Joshua Kurlantzick, Abigail McGowan – Indonesian President Prabowo Subianto began his tenure last October with characteristic bluster and bullishness about Indonesia's potential and his own abilities to transform the country. Prabowo vowed to fulfill his campaign promises of significantly expanding a national free meal program and elevating Indonesia's profile in regional and global politics, the latter pledge a reflection of his much deeper interest in foreign policy than his predecessor, former President Joko Widodo, popularly known as Jokowi.
But less than six months into his five-year term as president, Prabowo already faces a mountain of challenges. He has responded critically to recent mass street protests that poked holes in some of his economic plans. He has built a massively bloated Cabinet, while doing little to prevent potential corruption. And even on foreign affairs, ostensibly his specialty, Prabowo has seemed unable to develop coherent positions, sometimes seemingly pursuing contradictory plans in the same overseas trip.
Budget turmoil
Several months ago, with no warning to his own economic advisers and without providing a legal or constitutional rationale for his actions, Prabowo announced he would be making massive cuts to the national budget for 2025 that will reduce Indonesia's planned spending by 8.5 percent. The measures include significant reductions in state budget transfers to regional governments that depend heavily on state funds, especially in poorer parts of the country. Prabowo has also slashed the budgets of state agencies and ministries, a move highly unpopular in Jakarta and many other cities, where these funds represent a major contribution to the local economy in such a bureaucratic country. Those cuts have hit some particularly vital ministries hard, including those dealing with children's welfare, public infrastructure and natural disasters, which are extremely common in Indonesia.
The savings will be used in part to finance Prabowo's highly touted campaign pledge to roll out a $28 billion free meal program for students and pregnant women that will ultimately serve a quarter of the country's population. But more controversially, they also will go to finance a new state sovereign wealth fund called Danantara, which will control some of the country's largest state-owned enterprises. They also may go toward plans, approved last week by the legislature, to allow military personnel to hold a much broader range of civilian government jobs than at any time since the Suharto era.
Notably, Indonesia's legislature passed a law specifying that the fund will be overseen by neither the Finance Ministry nor the country's auditors or corruption monitors. Instead, Prabowo himself will manage it. As things stand, there appear to be few plans for what the new fund will actually do. Nonetheless, Prabowo has said that Danantara eventually will control $900 billion, which would make it the largest sovereign wealth fund in Southeast Asia. He even suggested he might make another round of large budget cuts whose proceeds may go to Danantara, which would further hobble the government.
The spending cuts that have already been made are also destroying not only ministries that deal with essential public services but also those that provide government oversight, raising serious concerns about corruption. Prabowo has increasingly relied on the military to carry out state functions, such as the pilot stage of the free meal program, and the law passed last week will expand military involvement even further. And some ministers in his enormous Cabinet oversee industries or areas where they have direct business interests.
Many Indonesians and political analysts view these actions as signs that Prabowo, a long-time member of the Indonesian elite, intends to further enrich the country's oligarchy while undermining Indonesia's democracy and the rule of law, which already eroded under Jokowi. The concerns have triggered public anger and sparked protests in many cities. The demonstrators have dubbed their campaign "Dark Indonesia," a cynical reference to Prabowo's predictions of a sunny economic and political future for the country.
It is not just those worried about Indonesia's democracy and rule of law who are concerned about Prabowo's economic policies, however. The budget cuts – along with the uncertainty surrounding his future plans, given that he made these initial cuts with no warning – are unsettling consumers and investors alike. The effect is likely to dampen GDP growth for the coming year, at a time when Prabowo is consistently promising it to rise.
Long-term growth may take a hit, too. Prabowo had claimed Indonesia, which has averaged around 5 percent growth recently, would start growing by 8 percent annually under his presidency. But Indonesian economists see that target as extremely unlikely, given Prabowo's policies.
Foreign policy confusion
Prabowo's foreign policy has also been muddled, a more surprising development given his background as a former defense minister and his numerous meetings with world leaders during the presidential transition period. But after taking office, Prabowo appointed his former personal secretary, who has no experience in the Foreign Ministry, as foreign minister.
Then, in November, during Prabowo's first official overseas trip as president, the Chinese Foreign Ministry released a readout of his meeting with Chinese President Xi Jinping in Beijing that appeared to legitimate China's contested claims in the South China Sea. While Indonesia does not have any formal territorial disputes with China in the South China Sea, Chinese vessels have increasingly encroached in waters around Indonesia's Natuna Islands. And historically, Indonesia has not approved of China's growing assertiveness in other Southeast Asian countries' disputed waters. So the communique came as a major surprise.
It was even more shocking to many Indonesians, since Prabowo had historically treaded carefully in dealing with Jakarta's relations with Beijing and has been known as a strong defender of Indonesia's borders and maritime claims, including around the Natuna Islands. Indonesia's Foreign Ministry quickly walked back the statement from Beijing, but Prabowo has since repeated it, causing more confusion. And in the first months of Prabowo's presidency, he failed to respond forcefully when China sent coast guard ships into Indonesian-claimed waters on multiple occasions, leading domestic critics to suggest Prabowo was jeopardizing the country's sovereignty.
Days after the visit to Beijing, Prabowo met with then-U.S. President Joe Biden in Washington, where he notched a commitment from the U.S. to continue supporting Indonesia's green energy transition while seemingly failing to understand that the commitment would likely falter under President Donald Trump. On that visit, Prabowo also asserted that Jakarta shared similar views on human rights as Washington, and the two countries reportedly agreed to work together on the issue, despite Prabowo not having emphasized human rights or shown a commitment to the issue in the past. In fact, Prabowo has a troubling human rights record that includes abuses during his time as a special forces officer during Indonesia's military dictatorship era.
A public backlash
Amid these stumbles, Prabowo is now facing growing public anger over his domestic policies and concern among Indonesia's foreign policy elite. And yet, he appears to be taking neither seriously so far.
Regarding his chaotic and potentially corrupt economic policies, Prabowo has stonewalled, criticizing the Dark Indonesia protests and any concerns about him controlling a giant sovereign wealth fund, while continuing to promise a bright economic future. He has repeatedly touted a Goldman Sachs study that predicted Indonesia would grow strongly and would be the world's fourth-largest economy by 2050. But the report, released in 2022, was just a projection, and strong growth relies on sound economic policies and the rule of law, which are currently lacking in Indonesia.
Particularly among younger Indonesians, Prabowo's economic policies and centralized economic management, and the potential damage they may do to growth, have created such serious dissatisfaction that the country could lose a generation of potential business leaders and valuable workers to brain drain. A recent poll by the ISEAS-Yusof Institute in Singapore found that young Indonesians are more pessimistic than their peers in any other Southeast Asian country.
These are the people that Indonesia would need if it is to become more innovative and sustain higher growth, which would fulfill the Goldman Sachs prediction Prabowo constantly repeats. Yet many of Indonesia's youth see little future in the country and are trying to emigrate elsewhere in the region or other parts of the world.
Prabowo's legacy from his military career already includes a dark history, one that he overcame in his political climb to the country's top office. But if his presidency continues down its current path, he may be remembered for both his past human rights abuses and the undermining of an economy with enormous potential, to say nothing of Indonesia's democracy and rule of law.
[Joshua Kurlantzick is senior fellow for Southeast Asia at the Council on Foreign Relations and a featured analyst for World Politics Review. His new book is, "Beijing's Global Media Offensive: China's Uneven Campaign to Influence Asia and the World." Abigail McGowan is research associate for Southeast Asia and U.S. Foreign Policy at the Council on Foreign Relations.]
Source: https://www.worldpoliticsreview.com/indonesia-prabowo-economy-corruption