The year in review; Economic downturn, the rule of law at the crossroads and the 2019 match

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Independent Observer

IO, Jakarta – In less than two weeks, we will leave 2018 behind. Various issues still facing the nation, starting from politics, the economy, to the rule of law have become “homework” for the Jokowi-Jusuf Kalla administration. Will Indonesia be able to solve these issues? If it can, it will have to do so amidst the difficulty of an election year, where the House of Representatives (DPR), Regional House of Representatives (DPRD), Regional Representative Council (DPD), and Presidential Elections will all take place simultaneously in mid-April.

The economy and politics always intersect. As for the economy, the government has work to do on the weakening of the Rupiah alongside bloated government and massive state-owned enterprise (BUMN) debts. Is the government going to be able to pay such a massive debt? Ministry of Finance Sri Mulyani herself stated that the debt to GDP ratio was high. Debt per person is also high with Rp 13 million of debt being burdened on any Indonesian citizen born today. Will your grandchildren thank you for having to keep paying off this obligation decades in the future? If it is not to be paid off, will Indonesia suffer the same fate as Sri Lanka?

One of the government’s most important tools in maintaining justice is the law. Unfortunately, as of late, it seems to be more like the old adage: “The law is sharp cutting down but dull cutting upward”. Corruptors are only punished lightly (if at all). The perpetrators behind the acid attack on Novel Baswedan have still “not been discovered”. On the political side, the 2019 Presidential Election has become interesting as it is now a rematch of the last presidential election, with Joko Widodo-Kyai Hajj (KH) Ma’ruf Amin going up against Prabowo Subianto-Sandiaga Salahuddin Uno. The political sphere in Indonesia has also been affected by the great gathering of the 212 Reunion recently held around Monas in Jakarta. So, where is Indonesia headed?

A frighteningly turbulent Rupiah and ceaselessly swelling debt
The value of a nation’s currency reflects its true self and as such the continuous fall of the Rupiah accurately reflects Indonesia’s current economic situation. When President Jokowi was inaugurated on Monday, October 20, 2014, according to foreign exchange data from Bloomberg the Rupiah stood at 12,011 per US dollar. On Monday, October 8, 2018, almost four years later, the Rupiah is teetering up around Rp 15,200 per US dollar, nearly Rp 3,000 less valuable. On Wednesday, December 19, 2018, the Rupiah closed at Rp 14,385 per US dollar on the spot market, strengthening 0.76% from the previous day. Although strengthening slightly, if compared to when Jokowi took office it has depreciated Rp 2,374.

When compared to its dynamics during the terms of other post-reformation presidents, the Rupiah has experienced its worse fate during Jokowi’s reign. During the era of President Susilo Bambang Yudhoyono (SBY), the world was gripped by a financial crisis. In 2007, as a result of the subprime mortgage crisis in the United States, the Rupiahs exchange rate sat at between Rp 9,000 – Rp 10,000 per US dollar. The weakening of the Rupiah was delayed until only after the financial crisis ended and western currencies began to recover. Around 2009, the US dollar hovered between Rp 11,800 to above Rp 12,000.

Senior economist Anwar Nasution believes that the current depreciation of the national currency is a result of the government’s continuous borrowing, in a desperate attempt to cover the yawning deficit in the state budget and balance of payments. Tax revenue has not been optimal, with Indonesia having the lowest tax revenue among developing nations. Anwar asserts that the Rupiah is weak because Indonesia’s economy has a poor foundation. Symptoms of this include Indonesia’s feeble tax collection and its weak financial institutions.

