Protester clash with riot police officers during a rally against the passing of a controversial revision of a military law that will allow military officers to serve in more government posts without resigning from the armed forces, in Surabaya, East Java, Indonesia, Monday, March 24, 2025. - AP
JAKARTA: experts warn that the revised Indonesian Military (TNI) Law passed on March 20 and the subsequent social unrest could lead to economic repercussions, including an adverse impact on investor confidence.
Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), told the The Jakarta Post on Tuesday (March 25) that the law revision meant businesses “or even farmers” might have to compete with the military for jobs, particularly on government projects.
“Economically, placement of active TNI members in civilian positions could spark resource inefficiency. That is due to the skills gap in the military, given that it is different from civilian [occupations], particularly in strategic decision-making,” he said.
Involving the military in government projects might result in a crowding out effect, Bhima said, as the TNI would be filling space that should be reserved for the private sector, especially micro, small and medium enterprises. “For example, this has happened in the free [nutritious] meal programme, with a centralised kitchen and food estate [project] managed by the TNI,” he said.
He added that expanding the military’s role gave the impression that the country was reverting to a centralised system rather than one based on innovation and healthy competition, which might cause investors to reconsider both portfolio and direct investments in Indonesia.
The government and the House of Representatives passed the controversial TNI Law revision last Thursday, which many feared would undermine civilian supremacy and result in democratic backsliding.
Critics have warned that the revised law ran the risk of regressing the country to the authoritarian New Order era of former president Suharto, although the government has made reassurances that TNI officers would have to resign prior to assuming civilian posts.
The one exception is appointments to the Attorney General's Office, which raises the separate issue of military encroachment on the civilian justice system. Shortly after the new law’s passage, thousands of people took to the streets to demand its rescindment, with a major crowd forming around the Senayan legislative complex in Jakarta.
Protests also broke out in other cities including Yogyakarta, East Java capital Surabaya and South Sulawesi capital Makassar, as well as in Surakarta, the Central Java hometown of former president Joko “Jokowi” Widodo. Composed primarily of students and activists, the protesters called on the government to revoke the TNI Law revision.
National Economic Council head Luhut Pandjaitan played down public concerns about the revised law, saying: “It’s good, no problem there.” During a press briefing on March, he asked reporters, “I belonged to the TNI, am I not good?” and urged investors not to worry about the new military law.
Analyst Wen Chong Cheah of the Economist Intelligence Unit (EIU) told the Post on Monday the TNI Law revision would “impact the perception of democracy in Indonesia”, and that the protests underscored “growing public discontent” that might pose “risks to investor confidence”.
As for the Indonesia Stock Exchange (IDX) Composite index momentarily plunging seven per cent on March 18, Cheah has attributed this to the government’s expansionary fiscal policy, which many fear could harm the country’s credit rating.
The American Chamber of Commerce (AmCham) in Indonesia has expressed high regard for the country’s legislative process, including those undertaken in revising the TNI Law, but asked for more dialogue on policies that might affect the investment landscape.
AmCham Indonesia managing director Donna Priadi told the Post on Tuesday that the chamber “respects the process of regulation-making” and was closely watching developments and dynamics related to the newly passed law. “For business actors, our primary attention is openness of access to dialogue with the government about various policies that have a bearing on industry and the investment climate,” she said.
Donna added that AmCham “respects the rights of every citizen to conduct dialogue and express their opinions in public”, and that it was monitoring developments on this front also. The chamber viewed Indonesia was “maturing in democracy” and American businesses perceived its political condition to be “far more stable” compared to other South-East Asian countries, she continued.
But Donna pointed out that the country still had to work on “many aspects to maintain its attractiveness” to investors, such as improving ease of doing business, enhancing regulatory and bureaucratic governance as well as ensuring that policies did not change “so fast”. Ensuring that corruption eradication efforts were going well and guaranteeing law enforcement would also help the country’s investment appeal, she said. - The Jakarta Post/ANN
