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Business

• The third cut is just as deep

  • Indonesia’s central bank slashed its key interest rate by 25 basis points — the third time in as many months — down to 5.25% to bolster growth amid a deepening global economic slowdown.

  • The latest round of easing comes as trade tensions and now higher oil prices weigh on the global economy and threaten prospects for Indonesia, where growth is at a two-year low.

• The rising cost of smoking

  • The government is going ahead with its plan to drastically raise the tobacco excise tax, which will see minimum cigarette prices raised by an average of 35%, in a bid to boost state earnings from the industry and reduce cigarette consumption in one of the most tobacco-addicted countries in the world.

  • Industry associations criticized the move, warning that it would force them to cut 15% from production volumes, resulting in job cuts and an increase in sales of illegal cigarettes.

  • In 2018, tobacco excise contributed IDR153 trillion to state coffers, which was by far the largest source of excise revenue for the state. This year, as of August, tobacco excise has already contributed IDR77.7 trillion to state revenue, and is on course to meet the end-of-year target of IDR158.9 trillion.

• India’s sweet deal

  • Indonesia has agreed to import rice and sugar from India in exchange for India leveling the playing field for Indonesian palm oil by charging the same duties on Malaysian palm oil.

  • The move will help to reduce the trade deficit between Indonesia and India — which currently favors the former — and increase trade volume to US$50 billion by 2025.

  • In the first half of 2019, Malaysia has exported 2.14 million tons of palm oil — surpassing all of last year’s exports of 2.08 million tons — to India on the back of favorable import duties. Indonesia has exported 2.13 million tons thus far — over a third of its 2018 shipment — and had been keen to strike a deal with India to help it stay competitive with Kuala Lumpur.

• Go-surance: Life insurance company AIA Group says it has invested in Indonesian superapp Gojek for the latter’s Series F fundraising round, though the amount of the investment was not disclosed. The two companies say they will work together to provide insurance services to users, ride-hailing drivers and merchants across Indonesia.

• Chickening out on Texas Chicken: Malaysia-based Envictus International Holdings is set to sell the Indonesian operations of its loss-making fast food franchise Texas Chicken — widely considered to be a poor KFC substitute in Indonesia — for IDR30.6 billion to franchise conglomerate Quick Serve Indonesia. Envictus’ TC operations have accumulated losses of about IDR15.3 billion since kicking off in September 2018.

Recommended reads

• Smoking kills and funds (The Jakarta Post)

  With Indonesia’s smoking culture and large exposure to cigarettes, price increases might do little to reduce cigarette consumption and smoking prevalence in the short term. After all, Indonesia’s cigarette prices remain among the lowest in the world, averaging roughly at Rp 17,000 (US$1.2) for a pack of a dozen or more cigarettes. It is affordable even for the poor. In the long run, government consistency in increasing tobacco excise and much higher retail prices from today’s level might be able to turn around the consumption habit.

Politics

• Revision crippling KPK passes

  • On Monday, Parliament passed a much-criticized revision to the law governing the Corruption Eradication Commission (RUU KPK) that revokes the agency’s independent status and weakens its powers in a number of crucial ways that activists warn will cripple the agency’s graft-busting abilities.

  • The bill containing the revisions was passed in seemingly record time for Parliament, less than two weeks after it was introduced to the current plenary session (one professor darkly joked it should be submitted to the Guiness Book of World Records for fastest discussion ever of an Indonesian bill). 

  • Its passage was further sped up by President Joko Widodo issuing a letter of agreement with the bill on Sept. 11, leading many to question Jokowi’s commitment to fighting corruption (and a controversial Tempo magazine cover depicting the president with a Pinocchio-shaped shadow).

  • A number of civil society groups have already announced their intentions to challenge the revisions in the Constitution Court, but if they are unsuccessful, the KPK will likely be unable to maintain its thus far excellent track record of fighting the endemic corruption in the government and business sectors.

  • Further reading

    • Amendments spell disaster for the KPK (Indonesia at Melbourne)

    • Indonesia law change sparks fears Jokowi is going soft on corruption (Nikkei Asian Review)

• Sports minister steps down 

  • Just two days after the revision weakening its powers passed, the KPK named Sports Minister Imam Nahrawi and his assistant bribery suspects.

  • Nahrawi is accused of taking IDR26.5 billion (US$1.88 million) in bribes related to a request to his ministry for a grant proposal from the National Sports Committee (KONI).

• Going easier on corruptors

  • In another much-criticized move, the government and the House of Representatives (DPR) agreed on Tuesday to revisions to the law governing corrections that will make it much easier for corruption convicts to gain early freedom from imprisonment.

  • The revision removes the requirement that corruption convicts act as “justice collaborators” (i.e. cooperating witnesses against other suspects) to receive sentence remissions as well as the requirement that they get a recommendation from the KPK in order to receive parole. 

• Jokowi comes out against controversial criminal code revision 

  • After the shockingly sudden passage of RUU KPK, activists have been scrambling this week to mount opposition to an equally alarming draft revision to the country’s criminal code (RKUHP) that legislators said they have already agreed upon and which is set to be passed next Tuesday (Sept. 24).

  • RKUHP, which would be the first-ever overhaul of the country’s criminal code (which is largely still based on law originating in the Dutch colonial era) has been criticized over numerous problematic articles criminalizing everything from moral “crimes” such as adultery and cohabitation to “insults” against the president and other state institutions (you can read our full rundown of all the controversial articles here).

  • It appeared that the government had also agreed to the contents of RKUHP, but after major public backlash including a large student-led protest at the DPR on Thursday, President Jokowi said this afternoon that he wanted the ratification of RKUHP to be delayed until after the current legislative session is over so that it can be studied further.

