Since the fall of President Soeharto in May 1998, Indonesia has gone through drastic political, economic and social change accompanied by a problematic process of democratisation. The decision to implement regional autonomy from January 2001 showed a clear recognition that regional interests needed to be reflected in policy-making processes. Under decentralisation, regional governments were given the power to determine their own policies, except in defence, foreign policy and some other limited areas. The preparatory period for the implementation of regional autonomy was short, leaving unresolved many legal issues related to the authority of the various levels of government, and much of the detail of power sharing between Jakarta and the regions.

Moreover, in the post-Soeharto era, long-suppressed local elites have sought to capture important government positions and strengthen the political position of the putra daerah (‘sons of the region’ or indigenous ethnic groups). In response to the complications arising from decentralisation, Jakarta has proposedamendments to the regional autonomy laws. So far, however, none have been passed.

This chapter will explore the impact of regional autonomy on regional resource management through a case study of West Sumatra's Padang Cement Company (PT Semen Padang), part of the Gresik Group. In order to deal with Indonesia's mounting national debt, the central government decided to sell Gresik to Mexico's Cemex Group as part of a privatisation program initiated under instruction from the IMF.

Semen Padang uses nearly 2.7 million hectares of land traditionally owned by the Nagari Lubuk (Nagari Luki) community as hak ulayat (a customary and communal right to land). The planned privatisation would involve the sale of this land, which is located in and around the city of Padang, to a foreign company. This is prohibited under the customary law (adat) of the indigenous Minangkabau people. The decision to privatise Semen Padang enraged local elites in West Sumatra, who demanded that the company be spun off from the Gresik Group and continue to operate as a state-owned company. Political tensionheightened when the provincial parliament endorsed a statement in November 2001 allowing Semen Padang to operate under the supervision of the provincial governor. The case of Semen Padang therefore provides a good case study to shed light on two important issues in post-Soeharto Indonesia: the complexities of regional elite politics, and the position of hak ulayat.