China's growing power, Indonesia, by virtue of its location and size, is central to Australian national security. Its collapse would lay waste to much of Australia's strategic planning.

The consequences of Indonesia's breakup would affect American interests, as well. American energy and raw materials companies (Exxon-Mobil, Texaco, Chevron, Newmont Mining, Conoco and Freeport-McMoRan, among others) operate in Indonesia, particularly in Aceh, Riau, and West Papua, and many of the ships that traverse the Strait of Malacca are American-owned. The United States is also a major trader and investor in East Asia and is to some degree hostage to its fate, especially now that the American economy is slowing. Moreover, if Indonesia fractures, worst-case thinking and preemptive action among its neighbors could upset regional equilibrium and undermine the American strategic canopy in East Asia. The United States has a network of bases and alliances and 100,000 military personnel in the region, and is considered the guarantor of stability by most states-a status it will forfeit if it stands aside as Indonesia falls apart. America's competitors will scrutinize its actions to gauge its resolve and acumen. So will its friends and allies-Australia, Japan, Singapore, Thailand and South Korea-each of whom would be hurt by Indonesia's collapse.

Prevention and Protection

SO WHAT SHOULD the Bush Administration do? Any plan to keep Indonesia whole and to restore its political and economic stability must be multilateral and multi-faceted if it is to have any chance of success. The size of the problem demands shared responsibility among Executive Branch agencies and U.S. allies, while its nature necessitates using multiple means: diplomacy, economic assistance and, more likely than not, military power. The United States should immediately begin regular, intensive consultations with friends and allies in East Asia both to lay the groundwork for future cooperation and to inform its policies with the assessments of states whose geography and history force them to pay close attention to Indonesia's drift.

Even with the best preparation, however, worsening tumult in Indonesia will make uncertainty the only certainty. Policymakers will work in an environment resembling a fast-moving drama whose cast, plot and likely conclusion change continually. Early-warning markers are therefore essential to chart the direction of change, identify qualitatively critical stages, mitigate uncertainty, and clarify choices. These are the critical markers: the effectiveness of ceasefires; the pace and scale of fighting in Aceh, West Papua and Maluku; the degree of disorder in Lombok, West Kalimantan, Sulawesi and Riau; the size and direction of refugee movements; signs that the Megawati government may be as maladroit as its predecessor; the extent of key personnel turnover in the new government; and signs of the military's increasing political role, particularly harbingers of a coup.

There are concrete steps that the United States can take to prepare for crisis. The Indonesian military is in bad odor these days because of the havoc it wreaked in East Timor. But, as the Bush Administration appears to understand, this is no time to shun an organization that could decide Indonesia's fate. Washington should use multiple channels to dissuade the Indonesian military from seizing power, for Indonesia is more likely to shatter and to be blood-spattered if the armed forces mount a coup to keep it whole. The United States should send quiet but unequivocal messages that it will not condone a coup and that the military's institutional interests--exchanges, training programs and arms sales involving the United States--would suffer if it attempts one. Economic aid and military sales to Indonesia are now suspended, but the administration should devise a plan to resume the former, both to help stabilize Indonesia and to provide incentives for its leaders to avoid reckless behavior. Nor should the resump tion of military sales and contacts with the Indonesian military be ruled out as a tool of diplomacy. The concern for human rights in Indonesia and the revulsion at the military's misdeeds in East Timor are justified and proper. But it should be understood that many more people will die and far-reaching instability will occur if Indonesia explodes. Thus, any means that could help influence the Indonesian military should not be excluded by allowing principle to trump prudence.

Washington should also declare its support for a unified Indonesia, particularly because prominent Indonesians have accused it of conniving to destroy their country. Growing violence in Indonesia will bring human rights to the forefront of American debates, and properly so. But the mechanical application of the principle of self-determination to so large and important a country will assuredly not curb but increase long-term violence and disorder. The United States should also favor settlements in Aceh and West Papua that offer autonomy and address in bold, convincing ways the economic and social problems that feed separatism in these provinces. It must, as a corollary, convey to nationalists in these regions that it will support devolution, but not secession. This is because the proliferation of mini-states in Southeast Asia and the implosion of its most important country will increase poverty and violence and unsettle the balance of power in ways that may cast a long and dark shadow. The United States shoul d therefore help identify the providers of arms and training to separatists and militias in Indonesia and use its influence to cut the supply. To help stabilize the Indonesian economy, the United States should organize a fund to support the rupiah and coordinate a long-term program to rebuild what is a ravaged country.

But the United States should not delude itself. To think that American actions can avert Indonesia's collapse is hubris or folly, possibly both. The problems gnawing away at Indonesia are numerous and complex. They may prove beyond the control of Indonesians, let alone Americans and other outsiders. If Indonesia breaks apart despite efforts at preventive diplomacy, the United States and its partners must develop plans to act on several fronts, together with international organizations. The challenges will include evacuating foreign nationals; keeping the Malacca Strait and the Lombok Strait open in the face of threats that could close them; protecting shipping from sabotage, attack and piracy; guarding and transporting refugees to pre-designated safe stations; stockpiling and conveying supplies for their care; organizing aid for post-war reconstruction; economic promoting ceasefires between government forces and separatist guerillas; and, perhaps, interposing forces between combatants so that ceasefires last and subsequent political negotiations have a chance to succeed.

The last task raises the critical matter of injecting American military power into a messy civil war--and into a country where anti-American sentiment is rising. Obviously, the United States should contemplate this measure only as a last resort, in concert with other states, and while taking care not to assume the largest obligations on the ground. Despite the dangers, though, Washington should not rule out a military role by invoking Procrustean preconditions. Maxims that recommend committing American forces only if vital interests are at issue, applying overwhelming force, defining a clear objective, and devising quick and clean exit plans seem cogent and compelling. But the confusion attending a blowup in Indonesia will torpedo tidy formulations, as may other civil wars, for that matter. Without the restoration of order and the separation of warring forces, other measures to manage a crisis in Indonesia--whether refugee relief, economic aid, or negotiations--will prove impossible. And if order is absent w ithin Indonesia, it will have to be supplied from without.

The corollary is not that the United States should insert its forces into wars (of any sort) lightly. President Bush's foreign policy advisors correctly emphasize care and restraint in this regard, and one of them, Deputy Secretary of Defense Paul Wolfowitz, has special expertise on Indonesia, where he served as U.S. ambassador from 1986 to 1989. Yet even beyond Indonesia there will inevitably be other civil wars that matter strategically, that are more than purely humanitarian crises. In such cases, military power may have to be part of a multifaceted strategy for restoring order. The choice is not, as one might surmise from recent foreign policy debates, between sending the military and abstention. There is a range of options that combines military power with other policy instruments--and in cooperation with other states and regional and international organizations--and the United States must be creative and flexible enough to devise them conceptually and prepare for them operationally. Its claim to world leadership will be hollow if it ducks such a critical responsibility.

Rajan Menon is Monroe J. Rathbone Professor of International Relations at Lehigh University and director of Eurasia Policy Studies at the National Bureau of Asian Research.