Indonesia

New momentum for Indonesia-EU free trade.

Incoming administrations in Brussels and Jakarta offer hope for progress in negotiations

After nearly a decade of negotiations, the proposed free trade agreement between the European Union and Indonesia may be becoming more feasible. This is according to Alif Alauddin in an analysis published in The Diplomat. Indeed, Indonesia aims to conclude negotiations under the administration of new President Prabowo Subianto, who officially took office on Sunday, Oct. 20. At the same time, the European Union unveiled a new European Commission team under the second term of Ursula von der Leyen, which began Sept. 17. The last roundtable between Brussels and Jakarta, held in July, showed that the remaining open issues are largely related to the domestic interests of both sides, which are concerned about protecting domestic industries from any disadvantages once the agreement enters into force. Since negotiations began in 2016, the EU has remained steadfast in enforcing sustainability standards, while Indonesia has found it difficult to meet these expectations. “Both sides now need to look more broadly at the changing geopolitical landscape,” argues The Diplomat, according to which Prabowo wants to seek Western trade and investment partners. This includes accelerating efforts to obtain environmental, sustainability and governance (ESG) certification for nickel mining sites to comply with EU and U.S. market standards. The ambition to achieve 8 percent annual economic growth during his first term will be largely driven by foreign investment, with a focus on green energy, electric vehicle manufacturing, advanced technology and the digital services sector. “Prabowo's inauguration should therefore be welcomed by the EU as an opportunity to revive talks on the free trade agreement,” it reads. “Likewise, ensuring Indonesian market access is a priority of the EU Commission,” as Jakarta could help it diversify its economic relations, reducing dependence on Beijing. Moreover, points out the Diplomat, “compared to imposing unilateral measures such as to dictate terms on key Indonesian products, a free trade agreement can be a more effective tool of external influence to meet global sustainability standards.” 

Prabowo Subianto's Economic Policies

Article by Luca Menghini

Indonesia's Path to Growth and Stability

Since October 20, 2024, Prabowo Subianto is the new president of Indonesia, following a highly contested election that brings both continuity and change. Building on the foundation laid by his predecessor, Joko Widodo, better known as Jokowi, Prabowo aims to boost Indonesia’s economic growth while introducing new strategies to address the long-standing structural challenges that have always characterized the country. His administration arrives at a crucial moment for Indonesia, which, as the largest economy in Southeast Asia, positions itself at the center of the global trade, especially given its wealth of natural resources.

Prabowo has emphasized that his commitment will be to continue many of Jokowi's policies, particularly concerning infrastructure development and resource management. Jokowi's administration saw Indonesia become a significant player in the electric vehicle supply chain, capitalizing on and leveraging its vast reserves of nickel, one of the key components used to manufacture EV batteries. Various foreign companies, including Hyundai and LG, have made significant investments in Indonesia, attracted by the opportunity to access these resources. Prabowo has promised to pay particular attention to developing the domestic downstream sector, which involves refining raw materials into high-value products. This is to ensure that Indonesia gains more benefits beyond the mere extraction of resources, allowing the country to better capitalize on the wealth present within its territory.

Prabowo's promises of continuity are reassuring for many people; however, compared to his predecessor, he faces an economy with new challenges. Under Jokowi, Indonesia experienced stable growth of around 5% per year. However, Prabowo has set an even more ambitious goal, aiming for growth of 8% during his presidency. Achieving this will not only require a continuous flow of investments in infrastructure but also reforms in other sectors, particularly in boosting the level of innovation and addressing the ongoing issue of informal employment in the country. Indonesia's economy, heavily reliant on exports of raw materials such as nickel and palm oil, needs to be diversified to ensure sustainable growth and avoid falling into what economists call the "middle-income trap." This is the point at which a country's economy begins to stagnate before reaching the status of a developed economy.

One of Prabowo's most ambitious plans is to significantly increase government spending, particularly on social programs such as free meals for school-aged children, one of his campaign promises. His administration is aiming to raise Indonesia's debt-to-GDP ratio from the current 39% to 50%, a move that is sparking a heated debate among economists and investors. While Prabowo's team argues that increasing the country's debt is necessary to provide the funds deemed essential for the various programs the government wants to implement, critics claim that such a move could destabilize Indonesia's long-standing fiscal discipline. Under Jokowi, Indonesia maintained conservative fiscal policies, with strict limits on budget deficits and debt issuance, which helped protect the economy from external shocks.

Prabowo's administration has reassured the markets by stating that the increase in borrowing will be accompanied by efforts to raise revenues. His team has proposed various measures to boost government income, including raising taxes and royalties from the mining sector, as well as enhancing the mechanisms for tax collection. However, the challenges are significant. The tax-to-GDP ratio remains low compared to other Southeast Asian nations, and many of the country's workers are employed informally, making it difficult to expand the tax base.

Energy and energy security are other key pillars of Prabowo's economic agenda. Indonesia is the largest producer of palm oil, and Prabowo is planning to expand its use in biofuel production, with the goal of reducing the country's dependence on diesel imports. Under the B35 policy introduced last year, a blend containing 35% palm oil is now legally required in biodiesel, and Prabowo has decided to increase this percentage to 50% by 2029. By reducing dependency on fuel imports, Prabowo hopes to improve the country’s trade balance and give a significant boost to domestic production. 

