Indonesia Intelligencer Year in Review: The stories that shaped Indonesia in 2018
Welcome to the final edition of the Indonesia Intelligencer newsletter for 2018. We’ll be taking a break next week for the holidays, but first we wanted to give our loyal readers a look back at this year’s top stories and trends to help illuminate where the country is going in 2019. And, in the spirit of the holidays, this edition is free to all, so you are more than welcome to share it with friends and colleagues who might be interested in subscribing to our service (follow the link here for to get a free one-month trial subscription).
We’ll be back with our next regular edition on January 4. Thanks for reading and Happy Holidays!
Top Business Stories of 2018
Slow but steady growth: While it likely won’t meet the 5.4% growth rate estimated by the government at the end of last year (nor the lofty 7% yearly target set out by President Joko Widodo at the start of his administration), Indonesia’s GDP once again grew by an average of more than 5% per quarter (5.06% year-on-year in Q1, 5.27% in Q2 and 5.17% in Q3) generally beating market predictions in spite of growing instability in international markets and a weakening rupiah, both of which can be attributed to fallout from the US-China trade war. Looking ahead, Bank Indonesia’s latest midpoint GDP growth projection for 2019 is 5.2%.
Rupiah’s new normal: Starting 2018 at IDR 13,542 to the dollar, the rupiah fell to its lowest levels since the 1998 economic crisis this year, surpassing the psychological threshold level of IDR 15,000 (it currently sits at about IDR 14,580). Despite that, the government has generally been praised for its measured currency control policy, including five interest rate hikes, in the face of mounting external pressures. After a rally late in the year, Bank Indonesia Governor Perry Warjiyo predicts that the rupiah will continue its stabilizing trend into the new year.
Freeport handover: After years of wrangling with US mining giant Freeport-McMoRan over ownership rights of Papua’s Grasberg, the world’s second-largest copper mine, the Indonesian government says state-owned miner PT Inalum is set to acquire a majority stake in the operation in the coming weeks, pending environmental clearances from the government that should take place before the end of the year.
Go-Jek goes regional as ride-hailing war ramps up
Indonesian ride-hailing “unicorn” Go-Jek continued its high-speed growth in 2018 (sources put its most recent valuation at about $9-10 billion), becoming a regional player, with operations launching in Vietnam and Singapore as part of a $500 million expansion plan that also includes moves into Thailand and the Philippines in the near future.
The expansion ramps up Go-Jek’s rivalry with Singapore-based Grab, which bought out Uber’s Southeast Asian business in March in exchange for a 27.5% stake in their company. Grab has said that much of the billions in fresh funding it has raised this year will be directed at aggressively expanding in Indonesia.
Buying into e-commerce: Last week’s announcement that Tokopedia had secured $1.1 billion in its latest funding round, led by Chinese e-commerce giant Alibaba Group and Japan’s SoftBank Group, underscored the huge potential for growth investors see in Indonesia’s rapidly expanding e-commerce sector. McKinsey recently forecasted that online sales in Indonesia would reach $65 billion annually by 2022, eight times the $8 billion recorded in 2017.
Cutting red tape: The government passed a number of regulatory reforms aimed at easing business friction and attracting more foreign direct investment this year, including a new centralized licensing system, new rules on fintech and e-money, and streamlining applications for temporary worker permits.
FDI still put off: Those reforms seem to have come too late to improve foreign direct investment this year, however, with the country’s investment board projecting FDI to be about $11 billion to $13 billion for 2018, far less than the average in recent years of $20 billion per year. Officials blamed the steep decline on a perception of slow policy reform at the start of 2018, but said FDI picked up later, in part due to a planned revision to the government’s negative investment list.
Palm oil pause: After years of pressure from environmental activists, the government finally passed a moratorium on the development of new palm oil plantations, which will last for three years, and ordered a full review of existing ones. Producers of the controversial commodity (exports of which reached $22 billion in 2017) have also faced increasingly sluggish global demand due to negative sentiments about it in Europe, as well as numerous allegations of unethical sourcing and bribery scandals.
Top Political Stories of 2018
Reading the regional elections
In June, Indonesians voted in regional elections for candidates in 171 contests across the country. Analysts were divided on whether the results constituted a good sign for Jokowi (his supporters won in several important battlegrounds, especially Ridwan Kamil for the governorship of West Java) or a bad sign for the incumbent (many observers thought the overall result pointed to a strengthening of opposition support in other key regions throughout the country; candidate’s from PDI-P lost in 11 of the 15 governor’s races they were competing in).
The National Mandate Party (PAN) performed strongly (with its candidates winning in 10 governor races), which led many to predict that Gerindra Chairman Prabowo Subianto would pick PAN chairman Zulkifli Hasan as his running mate, but that prognostication obviously did not bear out.