A similar view was expressed by economist Fuad Bawzier, who also believes the poor foundation of Indonesia’s economy is to blame for the Rupiah’s decline. By way of excusing itself, the Indonesian government has blamed the weakening on global instability and Rupiah’s search for a new equilibrium, while assuring the public the dip is temporary and recovery is on the way. “The government once said the exchange rate would never touch Rp 14,000 as this was a psychological barrier. The fact is that it has burst through, all the way to Rp 15,000. And that’s a fact. This is a result of not resolving the core problems triggering the weakening of the Rupiah. The problems themselves have instead ballooned. The main problem is the current account deficit: the government estimated that the deficit would reach 23 billion US dollars per year. However, it instead spiked at 25 billion US dollars. In the first semester of 2018, the current account deficit was 13.7 billion US dollars. A deficit in the current account balance means that the Indonesian economy’s demand for dollars could not be met. The market read this and (Indonesia) came up short. Hunting for dollars would be hard,” said Fuad.

Our Rupiah weakened, claimed Fuad, as a result of the growth of imports being larger than the growth of exports. Exports only grew by 5% while imports grew by 6%. Imports demand dollars. Exports bring in dollars. However, imports are currently on the rise while still being larger than exports. Fuad laments that the government’s solution to this was only temporary. The government intervened in the market by injecting up to 10 billion US dollars, even if it meant depleting its foreign exchange reserves, as a desperate measure: if it hadn’t intervened the situation might have become even worse.

While the Rupiah was still at approximately Rp 14,000, the government and state-owned enterprise (BUMN) debts continued to swell. Government debt rose to Rp 4,363.2 trillion as of August 31, 2018, a record for the Jokowi administration. In 2015, government debt was only Rp 3,165.2 trillion or 27.4% of GDP. In 2016, it rose to Rp 3,466.9 trillion or 27.5% of GDP and further increased to Rp 3,938 trillion or 29.2% of the GDP in 2017.

Economist Rizal Ramli is extremely critical of the continuous racking up of debt by the government. According to him, there are actually innovative ways to decrease government commitments. Unfortunately, the current government does not have the innovative debt management capabilities needed to achieve them. The key ingredient is stimulating and growing the economy. If the economy can grow twice its current size, the government will have a much larger capacity to pay off its debts, while the debt ratio will also improve greatly. Instead, however, the government has decided to crank up Bank Indonesia interest rates and tighten up by cutting its budget and increasing pressure on taxpayers. As a result, economic growth has stagnated at 5%.

As government debt increases, so does the debt of state-owned enterprises (BUMN). State-owned enterprise debts reached a total of Rp 4,825 trillion as of the end of 2017, a 38% increase from the Rp 3,488 accumulated in 2014. According to Ministry of State-Owned Enterprises records, state-owned enterprise debts will reach Rp 5,253 by the end of 2018, an increase of 8.87% over last year. The trend of state-owned enterprise debts passing economic growth numbers is worrisome.

State-owned enterprise debts would be fine if they were taken on prudently and based on a proper analysis. What the problem is, according to state-owned enterprise expert Said Didu, is when projects funded by these companies are not planned and executed from a sound business strategy. “I believe that the swelling of state-owned enterprise debts is not a result of objective business planning. For instance, many projects become a burden once finished, and their execution and funding become difficult, such as the Jakarta-Bandung high-speed rail project and the LRT, which also face problems,” explained Said.

Said Didu believes the burdening of state-owned enterprises by the government is a clear violation of the law, especially as state-owned enterprise debts are often used for infrastructure and wages such as for the airport trains, the LRT in Palembang, the Kertajati Airport, and many other poorly-run (and fundamentally unnecessary) infrastructure projects. State-owned enterprises are forced to undertake projects that are not economically worthwhile and are beyond their financial capabilities. Worthwhile projects such as renovating Pertamina oil refineries are instead ignored.