Regarding the issue of food security, Prabowo has emphasized the need for agricultural reforms to increase productivity and reduce Indonesia’s dependence on food imports. He has highlighted plans to invest in modernizing the agricultural sector, improving irrigation systems, and expanding access to credit for small-scale farmers. These measures aim to ensure that Indonesia meets the food needs of its population while also creating new opportunities in rural areas.

Prabowo's leadership will also be shaped by Indonesia's geopolitical position between the two global powers, the United States and China. Indonesia has maintained a neutral stance, carefully balancing its relations with both countries, and Prabowo is expected to continue this approach. China is Indonesia's largest trading partner, and economic ties between the two countries have strengthened in recent years, particularly in terms of infrastructure investments. At the same time, Indonesia remains a key partner of the United States in Southeast Asia, particularly in the security sector. Prabowo, a former general, is expected to continue developing Indonesia's defense capabilities while maintaining a neutral approach in the broader geopolitical competition between the United States and China.

Foreign investments will continue to play a key role in Prabowo's economic strategies. Under Jokowi, Indonesia saw significant growth in foreign direct investment (FDI), particularly in the mining and manufacturing sectors. Prabowo has indicated that he will maintain the incentives introduced under the previous administration to attract foreign investors, including tax breaks and streamlined regulations. However, the market reaction to Prabowo's economic policies has been mixed, with some investors concerned about the potential risks of increased borrowing. Recent downgrades by investment banks like Morgan Stanley reflect these concerns, although rating agencies such as Fitch and Moody's have maintained a stable outlook for Indonesia, citing the country's strong economic fundamentals.

Despite these challenges, Prabowo's presidency represents an opportunity for Indonesia to solidify its position as a regional economic leader. His administration is focused on industrial development, energy independence, and food security, which should lead to the goal of achieving long-term stability and growth. However, everything will depend on how effectively his government can balance the need for fiscal prudence with the demands of an ambitious economic agenda. Investors and international partners will be closely watching how Prabowo navigates these challenges in the early years of his presidency.

The inauguration of Prabowo's presidency marks the beginning of a new chapter for Indonesia. It is hoped that this chapter will be defined by efforts to accelerate growth while ensuring that its benefits are distributed equitably among the population. His ambitious targets, while challenging, signal a clear intention to transform Indonesia into a high-income country by 2045. If successful, his policies will not only lift millions of people out of poverty but also solidify Indonesia's role as a global economic power in the years to come.

Becoming Lumbung: cultural exchanges between Italy and Indonesia

Cultural and artistic exchange between the two countries has great potential. Becoming Lumbung is a first step to seize great opportunities

By Paola Pietronave

Between Italy and Indonesia, cultural and artistic exchange is a terrain with many avenues to explore. At the level of literature, contemporary arts, music, dance and culture in the broadest sense, there really seem to be many opportunities to expand and broaden mutual knowledge between the two countries.

For this reason, “Becoming Lumbung” was launched in 2023, which, thanks to the support of the Italian Council, sought to restore and disseminate in the Italian context some of the values and practices of ruangrupa and Gudskul Ekosistem, among the most relevant artistic collectives in the contemporary moment. 

ruangrupa was born in 2000 by a group of artists with the need to constitute a space (physical and mental) in which to cultivate a critical sensibility, and elaborate tools of analysis on urban contexts and culture in a broader sense, using different formats and languages. After several experiences geared toward building a collaborative network marked by mutual-help, knowledge sharing and critical thinking, Gudskul Ekosistem, founded with Serrum and Grafis Huru Hara, a “study space on the simulation of collective practices,” took shape in 2018, promoting the importance of critical and experimental dialogue through learning processes based on sharing and direct experience. 

In 2022 ruangrupa curated the 15th edition of documenta called, precisely documenta fifteen. Charles Esche called it “the first exhibition of the 21st century,” underscoring its importance in the history of exhibition making, thanks to the choice of “collective” curating and the activation of horizontal, rhizomatic and non-competitive collaborative processes. The foundational metaphor of the exhibition was “Lumbung,” or the traditional practice in Indonesia of sharing the surplus of rice among the families who manage the cultivated fields. This surplus is collected in a warehouse, and then distributed as needed through a collective decision-making process. This is a mutual-help approach to resource management that still survives today. “Lumbung” marked a paradigm shift capable of interrogating the dynamics and conditions of the contemporary art and culture system, proposing methodologies and practices marked by sustainability and sharing.

However, an exhibition of such magnitude has had little restitution in the Italian context, and “Becoming Lumbung” was the first attempt to disseminate its contents in an attempt to put them into practice. 

The project included an initial residency period in the spaces of Gudskul Ekosistem, which was followed by a phase of restitution and dissemination in the Italian context, using different formats (talks and workshops) and involving different institutions (ar/ge Kunst in Bolzano, MAMbo in Bologna, Fondazione Lac o Le Mon in San Cesario di Lecce and the Accademia Ligustica di Belle Arti in Genoa) and independent spaces (Alchemilla in Bologna, Osservatorio Futura in Turin and Disordedrama in Genoa). 

