Democracy Can Be An Asset To Indonesia’s Economic Transformation – OpEd

Leaving aside the genuine concerns about the quality of democracy in Indonesia, there’s no denying that there’s still a tremendous quantity of it. On 14 February almost 205 million enrolled voters — half of them under 40 — will have the opportunity not just to elect a president to replace Joko Widodo (Jokowi), but to choose between candidates from 18 national parties (plus 6 local parties in the province of Aceh) competing for over 20,000 seats in national, provincial and municipal legislatures.

It’s the biggest single-day election in the world. Yet it has attracted only belated attention in the international media, partly because 2024 offers up a suite of elections that give a more cheerful picture of democratic deepening (such as Taiwan), or more dramatically illustrate the global trends of democratic decay (such as Pakistan, India or the United States).

Indonesia’s elections may not trigger major civil unrest, destabilise global financial markets or shift the terms of geopolitical competition. But as Liam Gammon highlights in this week’s lead article, they speak to significant political changes that have taken place in Indonesia under the leadership of Jokowi since 2014.

With polls showing a strong lead for Defence Minister Prabowo Subianto, ‘the question isn’t whether [Prabowo] will win, but how’. The endorsement of the popular incumbent president — signalled loud and clear by the appointment of one of his sons as Prabowo’s vice-presidential candidate — has seen a stampede of voter support to Prabowo, who now has a chance of winning the 50 per cent of votes needed to avoid a runoff against one of the two other candidates, former Jakarta governor Anies Baswedan and Central Java governor Ganjar Pranowo.

This, combined with the possibility that Prabowo’s Gerindra party will win the legislative elections held on the same day, means Prabowo has a chance to be sworn into office in October 2024 as Indonesia’s ‘most authoritative incoming president in the democratic era’.

Prabowo inherits a growing economy whose macroeconomic management by successive governments has been vindicated by steady upgrades in its sovereign credit ratings. But as experts are at pains to point out, by shirking reforms Indonesia is still missing out on the benefits from greater integration with global value chains, and the formal sector employment opportunities that come with that.

Debate about this issue has featured little through the election campaign. Prabowo’s opponents quickly found that even restrained criticisms of ‘Jokowinomics’ — channelling public investment in infrastructure through a strengthened SOE sector, using export bans to promote ‘downstreaming’ in value-added industries in the minerals sector, and expanding the social safety net — had little political payoff. 

Indonesia is still awaiting a leader who can level with the electorate about the need for unfashionable reforms that will be needed to allow investors to deliver the jobs boom that all candidates are promising. These reforms include the regulatory changes, like creating a truly level playing field between state-owned and private enterprises, including foreign investors, or allowing easier immigration pathways for skilled foreign labour. Others are more to do with attitudes, including tolerating the bigger balance-of-payments gaps that will inevitably emerge via the import of finance, capital goods and other inputs crucial to manufacturing and infrastructure investments.

It would be a surprise if Prabowo turns out to be the politician who can sell these reforms to the public. He has moderated his rhetoric as part of his pose as the natural successor to President Jokowi, but if we take his back catalogue of statements on economics at face value, he appears stuck in a paradigm that frames foreign involvement in the economy principally in terms of the exploitation of Indonesia’s workers and natural resources.

Regardless of his heartfelt economic nationalism, Prabowo’s approach to economics will hopefully be guided by the demands of the Indonesian electorate. Their approval of a president depends much more on the tangible economic benefits of job creation, poverty reduction and price stability, not passing some economic ideological purity test.

Prabowo’s economic technocrats need to convince him, in the context of a still-underdeveloped tax base and limited domestic savings available to underwrite private and public investment, that alongside deepening Indonesia’s own capital markets, there is no alternative to inviting a bigger role for foreign investment in the economy if Indonesians’ expectations for growth, expanded public services and better employment prospects are to be met. ‘Politics’ is often blamed for getting in the way of economic reform in Indonesia, and it certainly does. But this ignores the way in which the pressures of electoral competition also incentivise responsible economic management. 

Hopefully Prabowo does not fulfil the worst fears of his progressive critics, and leaves the fundamental competitiveness of Indonesia’s post-New Order democracy undisturbed.

• About the author: The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.
• Source: This article was published by East Asia Forum