Kusfiardi, a political/economic analyist, believes the problem with state-owned enterprises is that they are treated as regular companies. As a result, they are forced to search for revenue and be managed based on the principles of private companies, whereas they actually have different obligations and privileges, as is specifically written in the 1945 Constitution. According to the constitution, they are meant to manage the land, water, and natural resources contained within them while also managing the production of goods important to the nation and the lives of the many, all of which is for, as much as possible, the best welfare of the Indonesian people. When treated as a regular privately-owned company, state-owned enterprises are forced to be managed as one and to chase revenue targets while also facing tax and funding burdens like any other company. This is despite state-owned enterprises belonging to the country. Unfortunately, state-owned enterprises are mismanaged, causing problems in assessing their financial management and performance. As a result, they have taken the shortcut and searched for loans from elsewhere. State-owned enterprises should be able to collaborate with other state-owned enterprises, such as Pertamina working together with banking state-owned enterprises and other publicly owned financial institutions. “I believe the government has mismanaged state-owned enterprises, in their role, function and authority, which has been made the same as a regular company. As a result, now our state-owned enterprises have entered into the pattern of corporatization. That wouldn’t be a problem if they were private companies. However, they are owned by the country. The implication is that when they take on debt, especially in dollars, this will certainly affect the price of their services. This will incentivize them to raise prices or use government funds – or in this case subsidies. Through this pattern, in time our state-owned enterprises will be privatized through a mechanism which has already been long ongoing: IPO’s. If they go through an IPO, they will become more privatized and will no longer be fully-controlled by the nation but rather tied to the rules of the capital market, the rules of private companies, and so on. This is a mistake in the treatment of state-owned enterprises. By taking on debt, state-owned enterprises will be further burdened and this will affect not just their service but also their ability to pay. In the end, if they have trouble paying, there is a potential of ‘debt to swap’ or their debts will be exchanged for bonds or stocks, and that will also lead to privatization. So, behind the debts of these state-owned enterprises might be a veiled attempt at privatizing our state-owned enterprises as if they were directly privatized, many citizens would be in opposition, as that would endanger them,” warned Kusfiardi.

Stagnant Law
Now, let’s talk about the law. The above adage seems to ring true under Jokowi’s administration. Various criminal cases which have fixed the public’s attention have now miraculously disappeared, and their fate remains unclear. Fresh in the public’s memory is the acid attack on Corruption Eradication Commission (KPK) investigator Novel Baswedan, carried out by two men on a motorcycle. At the time, Novel was on his way home after morning prayers in Jami Al-Ihsan Mosque in Pegangsaan Dua District, Kelapa Gading, North Jakarta. The attack happened so quickly that Novel had no time to react and ended with the acid striking his face. Not one person was at the location when the attack happened and Novel himself could not see who had carried out the horrific assault. The attack took place on April 11, 2017, more than one and a half years have passed with the police still allegedly helpless to identify and arrest the perpetrators.

Constitutional law expert Margarito Kamis stated that the government’s performance in the field of law has been very poor under Jokowi. Margarito gave Jokowi a grade of 5 out of 10 for enforcement of the law under his administration. According to Margarito, justice is not complicated. If found guilty, one must be prosecuted under the law. If found innocent, then one must be declared so. “The President cannot argue, by handing over power to another institution; this is an incorrect argument. Institutionally, the President’s name is authorized as his duty is to enforce the law,” explained Margarito.

Purposefully Not Revealed
During a special interview with Novel Baswedan, the KPK investigator stated that the apparent lack of developments in his case was done intentionally. “I already said this, four months after the incident. At the time I was already in a position where I could come to a conclusion from the evidence, conjecture, and facts collected. Instead, I received information that this case would not be processed seriously in the two weeks to one month after the incident,” he explained.

Novel was able to come to such a conclusion to his case after observing a number of indicators. First, there was suspicion of the involvement of high-ranking officers in the Indonesian Police. Second, important evidence was not collected, such as CCTV footage around Novel’s house. At the time, police investigators stated they had collected footage from 100 CCTVs but it turned out those were taken as alibis for the suspected perpetrators.

From early on in the case, Novel suspected there was a someone powerful involved. “I was worried that the Indonesian Police leaders who wanted to investigate the case had been scared off. If the Indonesian Police leaders were frightened, I could understand. Why? Because as we know leaders in the Indonesian Police are easily replaced and factors of political power affecting rankings and positions means if they were unnerved and stalled, I could still understand that,” he said.