Through the choice to create moments of encounter and reflection, it was possible to build a first network of initiatives that welcomed with enthusiasm and interest the possibility of activating “Lumbung Italia,” a laboratory to explore sustainable ways to “live well together” within and beyond the art system. 

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  1. Documenta is the contemporary art exhibition, founded in 1955 by Arnold Bode, which is held every five years in Kassel for the duration of one hundred days, representing one of the reference points for research in the field of contemporary art in Europe. 
  2. Charles Esche is a museum director (for twenty years at the Van Abbenmuseum in Eindhoven), curator, writer and editorial director of Afterall Journal and Books, based at Central Saint Martins College of Art and Design (London).

Indonesia, Nusantara's time has come

The Southeast Asian country's new capital is ready for inauguration, despite many hiccups

By Anna Affranio

In a bold and historic move, in 2019 Indonesian president Jokowi had announced the decision to embark on an ambitious journey to relocate its capital from the bustling metropolis of Jakarta to a newly planned city called Nusantara. This unprecedented initiative is not just about shifting the seat of government but represents a transformative vision for the nation’s future. As Jakarta grapples with chronic issues like severe flooding, pollution, and overcrowding, Nusantara emerges as a beacon of hope, promising a more sustainable and equitable urban environment. Set in the heart of Borneo, this new capital has been designed to be a model city that champions green technology, cultural inclusivity, and economic growth. The relocation to Nusantara marks a pivotal moment in Indonesia's history, reshaping not only the geographic but also the socio-economic landscape of the archipelago.

Construction of the city began in mid 2022, and while it will still take several years for its completion, the Government expects to hold its official inauguration and the largest independence Day celebration on August 17th. President Joko Widodo himself began working from the presidential palace in his country’s new capital Nusantara in the last week of July and reported to have already started receiving officials for meetings here, in the president’s office. The governmental building, also known as Garuda Palace, named and shaped after the mythical bird Garuda—also a symbol on the country's coat of arms, has been completed just in time for inauguration day, and will actually serve as the backdrop for these celebrations. This momentous occasion symbolizes not just the physical relocation of the capital but also the launch of Nusantara as Indonesia's administrative and political heart.

The ambitious project, however, faces a mix of promising strides and formidable challenges. While the vision of creating a sustainable, cutting-edge city in the heart of Borneo continues to inspire, the journey has encountered delays and obstacles, particularly in securing the necessary funding and managing environmental concerns. Despite the government's efforts to adhere to a planned timeline, the complexities of infrastructure development, economic uncertainties, and ecological considerations have made the process more arduous than initially anticipated. The new capital is expected to be a smart, green city that utilizes renewable energy sources and environmentally-friendly waste management. However, the project has been characterized by delays, land acquisition obstacles, and a poor investment profile, among other issues. For instance, the influx of workers from other parts of Indonesia has created new business opportunities but also raised concerns among locals about land grabs, rising costs of living, and environmental degradation. Disputes over land ownership, particularly involving indigenous groups, have led to conflicts, as local communities struggle to assert their rights to the land, which in turns hinder the possibility to receive fair compensation.  

Moreover, the estimated project cost of $35 billion, with the government hoping to fund 80% through private investment, has seen lukewarm interest from foreign investors. So far, the government has invested around $3.4 billion, with an additional $2.5 billion from the private sector. In a bid to attract more investment, President Jokowi signed a presidential regulation granting investors a range of rights in the future capital, including land rights for up to 190 years.

In early June, the head and deputy head of the body overseeing Indonesia's planned new capital unexpectedly resigned, raising questions about the project's future development. These leadership changes, coupled with the various challenges, underline the complexities of relocating the capital and developing Nusantara as envisioned.

As Indonesia continues to push forward with this monumental project, Nusantara stands at a crossroads. The success of this new capital will depend on the country's ability to navigate financial, environmental, and social challenges, ensuring that the city not only serves as a political and administrative hub but also as a symbol of a sustainable and inclusive future for all Indonesians. 

Indonesia's New Security Landscape Under President Prabowo

The foreign policy approach of Indonesia's newly elected president will help determine the balance in the region.

By Alessia Caruso

In February 2024, Indonesia's Defence Minister Prabowo Subianto won the presidential election in South-East Asia's largest democracy. He will formally assume office from October, taking over from his long-time rival Joko Widodo. 

Prabowo's presidency opens against a backdrop of rising regional tensions, presenting him with a significant challenge in positioning himself within the political chessboard. At 72 years of age, the newly elected President will have to skilfully navigate this complex geopolitical landscape. It will be crucial to understand what foreign policy approach Prabowo will adopt. Indeed, his decisions will have inevitable repercussions on the role and balance of power within ASEAN. 

Tension in the South China Sea area has been drastically increasing in recent years. According to available data, the total military expenditure of the countries in the region has grown by 6.2% in recent years, reflecting the desire of these states to strengthen their presence and projection capabilities in the area. In parallel, there has been an intensification of regional strategic alliances. In particular, the US has become more actively engaged, strengthening political and military ties with allies such as Japan, the Philippines. The combination of clashes, increases in defence spending and alliances in the region highlights how the South China Sea has become one of the main theatres of geopolitical competition between the great powers in the Indo-Pacific.

