Kennedy Muslim and Burhanuddin Muhtadi – Almost a year into office, Indonesia's central government must balance its ambitions against rising public discontent. There is still time to right the ship.
In his first Annual Presidential Speech, President Prabowo Subianto laid out his governing philosophy on the Indonesian economy: he named the country's constitutional "safeguard articles" such as Article 33 (1) through (4) as "the fortress of our economic defence". He mentioned "production sectors that are important for the state" and alluded to state control over people's livelihoods. This speech encapsulated the logic of centralisation and a top-down command economy led by Prabowo's government, which aims to implement many ambitious socioeconomic initiatives.
Three of these have invited particular scrutiny: the "Free Nutritious Meals" (MBG) programme targeted at feeding over 80 million Indonesian children and pregnant women, Red and White Cooperatives (Kopdes Merah Putih), and Indonesia's second sovereign wealth fund, Danantara. These three initiatives embody Prabowo's grand vision of a state-led, top-down approach in stimulating growth amidst worsening economic indicators, such as Indonesians' weakening consumption and purchasing power, and a weak job market. This is despite how centralisation and a command economy approach had run their course during the Cold War era, with the economic collapse of the USSR, for instance. Is President Prabowo trying to build a patronage structure filled with military generals and his Gerindra party loyalists? It seems so, as evidenced by the appointment of several former generals to the National Nutrition Agency (BGN), which supervises the MBG programme and Gerindra members taking the lion's share of seats as new commissioners in Indonesia's state-owned enterprises.
Prabowo's government has implemented significant budget cuts to regional fiscal transfers from state budget (TKD) using government efficiency as its justification, with up to 270 trillion rupiah (about US$16 billion) to be reallocated to central ministries. This has incited strong reactions from at least 18 governors, who came to Jakarta to protest to the new Finance Minister Purbaya Yudhi Sadewa.
The TKD cuts can be seen as a key trigger for the mass protests and unrest in several regions earlier this year, starting in Pati where the local government was forced to raise taxes to make up its budget. Further, Indonesia's worsening economic outlook combined with insensitive gestures such as the flaunting of wealth by certain members of Parliament (DPR) or their family members replayed over social media feeds fuelled the public's anger. The protests, which started as demonstrations against DPR legislators over their increased housing allowances (later cancelled), culminated in riots and lootings of several elites' residences by late August.
There are clear signals from university students, civil society groups, and concerned Indonesian economists under Alliance of Indonesian Economists and Institute for Economic and Community Research from the University of Indonesia (LPEM UI), in their lists of "17+8" demands and seven "emergency" demands from LPEM UI. They seek corrections in the government's economic policies and initiatives. The economists have called for the restructuring of the state budget – in the form of budget cuts to populist programmes like the MBG, Kopdes Merah Putih, and fuel subsidies. They also seek an end to state control in economic matters, which they see as having strangled the private sector, further deregulation, and the cutting of bureaucratic red tape to improve Indonesia's business climate, promote evidence-based policymaking, and strengthen institutional reform and democracy.
The question is whether given the criticism and policy difficulties, the government would be willing to adjust its well-meaning but overly ambitious initiatives, given its limited fiscal space?
The unrest at the grassroots level contrasts with elite power consolidation, especially in the legislative branch, given the president's grand ruling coalition. The Parliament has effectively turned into a rubber stamp for President Prabowo's agenda, which continues the centralisation of presidential power, evident since former President Joko Widodo's second term. As the frustrated public cannot find a formal political outlet (that is, parliamentary oversight of the executive) to voice their concerns and criticisms of Prabowo's ambitious yet poorly executed programmes, they have turned to street demonstrations and a cacophonous social media space. Globally, we see a significant rise in digital activism especially among "Generation Z" (born 1997-2012), in Sri Lanka, Nepal, and in Indonesia to connect and protest via social media. In Indonesia, there is even a popular expression "No Viral, No Justice", which highlighting this phenomenon.
At the root is a denialism displayed by Prabowo's government in its responses to criticism and a habit of misdiagnosing the causes of Indonesia's weakening economy and deteriorating democracy. For instance, the food poisoning scandal, which has affected more than 12,000 MBG beneficiaries from the programme's inception until 5 October (according to Health Ministry data), and the government's refusal to halt the programme, highlights this disconnect. The MBG's critics also point out how promises of stimulating the local economy have failed to materialise due to its top-down implementation. This includes involving the military in distribution and food preparation, and benefiting large players at the expense of distorting the local market. Similarly, the cooperatives are criticised for their lack of transparency and clear governance, and for not being based on bottom-up initiatives.
Nonetheless, the finance minister has made some corrections to the fiscal policies related to TKD by revising the regional transfer budget. This is a start but more is needed. In the wake of the late August protests, President Prabowo has accommodated some public criticism on the urgent need to launch the institutional reform of the Indonesian Police (Polri). One way to do so is to set up an external Reform Committee although the government has postponed the announcement of its members.
At this juncture, there is no indication that Prabowo intends to back down from his ambitious initiatives. The question is whether given the criticism and policy difficulties, the government would be willing to adjust its well-meaning but overly ambitious initiatives, given its limited fiscal space? Since protestors' demands and the economists' suggestions have not been seriously addressed, coupled with the president's insistence on pushing through his centralising and top-down initiatives, wider public resistance could result if things do not improve soon.
Historical polling data shows a consistent trend, that the public's approval of any president and his or her government is strongly affected by national economic conditions. Past the one-year mark into his presidency, if President Prabowo's approval slides, this would likely be due to the economic hardship suffered by citizens. In time, the political elite's support for the ruling regime would follow suit due to the highly pragmatic nature of Indonesian politics.
[Kennedy Muslim is a Senior Researcher and Analyst at Indikator Politik Indonesia. Burhanuddin Muhtadi is a Visiting Senior Fellow in the Indonesia Studies Programme, ISEAS – Yusof Ishak Institute, and Senior Lecturer at Islamic State University (UIN) Syarif Hidayatullah.]