Indonesia is about the closest thing left to a liberal democracy in Southeast Asia, so analysts had high hopes that President Joko Widodo could promote civil rights and transparency, while steering an open economy to more global trade. As the president enters his second term this month, however, those expectations are coming back down to earth.
Although Indonesia distinguishes itself with a relatively free press and big emerging market, it appears to be backtracking in examples like corruption, economic protectionism, and instability in the Papua region marked by separatism and ethnic tensions. In an analysis of the next term of the president known as Jokowi, investment research firm IHS Markit predicted Indonesia’s unfulfilled economic reforms would lead to gross domestic product growth of 5 percent, lower than the 7 percent government goal.
Corruption is a good example, given the high-profile change to the Corruption Eradication Commission (KPK) in September that led to protests across the country of 260 million people. Previously the commission was already seen as more show than substance, a nominal way for Jakarta to claim it was fighting corruption. But the September change took the teeth out of the commission even further, reducing the amount of time it can investigate criminals, and requiring it to seek approvals from the president, which weakens its independence.
‘Soft’ on Corruption
“There are signs that the government is going soft on its commitment to clamp down on corruption after parliament approved changes to how the country’s anti-corruption body (KPK) is governed,” senior Asia economist Gareth Leather wrote in a Capital Economics analysis. “We are concerned that the move will weaken the KPK’s powers to investigate new corruption allegations.”
He added, “Indonesia is rated as one of the most corrupt countries in the region and the high level of corruption remains a major deterrent to foreign businesses.”
Backtracking on corruption is all the more stark because Indonesia has been a “beacon of progress” among Southeast Asian democracies, according to the Lowy Institute. Elsewhere in the region are fewer signs of open societies: military rule in Myanmar and Thailand, one party rule in Cambodia, Laos, Singapore, and Vietnam, monarchism in Brunei, and authoritarian populism in the Philippines. The closest runner up is Malaysia, where democracy appeared to decline until the ruling party was surprisingly beaten in 2018 elections.
Even though the April election that returned Jokowi to power in Indonesia was free and fair, it involved curbing Islamic extremism in the Muslim-majority country, which is a slippery slope that could lead to curbing free speech more generally.
“The Jokowi government’s decision to take a tougher line against extremism is welcome, but he needs to ensure that tactics used do not feed a new narrative of repression,” Nava Nuraniyah, Institute for Policy Analysis of Conflict analyst in Jakarta, said.
She further argued Jokowi could have dealt with extremists by emphasizing that all citizens are equal, including minority Christians and Buddhists, rather than emphasizing his own Islamic piety.
Besides risks from the China-U.S. trade war, Indonesia faces economic risks in the areas of education, protectionism, and infrastructure. One has only to look at the subway proposal in Jakarta, long discussed but yet to appear, for an example. Infrastructure spending has fallen after a period of investment, and the island nation’s logistics sector sits behind those of Malaysia, Thailand, and Vietnam in World Bank lists.
Protectionism is evident in Indonesia’s willingness to block commodities exports, and poor test performance suggests the young generation is not as equipped for the future as it could be.
“The two key economic challenges facing President Joko Widodo in his second term are boosting GDP growth and reducing Indonesia’s external vulnerabilities,” Leather said. “We don’t think he will succeed in either.”
Still Indonesia has the biggest economy in Southeast Asia and thus a big customer base that appeals to domestic and foreign business. It is also a population full of people free to engage in critical public discourse, which cannot be said of the whole region. The question is whether the people and the economy live up to their potential.