As the most populous country and largest democracy in Southeast Asia, Indonesia plays a major role in the complex geopolitical context of the South China Sea. As tensions and conflicts in the area continue to escalate, all eyes are on how President Prabowo's administration will approach the increasingly tense regional environment.

During Widodo's tenure, Indonesia's approach towards China has evolved considerably from a proactive attitude aimed at promoting regional peace, to a passive, non-antagonistic one, while maintaining a firm defence of national borders in the Natuna Islands area, Indonesian territory claimed by China within its controversial ‘Dash line’. Under Widodo, the interest in redeeming a role in the regional balance of power has made way for the desire to develop local infrastructure, financed largely by China.

Although it is still too early to define how Prabowo will present himself in the international scenario, a clear indication was given by his visit to China, from 31 March to 2 April, at the personal invitation of President Xi Jinping. On this occasion, the President of the People's Republic extolled the development of bilateral relations between the two states, while Prabowo renewed his intention to pursue Widodo's cooperative policies. The intention is to strengthen economic, trade and anti-poverty relations. This is Prabowo's first trip as President-elect, and he thus decides to set the priorities of his term of office from the outset. This decision is reflected in the economic ties that have been built over the past decades between the two powers. The People's Republic has become Indonesia's main trading partner, accounting for 40% of its exports and 55% of its imports, thus creating an undoubted link of economic dependence. The visit thus testifies to the importance Prabowo intends to place on the domestic and economic dimension within his agenda, continuing his predecessor's policy of appeasement. The relationship established between the two states appears to all intents and purposes to be a mutual exchange agreement, such that Indonesia secures its economic interests, while China secures the tacit consent of the South China Sea's most populous nation, in a context where bilateral relations are becoming increasingly decisive. In describing his security and defence relationship with China, Prabowo describes the People's Republic as a key partner in ensuring stability and peace in the region. In doing so, the Indonesian general seems well prepared to cede control of the regional security and defence line to China, consciously abdicating his condemnation of military incursions into the territorial waters of other ASEAN member states. However, the risk of this strategy of security passivism is that Indonesia will abdicate altogether the political role it is entitled to within the region's balance of power. A role that, prior to Widodo's presidency, Indonesia was largely committed to redeeming.

The implications for ASEAN's resilience are important. Indeed, the risk is that the inability, as well as the lack of will, to take a stand within the regional debate will contribute to the fragmentation of political will, with the result that the region will increasingly become a playground for US-China rivalry. The lack of strategic positioning of the leading ASEAN democracy, in a tense context such as the South China Sea, is in itself a stance in favour of increasing fragmentation.

In conclusion, how the new Indonesian president will balance domestic, regional and global interests will be crucial in defining Indonesia's future positioning in the Asian arena and the consequent repercussions on the cohesion of ASEAN.

The fluidity of Indonesian Islam

Calling for the establishment of Sharia law are only minority groups, which counted much less in the last election on February 14 than in the past. This is probably due to the fluidity with which the Islamic faith has established itself in Indonesia and the constitutional approach contained in the Pancasila

By Francesco Mattogno

Being Islamic, in Indonesia, has always been a strategic choice. Or at least it is according to the theories of some historians. Some argue that Islam spread in the country from the 13th century as a result of trade relations with merchants from South Asia and the Arabian Peninsula, particularly from Indian Gujarat and Yemen. Others that the Chinese Muslim admiral Cheng Ho, who landed in Java in the 15th century, also contributed to its expansion. But beyond proselytizing, much of Islam's success in Indonesia may be due to geography.

Indonesia's is a territory spread over 17,000 islands, totally surrounded by water, not particularly famous for the quality of its soils, and therefore forced to trade. "Tired of paying tribute to the large and prosperous Hindu and Buddhist empires in the region," historian Carool Kersten told TRT World, many Indonesian rulers saw it as an opportunity to convert to Islam and "seek allies in Africa and the Middle East" at a time when Muslims, after the fall of Constantinople in the 15th century, controlled the world's sea routes.

It was not the consequence of foreign conquest, nor the result of the work of waves of preachers. Islam in Indonesia spread through a fluid, slow, diverse and probably peaceful process. Today nearly 90 percent of Indonesia's more than 275 million people are Muslim, a statistic that makes the country the largest Muslim-majority state in the world. A country not fully secular, but still democratic and tolerant. 

The preamble of the constitution still contains the Pancasila, or the five fundamental principles on which the Indonesian state is founded, stipulated in 1945. The first one states "faith in one God," and it is a deliberately vague concept. Early drafts of the text explicitly talked about introducing sharia, or Islamic law, into the constitution, a possibility later shelved in favor of greater religious openness. In fact, one cannot claim to be an atheist in Indonesia, but the constitution recognizes six other major religions (including Catholicism) and religious minorities are integrated into discussions of national interest. The vast majority of Indonesians, the offspring of this cultural and constitutional setting, are first and foremost nationalists and reject extremist currents that disavow the concept of belonging to the Indonesian nation-state. Islamic radicalism is present, but a minority, and the last elections on February 14 certified the marginality of the Muslim world as such within Jakarta's democratic system.