Novel stated that whether or not his case would be solved was up to the President. If the President were to take the correct steps, Novel is optimistic his case could be solved, but if the President maintains his silence (like he is now doing), Novel is pessimistic the case will go anywhere.

Disputes Over the Permanent Voters List
“The people who cast the votes decide nothing; the people who count the votes decide everything”. A quote attributed to Joseph Stalin, pertinent to the simultaneous elections coming up in April 2019.

Four months from the legislative and presidential election, the typically annoying problems brought on by the Permanent Voters List (DPT) have resurfaced once again. On September 5, the General Election Commission (KPU) approved the transformation of the Temporary Voters List (DPS) to the DPT for the 2019 General Election. After the KPU delivered its decision, information surfaced that there were 31 million voters who had not been entered into the DPT. This caused the two bodies most responsible for the DPT to differ in opinion. KPU Commissioner Viryan Azis stated that there were 31 million voters who had not been entered into the DPT even though they had already registered for electronic ID cards (e-KTP). Viryan stated that the number was based on a report from the Directorate General of Population and Civil Registration. At the same time, the Minister of Home Affairs, Tjahjo Kumolo asserted that there was no addition of data to the Potential Voters List (DP4) given by the Ministry of Home Affairs to the KPU. The 31 million voters were part of the 197 million in the DP4 given at the end of 2017. Time was closing in on the quinquennial celebration of democracy while the public was in the middle of spectating an absurd quarrel between two of the most important government bodies relating to the process. The flagrant lack of professionalism shown in managing the DPT data alarmed the public, and aroused distrust about the integrity and fairness of the upcoming election.

Political observer from Exposit Strategic Arif Susanto stated that the 31 million voters were in fact a significant matter. Early on, the KPU first determined that the DPT would contain 187 million voters – and then astonishingly revised this in September to only 185 million. “There should have not been any more revisions after that. But here we have a problem that recurs persistently, every five years. The KPU almost always changes around the voters’ list. There are two main reasons for this. First is the fact that our population data is not yet integrated. Second, poor coordination between the KPU and the Ministry of Home Affairs’ Directorate General of Population and Civil Registration,” he pointed out. “KPU stated that they would verify the data, and the Ministry of Home Affairs stated that the data was already ‘by name’ and ‘by address’. Clearly, there should be some intelligent supervision, as this does not only concern the interests of the legislative candidates or the presidential candidates but also the basic interest of the public,” continued Arif.

Political observer from LIPI Siti Suhro stated that the 31 million voters unaccounted for by the DPT must not become a serious issue during the election. Those in power must be pushed to solve the problem as soon as possible and not wait for the deadline in November. This will become a point of dispute in the upcoming election if not solved, as has been proven by previous elections where the DPT has caused problems. “We have to learn from experience where the results will be doubted by the electorate, as they are considered to have deleted names of those who should have voted. So, the solving of this problem of the DPT is quite concerning to both presidential candidates,” she said.

The experience of four elections should be a lesson and a reference so that we do not make the same mistakes over and over again. The problems of the DPT should at least be handled intelligently, so as to ensure there are no doubts among voters. “That is also not elegant, after four national elections it is still like this, after 1400-ish regional elections and the problems still concern the DPT. In such an absurd context, we see serious stagnation,” asserted Siti.

Mapping Problems
Besides the problems surrounding the DPT, another issue just as important is that of the electronic ID card (e-KTP) cases, starting from their dumping and scattering to their disposal. Director General of Population and Civil Registration of the Ministry of Home Affairs Zudan Arief Fakrulloh believes that however many e-KTP cases arise, what is important is how they are handled. The scattering of e-KTP’s in Bogor was accidental, and the standard operational procedure (SOP) there has been improved since. As for the cases where there was purposeful disposal of e-KTPs or purposeful disregard of the SOP such as in Serang, the Department Head was terminated and given harsh punishment.

