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Army's Cyber Security Bill Jeopardizes Tech Sector, Rights / KPK Falls / Adultery Ban / Land Bill

The Week that Was in ASEAN@Smartkarma - Vietnam, Hospitals, and Home Decor

Indonesia Political Risk Analyst

Kevin O’Rourke

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

President Widodo allowed a disreputable two-star police general to become the next chair of the crown jewel of Indonesia's public sector, the independent Anti-Corruption Commission (KPK).  He also allowed parliament to proceed with a KPK Law revision designed to curb the commission's power and independence.  This marks a reversal on governance reform that affects international perceptions of Indonesia, elevates risk and complicates prospects for preserving macro-economic stability.  Meanwhile, the World Bank issued a very sternly worded presentation to the president, warning of a growth slowdown without reforms to garner investment.  Policymakers have made no coherent response to the warning.  Widodo appears increasingly interwined with oligarchic interests, and this elevates the stakes surrounding the imminent change of cabinet. Politics: Parliamentarians named the two‑star police general Firli Bahuri as the next chair of the Anti-Corruption Commission (KPK) and a current respected KPK member, Saut Situmorang, resigned in response.  Meanwhile, President Joko Widodo agreed for the 2002 KPK Law to undergo revision.  The president claims that he aims to strengthen the commission, but KPK members and activists oppose the move and parliamentarians clearly intend to curb its powers and independence.  The development demonstrates that the formerly reform‑minded Solo mayor is taking a major step backwards from governance reform.  If so, this bodes ill: although the KPK itself is small and limited, its stands for principles and its dismantling will send a clear signal to the state apparatus that corruption entails lower risk.  The president is apparently attempting to consolidate yet more control over the political economy – but his retreat from governance reform will only complicate the investment climate further, which mitigates against macroeconomic stability (Page 2). Justice: KPK officials named a former Pertamina executive as a suspect in offshore oil‑trading arrangements a decade ago.  The case could embroil the long‑controversial importer Riza Chalid, a financier of Surya Paloh’s National Democrat (Nasdem) Party (p. 6).  Financial market authorities highlight the persistence of unlawful practices by hundreds of online financial technology (fintech) operators (p. 6).Policy News: Parliament asked the government to cut Rp7 trillion in electricity subsidies in 2020 by transitioning seven milllion households to a market rate (p. 7).  A World Bank presentation to the president warned that deteriorating policymaking could jeopardize Indonesia’s credibility with financiers, exacerbating vulnerabilities to liquidity shocks.  After hearing the stern warnings, Widodo asserted that “reformasi is the key”.  But he proposed no credible specifics, nor have any cabinet members taken action.  On the contrary, Trade Ministry officials affirmed that non‑tariff barriers will remain in place on poultry, in defiance of a recent World Trade Organization (WTO) ruling on the matter.  And policies of the industry minister highlight the debilitating conflicts of interest brought about by Widodo’s consensus‑sytle approach to the elite (p. 9). Elections: Widodo’s son‑in‑law aims to run for Medan mayor (p. 13).Environment: Pertamina made an initial payment of Rp19 billion to 10,300 people impacted by its oil blowout (p. 14). Obituary: B. J. Habibie emerged unexpectedly to accommodate Indonesia’s remarkable transition to democracy (p. 15).

President Widodo allowed a disreputable two-star police general to become the next chair of the crown jewel of Indonesia's public sector, the independent Anti-Corruption Commission (KPK).  He also allowed parliament to proceed with a KPK Law revision designed to curb the commission's power and independence.  This marks a reversal on governance reform that affects international perceptions of Indonesia, elevates risk and complicates prospects for preserving macro-economic stability.  Meanwhile, the World Bank issued a very sternly worded presentation to the president, warning of a growth slowdown without reforms to garner investment.  Policymakers have made no coherent response to the warning.  Widodo appears increasingly interwined with oligarchic interests, and this elevates the stakes surrounding the imminent change of cabinet. Politics: Parliamentarians named the two‑star police general Firli Bahuri as the next chair of the Anti-Corruption Commission (KPK) and a current respected KPK member, Saut Situmorang, resigned in response.  Meanwhile, President Joko Widodo agreed for the 2002 KPK Law to undergo revision.  The president claims that he aims to strengthen the commission, but KPK members and activists oppose the move and parliamentarians clearly intend to curb its powers and independence.  The development demonstrates that the formerly reform‑minded Solo mayor is taking a major step backwards from governance reform.  If so, this bodes ill: although the KPK itself is small and limited, its stands for principles and its dismantling will send a clear signal to the state apparatus that corruption entails lower risk.  The president is apparently attempting to consolidate yet more control over the political economy – but his retreat from governance reform will only complicate the investment climate further, which mitigates against macroeconomic stability (Page 2). Justice: KPK officials named a former Pertamina executive as a suspect in offshore oil‑trading arrangements a decade ago.  The case could embroil the long‑controversial importer Riza Chalid, a financier of Surya Paloh’s National Democrat (Nasdem) Party (p. 6).  Financial market authorities highlight the persistence of unlawful practices by hundreds of online financial technology (fintech) operators (p. 6).Policy News: Parliament asked the government to cut Rp7 trillion in electricity subsidies in 2020 by transitioning seven milllion households to a market rate (p. 7).  A World Bank presentation to the president warned that deteriorating policymaking could jeopardize Indonesia’s credibility with financiers, exacerbating vulnerabilities to liquidity shocks.  After hearing the stern warnings, Widodo asserted that “reformasi is the key”.  But he proposed no credible specifics, nor have any cabinet members taken action.  On the contrary, Trade Ministry officials affirmed that non‑tariff barriers will remain in place on poultry, in defiance of a recent World Trade Organization (WTO) ruling on the matter.  And policies of the industry minister highlight the debilitating conflicts of interest brought about by Widodo’s consensus‑sytle approach to the elite (p. 9). Elections: Widodo’s son‑in‑law aims to run for Medan mayor (p. 13).Environment: Pertamina made an initial payment of Rp19 billion to 10,300 people impacted by its oil blowout (p. 14). Obituary: B. J. Habibie emerged unexpectedly to accommodate Indonesia’s remarkable transition to democracy (p. 15).   

Widodo Scuppers KPK, World Bank Warns About Policy Credibility -- And Ministers Dither