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How the Economy Factors Into Indonesia’s Elections

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Pacific Money

How the Economy Factors Into Indonesia’s Elections

Looking at the candidates in the race to Indonesia’s presidency.

How the Economy Factors Into Indonesia’s Elections

Indonesian presidential candidate Joko Widodo, left, delivers his speech and his contender Prabowo Subianto, right, listens during a televised debate in Jakarta, Indonesia, Feb. 17, 2019.

Credit: AP Photo/ Achmad Ibrahim

Indonesia goes to the polls on April 17, with opinion polls putting President Joko “Jokowi” Widodo ahead of his main rival, former general Prabowo Subianto. Yet with the gap between the two contenders narrowing, economic growth slowing and the currency vulnerable, will voters in the world’s third-largest democracy back continuity or change?

Pacific Money spoke to Colin Brown, adjunct professor at the Griffith Asia Institute, on how he sees the outlook for the elections and the economy in 2019.

Pacific Money: Jokowi was seen as foreign-investor friendly and pro-business when he won election in 2014. Has he lived up to these expectations?

Colin Brown: It hasn’t quite worked as well as he had certainly hoped and as well as outside observers had hoped. The first couple of years went reasonably well, but the last couple have been a bit more problematic.

I don’t think the situation is that bad, but I don’t think Jokowi has been quite as investor-friendly and as positive for business as he had hoped to be. And that’s in large measure because he’s discovered that presidents in Indonesia have less power than they seem to have.

How about the economy?

The one thing that has become clearer is the difficulties the Indonesian economy is facing. In recent times the rupiah has come under considerable pressure; it’s fallen to as low as around 15,000 against the U.S. dollar whereas a few years ago it was around 10-11,000. That’s a matter of considerable debate in Jakarta at the moment – does it indicate the economy is getting out of control?

The other issue arousing interest is the increasing problems of balance of payments – imports have been outweighing exports. The Indonesian government recently announced a package trying to stimulate exports and reduce imports.

But it plays into the hands of Prabowo and other economic nationalists who see the major problem as Indonesia importing too much and needing to be more self-sufficient in products such as food and energy.

Jokowi and his bureaucrats recognize that autarky or economic self-sufficiency is not a game that Indonesia is likely to win. But he can’t say it openly, because the idea of self-sufficiency in things like rice, sugar, and so on is widely supported in the community. So those two issues have probably worked more in the favor of Prabowo than Jokowi.

What have been some of Jokowi’s successes?

He’s recorded some successes in infrastructure, health, education. It’s a mixed bag and there’s still a lot to do in those areas, but those are the three key spending areas he identified, and where even critics generally acknowledge some progress has been made.

What about less successful areas? Economic growth appears weaker than hoped.

Growth looks like it’s stagnating around a bit over 5 percent, when 10 years ago you were looking at 6-plus percent. In 2018 the growth rate was about 5.2 percent and the assumption this year is for much the same, so it’s not going upwards. That’s a bit of a concern as the new entrants to the labor market need to be absorbed and 5.2 percent is marginal in terms of doing that.

However, the biggest single area from my perspective where he has been unsuccessful, and it’s a very challenging area that I think he hadn’t expected, is in the broad area of social harmony or social cohesion.

We’ve seen in the past two years in particular some significant outpourings of populist opinion, directed primarily along religious lines. We saw it most dramatically in the prosecution of Ahok, the then governor of Jakarta, on a charge of blasphemy.

I suspect Jokowi was quite taken aback by the extent to which the leaders of that movement could bring people onto the streets – you saw close to a million people in Jakarta.

Were there any lessons learned?

He might have learned the lesson that politics is a very tough business. When he came to power, he made a lot of the fact that he wasn’t a professional politician – he served as a mayor of a medium-sized city in central Java and was halfway through a term as governor of Jakarta, but he didn’t come from a traditional political background.

But being president you need some of those old-style political skills and he’s found it difficult to run the country without a solid support base through a political party in the national parliament – he’s always having to cobble together coalitions on various issues.

Looking at April’s election – how do you see Jokowi’s move to pick Muslim cleric Ma’ruf Amin as his running mate?

I guess it shows in part that he’s learned one of the lessons – politics is a tough business, you have to play hard, and picking Amin as his vice presidential candidate is actually a fairly conventional tactic.

So it’s [about] what votes his vice presidential partner can bring into the coalition, and he’s calculated that Amin can bring in part of that populist Islamic vote, and that’s a fairly conventional approach in sandbagging his position.

But his critics would ask at what cost, as Amin is a fairly conservative person. The other candidate believed to be in the running, Mahfud MD, a former judge of the constitutional court, was seen as a better political choice but wouldn’t have brought in the votes.

Looking at the challenger, Prabowo picked Jakarta deputy governor Sandiaga Uno as his running mate. Jokowi beat Prabowo last time, can he do it again?

Yes, I think he can. It’s often said that Prabowo picked Sandiaga not for his political nous but his money: he’s a rather rich businessman and the rumors were that Prabowo was running into financial problems with his campaign.

The odds still are that Jokowi will win, but the interesting question will be what will be the voter participation rate? I suspect a lot of people who might be regarded as liberal voters, modernist, cosmopolitan, part of the Jokowi machine, might want to reject him due to his choice of running mate; they won’t go to Prabowo but instead perhaps to the no participation corner.

How do you see the policy differences?