Jokowi v Prabowo 2.0
After months of speculation about who Jokowi and Prabowo would pick as their running mates (and a fair bit of speculation over whether Prabowo would even run at all) the incumbent and his election rematch rival both made surprising, last-minute picks for their campaign partners.
Prabowo had been widely expected to pick former President Susilo Bambang Yudhoyono’s son, Agus Harimurti Yudhoyono, after declaring that SBY’s Democratic Party had joined his coalition, but in the end chose former Jakarta Vice Governor Sandiaga Uno (who was accused of paying IDR 1 trillion to coalition allies PKS and PAN as “political dowry” to secure his position).
Jokowi seemed ready to choose former Constitutional Court chief justice Mahfud MD, but also surprised observers by instead picking Ma’ruf Amin, the head of the Indonesian Ulema Council (MUI). Many believe Jokowi strategically chose Ma’ruf in order to neutralize attempts at Islamic mobilization by the opposition (as those which led to former Jakarta Governor Basuki “Ahok” Tjahaja Purnama’s downfall over his highly controversial blasphemy case) but there are also rumors that the president’s hand was forced after senior members of Nahdlatul Ulama — Indonesia’s largest Muslim organization — said he would lose NU’s support if he did not pick Ma’ruf.
Prabowo’s campaign has suffered numerous scandals and PR blunders, most notably a scandal involving his now former campaigner, Ratna Sarumpaet, but he and Sandiaga have remained steady in hammering the incumbent on economic issues. Although he has consistently lagged behind Jokowi by double digits in most polls, some of the most recent surveys suggest he is finally gaining ground on the president. Prabowo’s camp has said that they plan to ramp up their campaign in January, but they still have a lot to do before April’s election if the race is going to even be as close as it was in 2014.
Banner year for the KPK: Defying concerns about its leadership, funding and institutional attacks on its independent powers, the Corruption Eradication Commission (KPK) has had a string of major victories this year, indicting and in many cases convicting a host of high-level officials, including Cianjur Regent Irvan Rivano Muchtar, Deputy House Speaker and senior PAN politician Taufik Kurniawan, former Jambi Governor Zumi Zola, 41 out of the 45 members of the Malang DPRD and, most impressively, former speaker of the house Setya Novanto — the once “untouchable” Golkar leader who finally got sentenced to 15 years in prison in April for his role in the massive e-KTP (electronic ID card) graft scandal.
Hard year for hardliners
Despite predictions that they would exert an outsized influence on national politics following their successful campaign to unseat former Jakarta Governor Basuki “Ahok” Tjahaja Purnama last year, Islamist hardliners have largely failed to get their agenda and candidates in play due to infighting within the 212 movement and the continued absence of their figurehead, Islamic Defenders Front (FPI) founder Rizieq Shihab (who remains in self-imposed exile in Saudi Arabia, despite his suspect status in that infamous pornography charge being dropped by the police).
Although Prabowo did seek and secure their support, his choice of Sandiaga Uno as running mate shows he is only willing to go so far to pander to them. That, along with Jokowi’s choice of MUI head Ma’ruf Amin as running mate, makes it seem unlikely that hardliners will play a decisive role in next year’s presidential election.
Oz-Indo relations in trouble after Jerusalem call: After weeks of warnings from Indonesia to reconsider, recently elected Australian PM Scott Morrison made the decision to move his country’s embassy in Israel to Jerusalem and in doing so has imperiled bilateral relations with its neighbor, most especially in regards to a major trade deal that had been all but set for passage earlier this year but has now been put on hold while Jokowi’s administration decides how they’ll react to the move.
Constitutionally progressive, supremely conservative
Indonesia’s Constitutional Court maintained its surprisingly progressive record this year (following their decision last year on the recognition of indigenous faiths) by striking down several of the most controversial articles from the 2018 Legislative Institutions (MD3) Law, including those perceived as shielding legislators from criminal investigations as well as those giving them the ability to legally punish their critics.
Activists also cheered the Constitutional Court’s decision from last week to uphold a petition to review the country’s marriage law on the grounds that the current minimum age of marriage for women (16, as compared to 19 for men) was discriminatory and unconstitutional. However, their decision did not change the law but instead ordered Parliament to revise the age limit within the next 3 years.
The Supreme Court, on the other hand, surprised few with its record of narrow-minded conservative decisions this year, including striking down a regulation passed by the General Elections Commission (KPU) banning political parties from running candidates who had previously been convicted on corruption charges; rejecting a judicial review of Ahok’s blasphemy conviction; ruling that paralegals are no longer permitted to provide direct legal assistance in Indonesian courts (which activists warn could create a legal aid crisis); and overturning a lower court decision and sentencing a teacher that had been sexually harassed by her teacher to 6 months in prison for creating a recording of his harassment (on the grounds that she hurt the principal’s reputation and dignity).