Extremist Islamic groups have rarely really mattered politically, but in 2014 and 2019 the dual clash between Joko Widodo and Prabowo Subianto had also played out on the level of religious polarization. If Jokowi could count on the support of moderate Islam, in the second presidential race Prabowo had brought to his side the Islamist organizations that had developed from the "212" movement, which arose between 2016 and 2017 during the campaign for the Jakarta governor's post between Anies Baswedan and Basuki Tjahaja Purnama ("Ahok"). Ahok, an ethnic Chinese Christian and a favorite for reelection, was accused of blasphemy by Anies, who stirred up his more radical supporters against him and effectively started the trial that led to his opponent being sentenced to two years in prison.

On the wave of increased political relevance, groups that grew out of the "212" movement had chosen Prabowo as their spokesman for the 2019 presidential election. This was despite the fact that the history of the former general and Gerindra, his right-wing nationalist party, was totally unrelated to religious extremism. It was about mutual political opportunism. Prabowo was looking for voters, the Islamists for support to enter state institutions. Jokowi's victory extinguished their hopes.

After the Ahok case, the Indonesian president had already disbanded the radical group Hizbut Tahrir Indonesia in 2017, later doing the same with the Islamic Defenders Front (FDI) in 2020. During Jokowi's second term, the rise of extremist organizations gradually lost momentum, due to government repression and reduced popular support, while moderate associations ended up tying themselves even more closely to institutions.

The two most important nonpolitical moderate Islamic organizations are the Nahdlatul Ulama (NU) and the Muhammadiyah, to which tens of millions of people belong. Connected to them are various members of Indonesian civil society and the political class, distributed fairly evenly across the various political forces, not just the purely Islamic ones, indeed. Since the first elections in 1955, Muslim parties have never been strong enough to govern on their own, and even the preliminary results of the February 14 parliamentary vote confirmed their secondary status. In order to enter institutions, therefore, moderate Islam has always been forced to distribute its support among various political leaders, especially after the 1998 democratic reforms and the end of the Suharto era.

While maintaining a facade of neutrality, support for the right candidates guarantees NU and Muhammadiyah access to public office. For example, in the last Jokowi government, NU delivered Vice President Ma'Ruf Amin and four ministers, including Religious Affairs. In the face of the diminishing relevance of the ideological aspect, pragmatism and political opportunism led Indonesia's two largest moderate Islamic groups to support all three candidates in the last elections with different leading figures: winner Prabowo Subianto, Anies Baswedan and Ganjar Pranowo.

The process of depolarization has thus reduced the value of political support from religious associations, making the role of Islam marginal in determining the outcome of the 2024 elections. For Anies, who given the precedent with Ahok was thought to be the more radical candidate, public support from Abu Bakar Bashir-the spiritual leader of Jemaah Islamiyah, the al-Qaeda-affiliated terrorist group that organized the 2002 Bali bombings in which 202 people died-was indeed threatening to undermine his cleaned-up image as a moderate politician.

Rather than the ultimate goal, with the establishment of sharia law, Islam in Indonesia increasingly counts as a means to political ends and as a positioning tool, domestically and internationally. Although now extended to almost all political forces, the support of at least part of moderate Islam is an essential condition of legitimacy for any candidate aiming to govern the country, which is why NU and Muhammadiyah (lately more in trouble) are reserved for prominent roles in the executive. In foreign policy, moreover, the Islamic faith is used as diplomatic leverage to elevate Indonesia to one of the leading countries in the Muslim world, and generally the government is more inclined to tolerate Islamic mobilization of its civil society when international issues are at the center of public discourse.

The universal support for Palestine in these months of escalating conflict with Israel, both by the political class and the public, shows that Islam remains a very important identity component for most Indonesians. Some observers believe that the next few years could see a return of conservative groups, which during Jokowi's second term would only tone it down in anticipation of more favorable political conditions. But it remains a remote possibility. Indonesian Islam has never been monolithic and, after passing through a phase of polarization, seems to have returned to the fluid and opportunistic state that allowed it to penetrate the country between the 13th and 15th centuries.

Nusantara, the bet of the new capital city

The government has pledged to finance 20 percent of the costs from the state budget, and for the rest it relies on private capital, including foreign. But the new capital is slow to attract investors, both domestic and foreign

By Annalisa Manzo 

In 2019, President Joko Widodo "Jokowi" announced the location of Indonesia's new capital in East Kalimantan province, the Indonesian part of the island of Borneo. It will be built on 180,000 hectares of land already owned by the government, thus minimizing acquisition costs, straddling two districts, Penajam Paser Utara and Kutai Kartanegara, near Balikpapan and Samarinda, the province's two largest cities. Balikpapan is home to oil refineries and a port, making it a major economic center. Samarinda is the capital of East Kalimantan Province. Compared to other areas of Kalimantan previously considered, much of the necessary infrastructure is already in place. Both cities have an international airport and could be connected to the rest of the island via highways and railways. Kalimantan is geographically located in the center of the country and is less exposed to volcanic eruptions, earthquakes and floods. "We cannot let Jakarta and the island of Java continue to bear the increasing burden of population density, subsidence, traffic, and air and water pollution," Jokowi said in a speech broadcast live on television. "The economic gap between Java and other islands in the archipelago has continued to widen despite the regional autonomy policy launched in 2001," he added. 54 percent of Indonesia's more than 260 million people reside on Java and 58 percent of the country's GDP is produced on the island, despite it being the smallest of Indonesia's five main islands.