Presidential elections in Indonesia are fought as least as much on personality as politics. But if there are policy differences, Prabowo has a much more nationalist economic position. If he did become president, I think we’d see protectionism playing a greater role, and he’d be more robust on domestic and international political issues and much less concerned with issues like human rights.

The presidential poll is running in tandem with the national parliamentary election. What are the implications?

A good question – we’ve got no history of this happening before. Since it’s a two-horse race for the presidency, the presidency will be decided in that first round which will be held at the same time as the national parliamentary elections — April 17. Previously, the national parliamentary elections have been held before the presidential elections.

Elections in Indonesia post-Suharto have been reasonably robust, characterized increasingly by the flow of money, and I expect that to be even more evident. There may be a mixing of issues between the presidential and parliamentary elections.

I think we’re likely to see them as chaotic as usual, with people moving back and forwards in terms of whom they’re supporting, and an increasing amount of money flowing around to buy votes. This seems well entrenched now – it’s a traditional part of the electoral system and I don’t see any likelihood of this changing in the foreseeable future.

How might it change the assembly?

It’s a difficult one to answer – there are 16 parties registered for the election, but in order to win seats, a party must secure a minimum of 4 percent of the votes cast: the so-called parliamentary threshold. Current polling suggests that perhaps fewer than half those 16 parties will actually meet the threshold, and thus win seats.

But the likelihood is that whoever wins the presidential election will not have a majority in parliament in their own right, so they’re always going to have to rely on coalitions. This is the situation Jokowi himself has faced for the past five years, so nothing new there.

Jokowi has perhaps been more successful than many critics thought he would be in getting legislation through the parliament as he’s managed to craft together coalitions on various issues.

But coalitions don’t have a good track record in Indonesia – they tend to form on particular issues and then break away when that issue is done. They do not provide any great sense of legislative continuity or certainty.

[Former President] SBY’s party, the Democratic party, officially supports Prabowo but quite a few of its prominent figures have come out in support of Jokowi; and Golkar, which officially supports Jokowi, has had a number of leaders come out in support of Prabowo.

So what the balance is there I don’t know, but those coalitions coalescing around the two rival candidates always were going to be a bit fragile. There’s no guarantee that these coalitions will hold together in the new parliament.

In terms of foreign policy, how has Jokowi performed?

Jokowi probably ended up having more interest in foreign policy than some observers thought. He picked a good foreign minister, Retno Marsudi…she’s been very competent and effective. Indonesia, for instance, won its bid for a nonpermanent seat in the UN Security Council from 2019-2020. That was a major success.

ASEAN is still the centerpiece of its foreign policy, but ASEAN in recent years has run into a few problems, including the South China Sea, where ASEAN is clearly split, and most recently Myanmar. Indonesia has been very concerned about both, particularly Myanmar, and there has been great frustration with that on human rights grounds and for the Muslims being expelled.

Indonesia’s options are limited on this – it doesn’t want to go down the sanctions route, as it doesn’t like the idea of outside nations putting sanctions on Southeast Asian nations. It would prefer a negotiated solution but isn’t getting very far with that.

I don’t think Prabowo would improve that if he wins. China still looms large in Indonesian foreign policy, and it presents a similar dilemma to Jakarta as it does to [Australia]. Jokowi wants to see China’s participation in Indonesia’s economic development, but that has caused some problems with imported Chinese workers, and he doesn’t want to see a Southeast Asia politically dominated by China.

Indonesia doesn’t see the U.S. as a close ally but as a balance to China, and the government doesn’t want to see the U.S. pulling out of Southeast Asia. So they’re faced with a dilemma, but it’s simply a variant that many countries including Australia also face.

Would Prabowo take a different approach?

You’re a brave man to predict what he would do. He’s never held elected office, so there’s no track record of what he would do as compared to what he says. But the options Indonesia faces aren’t terribly great, and I don’t see any major alternatives to Jokowi’s policy that he could latch onto.

The other issue is Palestine, which continues to be a major issue for any Indonesian government. There’s very firm support for Palestine; it has an embassy in Jakarta. Jokowi’s government was upset with Trump’s movement of the U.S. embassy to Jerusalem and of course with the Australian government’s echoing of this move, to some extent at least.

And notions of international Islamic solidarity are still very powerful in Indonesia. That will be the case whoever is in power this time next year.

Indonesia at one point was ranked as a potential BRIC – how do you see the economic outlook for the next five to 10 years?

I think in some areas they’re doing not badly; things like the rise in ease of doing business index, which is showing a consistent movement in the right direction. As I said earlier, I think they are making some improvements in infrastructure; they’re looking at significant investment in maritime infrastructure, the World Bank announced a $300 million loan in June 2018 to boost maritime infrastructure, and they talked about the problems hindering Indonesian competitiveness such as inefficient port operations, logistics etc. The first step towards resolving a problem is recognizing a problem, so that’s been recognized as a major issue.

However, I still think Indonesia has a major problem with its education system. It does quite well at the primary level, in general literacy, at the mass market level, but it doesn’t do well at the tertiary level which is crucial to its economic development. There’s some major changes required before it becomes fully supportive of economic growth.

And of course there’s the ever-present issue of corruption – as much a drag on the economy as on the country’s political and social development.

So — Indonesia has a great capacity to muddle through, but also great capacity to never quite achieve what it’s capable of achieving.