INDONESIA’s first president, Sukarno, famously titled his 1964 independence day address Tahun vivere pericoloso – the year of living dangerously.
The phrase, later immortalised in a book and film, captured a period of deep political and economic turmoil.
More than six decades on, South-East Asia’s largest economy is again confronting a perilous moment.
To be sure, Indonesia is at little risk of the Cold War coup that toppled Sukarno, and led to 32 years of dictatorship by a hitherto obscure general, Suharto.
But growth is sluggish, global trade is fragmenting, and new geopolitical tensions – not least an increasingly unpredictable US-China relationship – are complicating policy choices.
The top-down governing style of President Prabowo Subianto – a military man who was once Suharto’s son-in-law – risks compounding this uncertainty and deterring overseas investment.
The high-profile trial of Nadiem Makarim, a former education minister and founder of popular ride-hailing giant Gojek, is the latest event to cause anxiety.
In 2019, then president Joko Widodo, also known as Jokowi, appointed him to modernise the education system, in the hope that the dynamic startup boss who had successfully developed a super app, would be able to execute his vision of building a 21st century Indonesia.
Instead, prosecutors last week opened proceedings against Makarim over alleged graft linked to the procurement of Google Chromebooks for schools, saying the project caused 2.1 trillion rupiah (US$125mil) in state losses.
They also claim the process involved undisclosed conflicts of interest and improper gains of about 809 billion rupiah for Makarim.
He denies all charges and has entered what’s known in the Indonesian legal system as an objection plea, challenging the validity of the case.
In a statement to the court, he argued that the case reflects resistance to reform.
“My case is not a criminal case,” he wrote, “but rather a narrative of friction between a new group seeking change and old players seeking to preserve the status quo.”
That framing resonates in a country long held back by entrenched interests and a lack of transparency.
The trial is being closely watched by investors concerned about legal predictability in the archipelago, home to more than 280 million people and regularly ranked by Transparency International as one of the world’s most corrupt nations.
Obstacles galore
The US State Department’s latest assessment cites legal and regulatory uncertainty, corruption and vested interests as obstacles to pursuing business opportunities.
Legal experts warn that applying criminal law to policy and procurement decisions, as prosecutors have done in this case, risks creating a chilling precedent.
The issue goes beyond one individual, Bert Hofman, a former World Bank official who has advised governments across Asia, told me.
“It speaks to governance, and whether the system attracts or deters young and capable technocrats from entering public service.”
It’s becoming a worrying pattern.
Thomas Lembong, a former trade minister known for his reformist views, was convicted in a sugar import case last July, as speculation grew that the charges levelled against him – a key ally of an opposition figure – were politically motivated.
He denied all charges and maintained his innocence, but was sentenced to 4.5 years.
Prabowo later granted him a full pardon, a rarely used presidential power, meaning that his conviction was overturned.
That decision has added to the unease over the president’s expanding influence over legal and political issues.
The former general has brought the military back into civilian life, raising fears of a return to Indonesia’s authoritarian past, when the army played a dual role.
Soldiers were used to implement Prabowo’s signature free meal programme for school children and have been deployed in controversial land seizures and forest clearances for a state-backed agricultural project (although the move has been framed as protecting national assets from foreign exploitation.)
Millions of hectares have already been reclaimed from plantation owners and private companies, with more likely to follow this year.
Civil liberties are also under renewed pressure. A new criminal code came into force on Jan 2, and includes provisions penalising insults to the president and state institutions.
Human rights groups warn this could be used to stifle dissent, such as last year’s nationwide protests sparked by parliamentarians’ perks, or concerns raised over government failures exposed by disasters like the recent Aceh floods.
Lack of confidence
Markets aren’t happy. Global funds sold Indonesian bonds between September and November, erasing billions of dollars in net inflows, following the social unrest.
Confidence was further shaken by the dismissal of Finance Minister Sri Mulyani Indrawati, who was widely regarded as an anchor of fiscal credibility but became a particular focus of the protests.
Flows stabilised somewhat in December, but only modestly. Foreign investment has also been lacklustre.
Jakarta has promised to improve the investment climate, but this will require transparency and institutional reform at a time when Prabowo seems more inclined toward populist programmes.
He has set an ambitious 8% growth target, which will be difficult to achieve without foreign capital, policy credibility and a new set of young, educated technocrats willing to bring change to an arcane bureaucratic system.
Prabowo has earned strong approval ratings.
But power in Indonesia has long been understood through the Javanese concept of wahyu, authority granted on the chosen few, similar to China’s mandate of heaven.
The archipelago’s own history has shown power is never permanent.
He should remember that authority weakens when it drives away the very people – reformers, investors and technocrats – needed to secure Indonesia’s future. — Bloomberg
Karishma Vaswani is a Bloomberg Opinion columnist covering Asia politics. The views expressed here are the writer’s own.