The $32 billion megaproject aims to create a new capital from scratch. Its name is Nusantara - Indonesian for 'archipelago' - precisely to reflect the geography of the world's largest archipelago-state. Its construction has been planned in five phases until 2045, the 100th anniversary year of Indonesian independence. Work on the first phase began in 2022 and is expected to be completed by this year.

The primary stated goal in the Ibu Kota Negara Nusantara project-in short, IKN-as it is officially known, is to create a new, more geographically central hub for Indonesia and drive the nation's economic transformation, without centralizing Indonesia around Java anymore. The government estimates that the city's population will reach 60,000 in 2024, rising to 2 million by 2040.

The capital relocation is currently in the infrastructure development phase. The Ministry of Public Works and Construction has assured that the IKN project is proceeding according to plan. Work is focusing on the development of basic infrastructure and government buildings. The development of the central government area (KIPP, Kawasan Inti Pusat Pemerintahan), especially the Presidential Palace, which will be the largest complex in KIPP, is key to building public confidence and attracting investors. The palace will cover twice the area occupied in Gicarta and will be able to accommodate up to eight thousand people for ceremonial activities on August 17. Public infrastructure will also be built, such as places of worship, health facilities, parks, sports, educational and commercial areas, and housing for officials. This area will also be surrounded by green belts in line with the goal of making the capital a "smart forest city," with 65 percent of the land covered by urban forests, which will help achieve the goal of zero net emissions by 2045 through the use of renewable energy. Starting in August, many government ministries and agencies will open offices there, and the government plans to relocate 3,000 civil servants from July to November. In contrast, embassies and headquarters of foreign companies located in Jakarta have been reluctant to discuss relocation.

Regarding investment, the government has pledged to finance 20 percent of the costs from the state budget, and for the rest it relies on private capital, including foreign capital. But Nusantara has been slow to attract investors, both domestic and foreign. SoftBank has withdrawn plans citing concerns about economic sustainability. The government is claiming the interests of nearly 300 companies worldwide, but negotiations have yet to conclude. Few investors are willing to commit funds until Jokowi's successor--and his views on the new capital--are clear. Foreign investors also need to make sure that Nusantara's plans move forward after the elections.

Jokowi has made every effort to ensure that his successor continues the project, going so far as to pass a law on the new capital in early 2022, supported by 93 percent of the parties in the House of Representatives. Another guarantee became clear last October when Prabowo Subianto, the 72-year-old defense minister and former army general now leading the preliminary outcome of the Feb. 14 presidential election, announced that his running mate in the next election would be Jokowi's 36-year-old son Gibran Rakabuming, who intends to carry on his father's legacy.

The skepticism of foreign investors also reflects the observation that historically there have been few successful transfers. Many fear that Nusantara may share the fate of similar projects pursued by its neighbors in Southeast Asia who transferred their capital in the postcolonial era. In 1999, for example, Malaysia began relocating federal ministries and government agencies to its new administrative capital, Putrajaya, 25 kilometers south of Kuala Lumpur, which remains the country's financial and commercial capital to this day. Similarly, Myanmar in 2005 moved its administrative capital from Yangon to Naypyidaw, but most major embassies remained in Yangon.

There are many who doubt that Nusantara will be able to quickly replace Jakarta as a financial center. Kalimantan has industries that could support development, including forestry, agriculture, and mining, but Java has an industrial and service-based economy. It is uncertain whether it will be able to sustain the role of a true capital city: connectivity with other global cities, knowledge creation, administrative services. 

Despite doubts and strong criticism, Nusantara Capital Authority said the metropolis follows the models of Shenzhen and Dubai, two economic centers built from the ground up, as well as the other benchmarks of Canberra, Putrajaya or Washington D.C. to become a center of the world economy as well as a pivot of government and economic growth.

If the plans go ahead, Jokowi and his successor will succeed where previous Indonesian leaders have failed. However, massive deforestation, risks to biodiversity and wildlife, and overexploitation of the area's mineral resources remain major concerns, as well as the danger of corruption and excessive debt. As stated by I. M. Sukma, "a mega infrastructure project presents two distinct possibilities: the potential for a waste of funds if it is completely abandoned, with the project already underway, or the risk of a failed city, especially given the government's continuing challenges to attract the investment needed to make the center of the 'new Indonesia' a reality." We shall see. The future of Nusantara and the incoming government is yet to be written.

Nickel, Indonesia's gold

Jakarta is extremely rich in it, and the element has become strategically important due to the advancement of electric vehicle production. Attracting the interest of major powers

That there is unanimity toward the need to move away from fossil fuels by 2050 is now a fact, especially following the historic COP28 agreement. However, when it comes to considering the shift to renewable energy sources as an opportunity for sustainable growth for developing economies, unanimity leaves room for a view imbued with both optimism and pessimism. Indonesia, with its use of nickel as a driver of the green transition and subsequent environmental damage, is a case in point.