Data, such as that on ID cards, are very important and cannot be handled carelessly, as they are used by the government to calculate birth rates, mortality rates, gender ratios and so on. All of which is related to the population. Siti Zuhro stated that this is the first time she witnessed thousands of ID cards scattered in such a fashion. Her biggest question is what is wrong with these e-KTPs? These ID cards are not only for population data but also a reference for voter population data, age requirement data, and gender data from all across Indonesia. “This cannot be handled carelessly as it has entered the political landscape. This population (data) is directly connected to the political landscape, especially as now the elections are now simultaneous with the legislative and presidential elections being held simultaneously and certainly with problems other than in the DPT: they will still encounter other problems, especially with the addition of the DPT. Throughout the history of our elections, this DPT has persistently acted as the source of serious dispute,” asserted Siti.

This e-KTP problem has indeed caused serious mistrust among voters and political party members. At its core, democracy depends on how to build trust through every step of its process. “Since the beginning, I screamed about the DPT in the 2019 Presidential Election. I repeatedly shouted asking why Poniran’s name, or whoever it was, was recorded dozens of times in the same data. This is a problem. Was the DPT created purposefully that way to benefit someone? Whether or not there is an election, the population data must be guarded and guaranteed; it may not be bought and sold,” asserted Siti.

The handling of population data should be improved, as is does not just concern a short-term interest but rather the interests of a nation that has been independent for 73 years.

Corruption Cases
Still on the issues concerning the law, corruption has also become a tangled web difficult to unravel. On February 2018, Transparency International released its Corruption Perception Index for 2017. Indonesia ranked in 96th Place!!  Such an honor. Indonesia’s corruption perception index stayed the same from 2016 to 2017 at 37, however, sinking downward. In 2016, Indonesia was ranked 90th, far below Southeast Asian nations such as Singapore (6), Brunei Darussalam (32), Malaysia (62), and even Timor Leste (91).

At the same time, data from the Ministry of Home Affairs revealed that between 2004 and 2017 there were 392 district heads who were suspected of having broken the law. The Corruption Eradication Commission (KPK) recorded the arrest of 26 district heads in a number of suspected corruption cases in 2018. Most recently, on Wednesday, December 12, 2018, the KPK arrested Cianjur Regent Irvan Rivano Muchtar as a suspect after being caught in a sting operation.

Massive action has been taken on corrupters, mainly by the KPK. Unfortunately, until now, punishment of corrupters has not been effective as a deterrent as evidenced by the current flourishing of corruption. Arrests are being continuously carried out by law enforcement. According to Lalola Easter, an Indonesian Corruption Watch (ICW) Law and Judicial Monitoring Division member, current attempts at fighting corruption have not deterred corruptors as the punishments have not been harsh enough. On average, sentencing has been 2.2 months! Another way to deter corruptors is through impoverishment. Impoverishment can be done in two ways. First, rulings which add to the total money which must be repaid. This only applies to corruption cases which cause losses to the country. Second, is by relying on the money laundering crime laws.

In 2017, ICW found that only four cases included prosecution using money laundering crime laws even though there were 1,249 cases with 1,381 defendants. “Even of those none were found guilty by the judge. So, they were only charges. We feel there is a lack of seriousness from the enforcers of the law in bringing up charges. Also, there haven’t been rulings punishing defendants from the judiciary,” complained Lalola, who also said there were complaints that imprisonment was repressive. Imprisonment was seen to be ineffective as a deterrent. Unfortunately, impoverishment has also not been carried out optimally. “We are also ‘confused’ in what direction corruption enforcement is being taken. Because nothing is being reflected on based on our study, neither deterrents through imprisonment or through the mechanism of impoverishment,” he continued.

The 2019 Race
The contenders of next year’s presidential election are Prabowo Subianto with Sandiaga Uno and Joko Widodo with Ma’ruf Amin.

