Rays of Hope

July 2020

Commentary by Wayne Forrest, President

We’re close to America’s Independence Day, typically a time of public celebrations, parties, and mass gatherings.   Of course, this year these events honoring the birth of our democracy are severely hampered by the pandemic.  Indonesia modeled its Republic on ours, but only in part.  After starting as a federal republic, Indonesia rejected it in favor of a unitary state, ascribing most powers to the central government.  Further along in its history (late 1950’s) it jettisoned important democratic institutions, such as press freedom, free elections and term limits, rule of law, separation of powers, and open political parties.  After 1998, free speech returned, the nation rebooted, and began returning to its democratic roots. Its democracy remains a work in progress but clearly much has been accomplished that would make the Founders proud.   Though Indonesia is still a unitary state, a few elements of federalism crept in through a series of decentralization laws and direct elections of provincial and regional leaders.  But, the essential core remains a centralized bureaucracy, budget authority, security apparatus and judicial system.   For example, unlike the US, Indonesia has one police academy for the whole country.   Similarly, local taxation is extremely limited, the courts are centrally managed,  and there is basically one health bureaucracy for the entire nation.

Perhaps these differences partially explain why Indonesia, with about the same population as the US (267 million vs 332 million) as well as the same starting date for the appearance of COVID-19 cases (late February),  has not been affected as drastically.   It is remarkable that the US had about as many new COVID-19 on July 1 (54,357) as Indonesia has had since the beginning of the pandemic, 60,695.   The differences in deaths is just as striking: US (128,783) vs Indonesia (3036).   It does seem at times here in the US that we have 50 republics each with their own approach to the pandemic; Indonesia basically has one, with some local variations. Certainly, Indonesia hasn’t been perfect in its approach and the rate of infections continues to steadily grow. But, the growth rate, unlike ours, is modest and arithmetic, hovering around 15% on a 7-day average.  I am not suggesting the US become a unitary republic, but we’re going to need more of a top down approach like Indonesia’s now and in the future if we are going to handle this enormous public health challenge from an adversary that sees no borders.

Other rays of hope can be detected and celebrated on this auspicious day:
  • Relocations:   In a variation of “If you build it, he will come”, the other worldly voice in Kevin Costner’s head in “Field of Dreams”,  Indonesia has allocated land on the north coast of Central Java for an industrial estate in Batang catering to “refugees” from China.  Although there hasn’t been public confirmation yet, apparently 7 companies, representing $38 billion in investment, have decided to move production facilities to the yet-to-be-completely estate.  President Jokowi traveled to Batang last week and appeared quite determined to go beyond this group to gain as many of a projected 112 exiting companies as possible.  The wise deputy chair of Indonesia’s Chamber of Commerce, Shinta Kamdani, warned against complacency: “This is a great development for Indonesia as we’ve been waiting for foreign investment to arrive in our country. We have to realize these [investment] commitments”.  I would add that the President should expend the large amount of political capital he has earned and push through reforms to the archaic labor law, currently stalled because of resistance in his own party.  Along with several other key hurdles, this law has stymied investment in labor-intensive industries.
  • World Bank Milestone: Indonesia is now classified as an upper middle-income nation, based on its higher per capita income now above $4,000, an achievement that should not be underestimated.
  • Tax Rates: Indonesia announced corporate tax reductions for listed companies that could go as low as 16% which would be lower than Singapore’s
  • Judicial Mafia Indictment:  One of the highest figures in the highly centralized judicial system, Nurhaddin Abdurrahman, former secretary of the Supreme Court, was indicted for corruption.  His position allowed wide control over case scheduling, financial affairs of appeals and district courts, as well as judicial promotions.  The cash and material possessions found at his home in a 2016 KPK raid far outstripped his salary.
  • China Pushback: ASEAN issued one of its strongest statements on China’s militarization of the South China Sea at its annual summit.  This can help Indonesia navigate the growing number of land mines in the US-China relationship.
  • Super Chef Visits Indonesia:  British chef Gordan Ramsay visited West Sumatra to shoot an episode of his National Geographic program “Unchartered”.  Ramsay highlighted the culinary wonders of the region’s signature dish, rendang, (slow-cooked beef in coconut milk) and paid respect to one of Indonesia’s greatest chef’s, William Wongso.
Have a happy fourth.  Keep on the sunny side !
The writer’s opinions do not necessarily reflect those of the American Indonesian Chamber of Commerce or its members)