In recent years, nickel (especially class1 nickel) has become strategically important due to the advancement of electric vehicle (EV) production, whose annual sales will reach at least 41 million by 2030, according to the IEA. Due to its exceptional properties and high recycling efficiency, nickel contributes to the circular economy, and more broadly to the achievement of various SDGs. Not surprisingly, Indonesia, as the world's largest nickel producer with 52 percent of total global reserves, aspires to become an indispensable hub for the EV industry. Indeed, the country has cost advantages and relative ease of developing new projects compared to other countries producing the metal, including the Philippines, Russia and Australia. Moreover, with the adoption of regulations banning its export, the government has been able to attract massive investment, mainly from China.

However, while it is true that the phasing out of gas-powered cars is a major part of the energy transition, it is also true that processing nickel for use in EV batteries involves significant environmental impacts. Indeed, it is worth noting that most of Indonesia's production is class2 nickel, which requires processing processes to be transformed into class1 nickel. And, unfortunately, mining and processing activities have generated large volumes of toxic waste, caused deforestation and loss of biodiversity. It gives pause for discussion that the environmental damage is borne entirely by the place where the mining takes place, and ultimately by the communities living there. Just as it makes one wonder that these plants are highly energy intensive, sourcing mostly from coal-fired power plants. 

Nevertheless, nickel exploitation represents a significant opportunity for Indonesia to sustain its economic growth, consolidate its leadership role in the region, and aspire to be a high-income country. Being a critical sector for industrial balances, nickel inevitably affects geopolitical dynamics, making Jakarta an increasingly coveted prey for Beijing and Washington. On the one hand, China as the world leader in EV production, has invested $8 billion in 2022 increasing its influence in the country as a crossroads between the Indian and Pacific Oceans. Effectively, many nickel refining operators are owned by China's Jiangsu Delong Nickel Industry, just as the Morowali Industrial Park (IMIP) is Sino-Indonesian-owned. On the other hand, strategic ties between Washington and Indonesia were elevated to a Comprehensive Strategic Partnership (CSP) in November 2023, although they still remain superficial and lack economic cooperation. Indeed, the absence of bilateral free trade agreements between the U.S. and Indonesia and the resulting trade barriers will make it difficult to implement key programs for the CSP, including precisely the possibility of a critical minerals agreement. In conclusion, just as the transition to EVs alone will not be enough to ensure sustainable development, the persuasive attitudes of the two major powers toward Indonesia will also not be enough to achieve the abandonment of the non-alignment policy pursued by outgoing President Joko Widodo and, apparently, also by the next leader Prabowo Subianto.

‘Capitalism with Indonesian characteristics’: the role of State-owned enterprises in Jakarta's politics

The Indonesian economy is growing at a rapid pace, following a model that combines free market principles with State planning. During Jokowi's administration, state-owned companies have gained even more prominence. How will his successor Prabowo wield this tool?

Over the next twenty years, Indonesia could become the world's fourth-largest economy. Currently, it ranks seventh when measuring its GDP at purchasing power parity. The archipelago is endowed with abundant natural resources and a young, sizable workforce—two key factors for growth, albeit insufficient on their own. It also requires foreign investments and facilitating business activities. The Jokowi administration attempted to accomplish this in one fell and decisive swoop. In 2020, the Omnibus Law, a massive piece of legislation spanning about a thousand pages and touching many sectors, was passed. Even the trade policy follows the path of economic liberalization. Jakarta has intensified its diplomatic efforts to conclude an ambitious free trade agreement with the European Union and strongly opposes any foreign measure that may have protectionist effects on its exports, such as those from Brussels regarding palm oil.

Yet, despite the determined liberalizing push, State-Owned Enterprises (SOEs) continue to play a central role in the Indonesian economy, a role that has further strengthened in the last decade. Jokowism, as his government's economic doctrine is called, is a fusion of free market principles and robust State intervention. In Europe or the United States, where the market is deemed more efficient than the State by principle, such a mix would appear contradictory and even economically irrational. Not to Indonesians, nor to other Southeast Asian countries. This economic model, rewarded in recent decades by stable and vigorous GDP growth, predates Widodo and, as mentioned, is also present elsewhere in the region. In different forms, as described by Dr Gianmatteo Sabatino, a researcher at Zhongnan University of Economics and Law in Wuhan, in the excellent article The emerging trends of the modernization of state-controlled economy in the ASEAN space. The case of Indonesian State-Owned Enterprises (published on Rivista di Diritti Comparati, 1/2023).

Sabatino reconstructs how the Indonesian model of state-owned enterprise has evolved, starting from the commercial law of the Netherlands, which was transplanted into Indonesia during the colonial period, then passing through the regimes of Sukarno and Suharto. The independence process, officially sanctioned by the Indonesian Constitution of 1945, also involved the nationalization of Dutch public and private properties. Article 33 of the Constitution, still in force, states that ‘sectors of production which are important for the country and affect the life of the people shall be under the powers of the State’, as well as ‘the land, the waters and the natural resources’, which must be ‘shall be used to the greatest benefit of the people’. Article 33 also sets ‘economic democracy’ as the lodestar of the Indonesian economy. To implement these principles, Sukarno looked to the socialist economic planning model, also in line with his foreign policy of gradual rapprochement with the Soviet Union. This course was abruptly interrupted by Suharto's coup, supported by the United States to prevent Indonesia from definitively entering the Soviet orbit.