The incumbents face a myriad of criticism as a result of the poor condition of the nation’s economy. The Rupiah has dropped, growth hasn’t exceeded 5% in four years, prices of basic needs have skyrocketed while purchasing power has weakened, employment is scarce, exports have declined, and debts are on an upward trend. Jokowi has only been able to manage inflation. In the 2015-2019 National Mid-Term Development Plan (RPJMN) only one of the targets was reached (inflation), one was almost reached (unemployment), and thirteen were not reached, with some even worsening compared to targets from previous years, such as the debt to GDP ratio, budget deficit, foreign exchange reserve, and exchange rate of the Rupiah.

During his time as President, Jokowi’s biggest achievement has been infrastructure development. In fact, there has been so much infrastructure development that Jokowi has been forced to borrow in order to fund these projects, most which consist of toll road and airport construction. The death of construction workers and residents caused the temporary halting of infrastructure projects. Jokowi was also forced to stop a number of infrastructure projects as a result of funding difficulties.

The poor condition of Indonesia’s economy has created a big opportunity for challengers such as Prabowo-Sandiaga. As a result, through various venues, Prabowo and Sandiaga put forward programs that are focused on building the nation’s economy through a strong government and economic independence, specifically relating to price stability. Not only that, but the two also hope to create social justice for all of Indonesia, instead of just for a handful of elites.

According to Arif Susanto, Jokowi’s position as the incumbent has many benefits, one of which is media exposure. Prabowo-Sandiaga have received loyal supporters from conservative Muslims but are in need of escaping the image that has been forced on them. Prabowo’s leadership has shifted from a that of a military figure to one who is very close to conservative Muslims and is now considered to represent conservative religious views, especially among Muslims themselves.

The 212 Reunion’s Meaning
Human rights activist Natalius Pigai believes the meaning of 212 Reunion can be explained through its fight against Western perception. There is a strong perception in the West, including in both the U.S. and Europe, that Muslim majority nations are anti-democratic, anti-peace, and anti-humanitarian, the three pillars of the 21st century. After the creation of Western view that Muslim majority nations could not build modern countries based on peace, human rights, and democracy the three reunions; 411 in 2016, 212 in 2017, and 212 in 2018 became the peak of Islamic civilization which showed the world that this Western view was mistaken. These people created a society based on democracy, human rights, and peace.

Global Future Institute geopolitical analyst Hendrajit believes the secret power of the people was shown in the National Monument (Monas). It all started from the issue of Ahok. Starting from 411 to 212 to Ahok’s blasphemy verdict. Both the ummah and the ummah leaders found a new tradition in which they could show the people power of Indonesians. During the 212 Reunion there were no insults or attacks on the government but rather activities such as dhikr and mass prayers letting the people gather their spiritual energy. Through this, the people were able to feel the implicit message that truth and justice must be restored.

Hendrajit stated that the number of participants in the event was disputed, with some saying 7 million, 8 million and some even saying 40 thousand attended. “We will take the middle-of-the-road number of about 6-7 million. But for me, the number wasn’t important as seeing it visually in all of the locations already gave an impact, especially for the people around the event receiving a very impactful ‘shock therapy’ and this was ‘people power’. The problem was the Western media or the countries who all this time were called prima donnas of democracy suddenly gave a good response even though from a journalistic sensitivity this was ‘people power’. Perhaps even Manila who overthrew Marcos or the Arab spring in Egypt loses out to this. But that is specific to Indonesia. Yesterday there wasn’t only collective dhikr but a movement pattern that if paid attention to was a new tradition which has two cores, ukhuwah Islamiyah (Islamic brotherhood) and the rise of Islam, in the sense of spiritual energy, and this was not understood by many people. So, this is not about the issue of Islamic politics but the spiritual energy and ukhuwah Islamiyah,” he said. (Dessy Aipipidely, Ekawati, Syahrullah)

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