ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter

Indonesia's Jokowi needs to boost fight against corruption, not hinder it

Neutering Corruption Eradication Commission would harm economy and society

| Indonesia
Jokowi is giving the world reason to worry about Southeast Asia's biggest economy.   © Reuters

In his five years as Indonesian president, Joko "Jokowi" Widodo has put some key reform wins on the scoreboard. He has not been a game-changer like predecessor Susilo Bambang Yudhoyono, who returned Jakarta to investment-grade status after years of corrupt dictatorship, yet Jokowi accelerated efforts to build better roads, bridges, ports and power grids. He championed a tax amnesty scheme to encourage tycoons to invest at home.

Ahead of his inauguration on October 20, however, Jokowi is giving the world reason to worry about Southeast Asia's biggest economy once again because of his bewildering support for a law neutering the Corruption Eradication Commission, or KPK.

Created in 2002, its success has been integral to investors' return to the world's fourth most-populous nation, and Jokowi must reconsider his course of action, or risk a global loss of faith in Indonesia.

His choice is bewildering enough to bring students back onto the streets. Demonstrations against Jokowi's intention have yet to match the size of Hong Kong's, but tens of thousands of young Indonesians marching summon worrying echoes of a past that voters and investors hoped would not return.

The last time mass Indonesian protests made headlines was in 1998 amid the Asian crisis. Students turned out en masse to end the kleptocracy that dictator Suharto built over 31 years in power. Since then, a succession of leaders worked to eradicate Suharto Inc., whose tentacles touch every sector of the economy.

No post-Suharto leader did more disrupting than Yudhoyono. The former general made for an unconventional reformer, given the military's vast economic links.

When Yudhoyono entered office in 2004, Indonesia trailed Pakistan and Iraq in Transparency International's corruption perceptions index -- 133rd place. It had risen to 107th in 2014 when he passed the baton to Jokowi. In his first term, Jokowi improved the score to 89th.

Why would he jeopardize one of the best things Indonesia's economy has going for it, especially as growth falls to 5% this year, a far cry from the 7% Jokowi promised? The answer is political horse-trading.

Over the next five years, Jokowi wants to invest in education and health to strengthen the workforce. He promises to modernize labor laws and end budget-busting fuel subsidies. He aims to loosen rules on foreign ownership and hasten infrastructure upgrades. That includes an audacious $33 billion plan to move the capital from Jakarta to Borneo.

To win support for these priorities, Jokowi figures going easier on graft will pull opposition votes his way.

This gamble makes for a "hazy start to Jokowi's second term" which "burst the bubble of optimism" that Indonesia will stay on the path of reform, says analyst Peter Mumford of Eurasia Group. Jokowi, he says, is "highlighting his willingness to sacrifice progress on governance to achieve other political goals."

It is an economic own goal, but there is still time for Jokowi to change his mind. Perhaps he should be paying attention to what long-term overseas investors are telling him.

In the first half of the year, foreign direct investment into Indonesia fell 6.6% from the same period a year earlier. Some of this pessimism has its roots in the global trade war and worries about China's slowdown, but Jokowi's willingness to gamble with Jakarta's success in cleaning up politics and business is giving some pause.

The real cost could come as Jakarta struggles to finance the move to Borneo. Jakarta is literally sinking and its notorious traffic squanders $7 billion of gross domestic product each year. Moving the capital could dilute the power of the last vestiges of Suharto Inc., diversifying political power and industries geographically.

Yet history will almost surely record that the shift cost considerably more than $33 billion. Such projects always do. In fact, Jokowi may be ensuring it does by watering down the Corruption Eradication Commission's ability to police projects, ensure that foreign capital is productively utilized and guarantee that proceeds from natural resources enrich the masses.

The bill to neuter the anti-corruption efforts is not the only one animating young protesters. Outrage also stems from lawmakers hurriedly trying to make sex outside marriage a crime, curb free speech and throw most women having abortions in jail.

Jokowi should protect the anti-graft agency's independence, recognizing that it is a key ally in the fight to buttress Indonesia's global clout. It is better to address the criticism it faces, including overly lengthy investigations, to find a happy medium between probes and efficiency.

This is a moment for Jakarta to reassure investors and companies, not give them reasons to pivot to Malaysia or Vietnam.

Overseas interests have reason to worry that Jokowi is losing sight of why voters turned to him in the first place. In his 2012-2014 stint as Jakarta governor, he had a well-earned reputation for probity. He streamlined bureaucracy and put more public services online, cutting rent-seeking middlemen out of the process.

His campaign slogan was "Indonesia maju" or "Indonesia advancing." There is no time like the present to prove it.

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more