  • Jokowi’s stance should, theoretically, prevent RKUHP’s immediate passage, but DPR members have yet to respond to the government’s new position at of the time of writing. 

Recommended reads

• Habibie’s lasting legacy for Indonesia (The Interpreter)

  Although it lasted only 17 months, Habibie’s presidency was transformational. Before entering politics, Habibie had been a prominent aviation engineer educated in Germany and the Netherlands. Serving in the research and technology ministry in the early days of Suharto’s New Order regime, Habibie was known more for his skill in aircraft building and other high-tech industries than for his political agenda.

  But today he is widely credited with the democratisation of Indonesia after the Suharto era, overseeing Indonesia’s first democratic legislative elections in 1999, and broadening freedom of speech. His democratic principles also led him to allow East Timor, now known as Timor-Leste, to vote on a referendum for autonomous status within Indonesia or outright independence.

• Moving the capital: a future in Kalimantan? (New Mandala)

  Yet the move also has its proponents. While in Jakarta during Jokowi’s announcement, I discussed the issue with academics at universities and with several civil servants. Although all were impressed with the size and complexity of the operation, these Jakartans saw that the quality of life in Jakarta is not improving and that the current approaches to its most fundamental problems are insufficient to offer substantial solutions. Moving the capital now, a staff member of the National Planning Agency pointed out, is preferable over a future move necessitated by a disaster. Costs might be high, but, if all goes well, it will largely be paid for by third parties rather than by taxpayers, and will be more manageable now than when incurred during an emergency move. Crucially, the national government already owns the required land in East Kalimantan. NGOs and activists in Kalimantan I asked about the move point out that rather than becoming isolated and out of touch, the nation’s political elite will finally be made to take notice of the lives of ordinary people outside of Java.

Other News and Notable Features

• Haze continues to wreak havoc 

  • The transnational haze crisis, caused by thick clouds of noxious smoke created by forest fires in Sumatra and Borneo that are drifting across the sea to peninsular Malaysia, Singapore and now even southern Thailand, is causing air pollution so severe that thousands of schools across the region have had to shut down due to health concerns. 

  • The Indonesian Disaster Mitigation Agency said on Thursday its satellites had detected 2,719 hotspots across the country on Thursday, and that 99 percent of them were caused by deliberately set fires.

  • The Indonesia government has deployed an additional 5,600 officers to fire-prone regions, bringing the total number to more than 14,000. Officials are also looking to new ways to curb the difficult-to-fight fires, including the use of calcium oxide to help form clouds for potential seeding and the deployment of drones to get more real-time information on emerging hot spots. 

  • Indonesian police say they have arrested some 230 people on suspicion of starting land-clearance fires, all of whom are facing up to 10 years in prison. Authorities have also sealed off land owned by at least 49 plantation companies in the past week for investigation after fires were found on their concessions.

  • Further reading

    • Choking and gasping in Indonesia’s noxious haze (Asia Times) 

      Indonesia refuses to accept all the blame, claiming that satellite imagery shows Malaysian and Singapore oil palm companies own several of the 42 agricultural concessions on the two islands where more than 1,600 hot spots have been detected in the past three weeks.

      But Indonesia’s record on forest fires dating back to the late 1990s has been a national embarrassment, as has its failure to deal effectively with a problem that in 2015 resulted in an estimated US$16 billion in economic losses in Indonesia alone and 100,000 premature health-related deaths across Southeast Asia, according to the World Bank.

• Deaths in Papua

  • After weeks of protests and riots, unrest continues to persist in some areas of Papua and West Papua, with the military telling the media that three civilians, including a toddler, had been killed and four wounded during a shootout between Indonesian security forces and armed separatists in the West Papuan town of Ilaga on Tuesday. 

  • Further reading

    • West Papua unrest tests Indonesia's Jokowi as second term begins (Al Jazeera)

      The violence is a major test of President Joko "Jokowi" Widodo, who was returned to power in April's election and will be officially installed for his second term in office on October 20. Having won 78 percent of the vote in Papua, he now faces the difficult task of delivering on his promises of economic growth and genuine autonomy to Papuans, while dampening calls for independence that threaten to carve out another part of the country.

Recommended reads

• Indonesia’s pre-social media laws are no match for animal traffickers (SCMP)

  Contributing to the rise of the problem are online and social media sites that specialise in the buying and selling of these animals. Between 2016 and 2017, the number of online cases of protected wildlife being traded online increased 39 per cent.

  Throughout 2017, WWF Indonesia identified 2,500 adverts on Facebook, 2,207 adverts on Instagram and 195 adverts on e-commerce sites that were selling either live animals or their body parts.

• Mother-tongue language education: improving education quality while preserving culture (Indonesia at Melbourne)

  According to UNICEF, children whose first language is a local language are far more likely to be excluded from education than children who were raised in a country’s national language. And if they do make it to school, children with a local language mother tongue get poorer test scores than their peers who speak the national language fluently.

  This is a particular problem in Indonesia, where Bahasa Indonesia is the mother tongue of less than 10 percent of the population.

Top Coconuts News

• Two ladies aggressively fighting over rendang during wedding party is peak Indonesia (Video)

• Indonesian TV station warned over portrayal of violence in Spongebob Squarepants movie

• WATCH: Jakarta cop throws himself on hood of car to stop it for traffic violation

• Refugees, living again on the streets of Jakarta, promised temporary shelter once more 

• Put your guns up in the air: Indonesian cops shoot live rounds into the sky to liven up wedding party (Video)