Q&A: Indonesia President on the Country's Comeback

Indonesian President Susilo Bambang Yudhoyono leads the world's newest major democracy and its largest Muslim state. In the decade since the fall of the dictator Suharto, Indonesia has avoided disintegration, weathered a crippling financial crisis and built an impressive, if imperfect, new political system with a robust economy. SBY, as he is known, met recently with NEWSWEEK's George Wehrfritz and Solenn Honorine to discuss his record, Indonesia's future and the global economy. Excerpts:

NEWSWEEK: How worried are you that the financial crisis in the United States could hurt Indonesia?
YUDHOYONO: We are actively monitoring the troubles. I don't believe we will return to the crisis of 1997 because our fundamentals are good.

Ten years ago, Indonesia ' s high levels of debt exacerbated the impact of the Asian financial crisis. Is there a similar danger today?
When I assumed office, we faced four big issues. Our growth had fallen from 6 percent to as low as minus 13 percent. Poverty had risen dramatically. Unemployment also rose, and our foreign debt got worse. Four years ago [government debt] was 54 percent of GDP. Now it is 33, one of Asia's lowest. We also [re]paid our $7 billion in IMF loans four years ahead of schedule.

Indonesia is the world ' s third-largest democracy. What does it shares with its two larger cousins, India and the United States?
There is no single model of democracy. In Indonesia, we [ended] the authoritarian era only ten years ago; what [followed] is a form of democracy whereby freedom and harmony can advance together in a sustainable way. Indonesia can be very adaptive. We live in a nation where Islam, democracy and modernity exist side by side. We are creating a multiethnic, multiparty democracy with consensus building that has roots in Indonesian culture.

What would you like to strengthen?
Openness must be coupled with the rule of law. Freedom for the sake of freedom is not enough. We must develop constitutionalism, have clear rules of the game, advance ethics in politics and [encourage] greater participation. We also need [better] checks and balances.

Do you believe that democracies necessarily grow slower than nondemocracies?
Not really. As democracy grows it creates greater accountability, including on economic affairs. There is no reason that Indonesia's economy cannot progress more rapidly, even compared to China.

Could and should Indonesia become the Muslim world ' s democratic exemplar?
I have tried to play a role, and Indonesia has always tried to demonstrate and project moderate Islam. Indonesia is not immune to the radicalism, but this is exactly why we must maintain our identity as a moderate, tolerant nation. It enables us to prevent a clash of civilizations and instead ensure harmony among civilizations.

Indonesia ' s counterterrorism record is impressive. What lessons does it offer other countries?
At the national level we [must] create a climate that rejects extremism and radicalism through education. Empowerment of moderate religious leaders is also critical. Tactically, we must be tough when combating terrorism. [That requires] very good intelligence, police work and the ability to discover and disband terrorist cells. We [also] need to avoid political noise. To talk about terrorism every day in my office would be counterproductive. And our court system needs to be very transparent, so we have a good record not just in catching terrorists but also in respecting human rights.

What report card would you give yourself, after four years in office?
First, our democracy is stronger, more vibrant and increasingly mature. [Some] countries are going back to authoritarianism, but Indonesia is not reversing course. We have resolved security issues through peaceful, nonmilitary means. We are dealing successfully with communal conflicts. Indonesia has suffered several large-scale natural disasters like the 2004 tsunami, and we have undertaken reconstruction and rehabilitation in a very speedy way. Some people say our anti-corruption campaign is the most aggressive in Indonesian history. Last but not least, over the last seven quarters Indonesia's economy achieved growth above 6 percent and our poverty rate is at its lowest level in ten years.

What remains to be done?
We must keep up the effort to reduce poverty and unemployment. We must create a good climate for doing business in Indonesia. Our legal framework has to be improved. I'm still not satisfied with our efforts [to promote] bureaucratic reform and good governance. I know we can get much better. Lastly, we need to be open-minded. We should shun our xenophobic tendencies and evolve into a nation with a moderate character.