The orderly transition of power to a duly elected leader is a, if not the, hallmark of a well-functioning democracy. As if setting a template for Donald Trump to follow, Prabowo Subianto reacted to his loss in two straight presidential elections to Joko Widodo in 2014 and 2019 by declaring himself the victim of electoral fraud and refusing to accept the results.

Now, Prabowo and Widodo, having reconciled after the 2019 elections, are jointly engineering a transition of power that many feel is a little too seamless to be healthy. As Liam Gammon details in this week's lead article, Widodo is putting state money and technocratic energies behind some of Prabowo's signature campaign promises, expecting in return that Prabowo will cooperate in dynasty-building in the local elections scheduled for November 2024.

Widodo is leaving office with his approval ratings still well over 70 per cent, and, despite Prabowo's behind-the-scenes influence being on the rise ahead of his inauguration on 20 October, there is little sense that Widodo's dominance of the political scene is changing. An economy humming along reasonably well on the back of favourable demographics, stable economic growth, long-overdue infrastructure development and generous social assistance programs is keeping his approval rates at healthy levels.

But just as Widodo's political influence will have a use-by date, so might this economic formula. For years economists have warned that the Indonesian government is not doing enough to deliver the millions of young people who enter its workforce each year pathways to formal sector employment, and with it the opportunity to secure middle-class living standards.

Recent data from the National Workforce Survey, collected by Indonesia's official statistics agency and analysed by Kompas, Indonesia's biggest newspaper, show that the rate of formal sector job creation is slowing sharply. As more and more young Indonesians acquire tertiary qualifications, graduates are waiting longer to get jobs after getting their degrees. With the figure of the un(der)employed university graduate now a staple of social media and media discussions, Prabowo's satisfying the economic aspirations of young people who voted overwhelmingly for him in February's presidential election will be as much a political priority as an economic one.

If Prabowo is going to come anywhere near fulfilling his promise of delivering Indonesia's economy an 8 per cent growth rate by the end of his term, he will have to change the kind of mindset evinced by his own economic manifesto for the 2024 elections. That document, A Strategy for National Transformation, is classic Prabowo, bemoaning Indonesia's comparatively slow development compared to China's and its marginality in global supply chains, and highlighting the urgency of escaping the middle income trap.

These are all perfectly sensible national goals to be concerned about. But Prabowo's rhetoric, though it lately comes infused with the praise of the Widodo administration's economic strategies, still leans heavily on the nationalistic idea that greater national ownership of industry and keeping corporate profits in domestic hands, especially those related to Indonesia's rich natural resources, are the solution for Indonesia's development challenges.

This flies in the face of the reality that foreign investment must play a key role in driving the expansion of high-productivity industries and will be crucial to achieving the goal of high-income status by 2045, as promised by the government's 'Golden Indonesia' economic strategy. Government spending can't fill the void with lavish industry policy. Indonesia's tax-to-GDP ratio remains low by regional and international standards and the national budget is geared towards transfers to local government, compulsory spending (such the education budget and civil servants' salaries), and an expanding suite of social programs, both of which politicians defund at their peril.

If Prabowo uses the cover of his post-inauguration political honeymoon to make space in the budget by reducing energy subsidies, part of the monies freed up will have to be redirected to the iconic programs he promised during the election campaign, including the free school meal program, while continuing to disburse large cash transfers to poorer households to cushion them from the impacts of inflation and price rises. Otherwise, he's likely to earn the enmity of the low-income voters who backed him in big numbers in the election.

Prabowo has shown capacity to adapt his political persona to political incentives in the past. Having tried and failed to win the presidency in 2014 and 2019 by playing the angry populist outsider, he pivoted to promising a continuation of politics-as-usual in 2024 and won by a landslide. Indonesia's technocrats shouldn't let up on reminding him that a grateful electorate awaits if his approach to economics also undergoes a transformation.

Prabowo's quasi-mercantilist instincts and the possible entrenchment of oligarchic democracy notwithstanding, it should not be a surprise if pragmatism prevails when economic nationalism collides with reality. Foreign investment and imports of consumer goods, including food, will be a source of jobs, revenue, and price stability – all political assets that will come in handy if Prabowo aspires to re-election in 2029.

[The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.]

Source: https://eastasiaforum.org/2024/07/22/the-guessing-game-about-prabowos-policy-agenda