That last decision has been severely criticized from almost all corners and may even be personally rebuked by President Joko Widodo, who has indicated that he would give the teacher a pardon should the court not accept a judicial review of her guilty verdict.
Other Major News Stories
A year of devastating natural disasters
According to the latest figures from the National Agency for Disaster Management (BNPB), 4,211 people have died within the past year due to some 2,374 natural disasters, which also seriously injured 6,940 others and forced almost 10 million people to relocate.
The most devastating of those disasters were the 7.5-magnitude earthquake and tsunami that hit Sulawesi in late September and killed more than 1,400 people, and the 7.0-magnitude quake that rocked the island of Lombok in August killing nearly 400 people.
The crash of JT-610
Another tragedy struck on Oct. 29, when Lion Air flight JT-610 crashed into the ocean off the coast of West Java, killing all 189 people on board.
While investigators say they have not yet pinpointed the cause of the crash (a new search for the plane’s cockpit recorder, which may offer vital clues, is being mounted with funding by Lion) evidence suggests that it was caused by pilots struggling with an automatic anti-stall mechanism in the plane’s safety system that malfunctioned due to a faulty instrument.
Boeing, the manufacturer of the 737 MAX jet flying JT-610, has faced hard questions about their culpability in the crash, and Lion Air has threatened to cancel all of their remaining 737 orders with the company, worth $22 billion, over Boeing’s handling of the fallout.
Terrorism takes a horrific new form
The worst act of terrorism to hit Indonesia this year happened on May 13, when three churches in Surabaya were attacked by suicide bombers. Chillingly, the attacks were all committed by the members of a single family and the 18 killed in the attacks included 12 civilians as well as the four children from the bombers’ family, aged 8-19. That same day, three members of a family of six were killed after homemade bombs exploded in their apartment in Sidoarjo, a town near Surabaya. Police say the detonation was premature and that family members had been planning another attack.
Both families were connected to Jemaah Ansharut Daulah (JAD), a terrorist network loyal to Islamic State (IS). JAD was also behind a deadly riot at the Mobile Brigade Command Center (Mako Brimob) detention facility the week before that precipitated the Surabaya attack. Indonesian police say both the riot and subsequent bombings were done based on instructions from IS as part of their global terror strategy,
Authorities quickly ramped up anti-terrorism efforts in the wake of the attacks, with Parliament passing a bill to greatly expand law enforcement’s ability to take preventative action against terrorist attacks. Hundreds of people suspected of being connected to the attacks in Surabaya and other acts of terror have been detained by police and JAD was officially banned under the new law’s statutes.
Asian Games gets the gold: Indonesia earned high praise for its performance during the huge regional athletic competition that took place in August and September. Not only did the host country exceed expectations in terms of its logistical and infrastructure preparedness, Indonesia’s athletes also did the country proud with a historic 31-gold-medal finish. President Jokowi capitalized on the moment by announcing that Indonesia was making a surprise bid for the 2032 Olympics.
Discrimination against LGBT reaches alarming levels
Activists were concerned early in the year that Parliament would succumb to public pressure and pass a draft revision of the country’s criminal code (KUHP) that would criminalize homosexual relationships. But politicians, surprisingly, proved willing to back off some of the bill’s most contentious articles, including those regarding sex outside of marriage, but consensus could not be reached and the bill remains tabled for now.
Anti-LGBT sentiments saw a sharp rise later in the year, especially in the highly conservative region of West Sumatra, which saw numerous anti-LGBT rallies, led by government officials and featuring thousands of participants. There has also been a sharp increase in state-sanctioned discrimination including the extra-legal harassment and detainment of LGBT “suspects” by authorities — one city has even passed a law heavily fining LGBT behavior while leaders agitate for more brutal criminal punishments. Activists say the minority group is being scapegoated for political purposes and it could get worse ahead of next year’s elections.
Papua tensions high
Long-simmering tensions in West Papua escalated late in the year with the arrest of hundreds of Papuan independence activists at rallies across the country on Dec. 2. On the same day, the government claims that the West Papua National Liberation Army killed a group of 16 government construction workers (the separatists claim they were military officials). If the dead were not military, the incident would mark the first time West Papuan separatists have fatally attacked civilians, a huge escalation in the more than 50-year-old conflict.
The West Papua National Liberation Army have refused calls from authorities to surrender, saying they would continue their fight for an independent Papua after government officials said they would not engage in discussions with them.
Top Coconuts Jakarta News Stories of 2018
Indonesian Youtuber pulls a Logan Paul by filming dead body in Japan’s suicide forest
Indonesian boy mistakes father’s ecstasy stash for candy, shares it with friends
After living together for 21 years, Indonesian family tearily says goodbye to 200 kg ‘fat crocodile’
Indonesian mayor kicks cops to ‘test their physique’, police chief: They’re happy to be kicked
Indonesian cop shot with arrow in the eye during riot in Papua, casually walks away (Video)