After brutally eliminating any socialist (or suspected socialist) elements, Suharto reversed course by promoting a liberalist economic model, albeit without much success. His reforms introduced corporate governance legal frameworks closer to those of Europe and America but clashed with the corporatism rooted in Indonesian society. Suharto's fall ushered in Indonesia's era of political-economic Reformasi, with the constitutional principle of economic democracy resurfacing and the emergence of a new ‘national’ development model. Despite demands from various sides, particularly from the International Monetary Fund, to continue with liberalizations and privatizations, Jakarta prefers to maintain the State's role in the economy. A well-administered public company can stimulate development and even facilitate the emergence of new private enterprises. Jokowi knows this well. His entrepreneurial career began as a manager of a State-owned cellulose factory and, after starting his own private business, the future president was repeatedly aided by SOEs in times of need.

However, Indonesian state capitalism is exposed to two serious risks. Private enterprises need personal and political contacts in the government to conduct business and cooperate with their State counterparts. A good network of contacts can keep a company afloat that would otherwise be destined to fail. This dynamic then produces the second problem: the risk of interest coalitions forming between ministries and companies that degenerate into corruption or paralyze decision-making processes. This is a significant problem, as a corrupt and unstable political system can deter the much-sought foreign investment. A ministry may put aside more important political goals to prioritize protecting the companies it owns, even at the expense of clashing with other ministries. For example, negotiations with the EU for the free trade agreement were greatly hindered by internal divisions within Widodo's cabinet, with each ministry taking sides for or against certain issues. Perhaps the Ministry of Agriculture would want to reject every European request regarding palm oil, even at the cost of completely blocking the negotiations, to appease a core constituency of the minister. The Ministry of Industry, on the other hand, would be eager to conclude the agreement as soon as possible, to gain greater access to the European market for (its own) manufacturing companies. 

Widodo's successor, former general Prabowo Subianto, may rely on SOEs to promote his policies, unless he intends to change this economic doctrine. It is unlikely that he will, considering that Jokowism is extremely popular and allows for mobilizing the country's growing economic resources for other purposes. It is more difficult to anticipate what these purposes will be. Fulfilling the constitutional principle of economic democracy? Growing the economy, fairly and sustainably, or just focusing on the GDP growth percentage? Or perhaps strengthening his own power system? The proliferation of SOEs under Jokowi recalls a similar trend observed in Xi Jinping's China. The key difference is that in Indonesia, the actions of ministries, and thus their enterprises, can be subject to political debate and change from one legislature to another. As Sabatino points out, the timing of development planning is appropriately synchronized by Indonesian law with elections. Electoral results impact the business choices of SOEs. Borrowing a famous expression associated with China, the ‘capitalism with Indonesian characteristics’ presents unique and undoubtedly interesting elements, as it is an alternative and almost opposite to Western capitalist practices, destined to lead the archipelago to the podium of world economies.

Who are the candidates for the presidency of Indonesia?

Prabowo, Defense Minister and retired general, is the favourite. His deputy is Gibran, son of his historic rival and outgoing President Joko Widodo

By Tommaso Magrini

Here we are. A few days and presidential elections will be held in Indonesia. On February 14, one of the world's largest democracies goes to the polls to choose its next leader. According to the election commission, around 205 million of Indonesia's more than 270 million people have the right to vote, and around a third of these are under 30. The presidential poll will be held on the same day as the national parliamentary elections, and voters will also choose executive and legislative representatives at all administrative levels across Indonesia.

The favorite appears Prabowo Subianto. Suharto's son-in-law and former head of the special forces, the retired general has in the past been accused of being among those responsible for the repression of student protests, the disappearances and extrajudicial killings of opponents, and human rights violations against Papua's minorities and East Timor. After his dismissal from the army and a few years of self-exile in Jordan following an attempted coup, Prabowo is now convinced that in the elections on 14 February he will be able to become president of the largest economy in South-East Asia. In the last ten years, Prabowo had twice attempted to run for the presidential palace in Jakarta, but was defeated by the reformer Joko Widodo.

This time Prabowo really believes it, after joining the government in 2019 as Defense Minister. According to President Widodo, Prabowo was chosen as Defense Minister because "he has vast experience in that field". As Francesco Radicioni, Radio Radicale correspondent from Bangkok, explains, "the macho law-and-order military pose has been archived, now Prabowo shares with his millions of followers on Instagram and TikTok posts with relaxed and captivating tones that have earned him an avalanche of likes and enthusiastic comments: the most used word online is «gemoy», an expression that sounds like «adorable»” . 

The real twist, however, came when Prabowo announced that his vice-presidential candidate would be Gibran Rakabuming Raka: born in 1987, young mayor of a small town on the island of Java, but above all son of the same President Widodo. A truly surprising move, given that in Indonesia the law sets the minimum age to run for vice-presidency at 40. However, on the eve of the presentation of the candidates, the Constitutional Court decided that that limit should not be applied to those who have already won a local election. 

And the challengers? Ganjar Pranowo is the candidate of the ruling Indonesian Democratic Struggle Party. His long career in public service, most recently as governor of Central Java, has earned him a following outside the capital Jakarta. In opinion polls he is second in the rankings behind Prabowo. And then there is the independent candidacy of Anies Baswedan, already at the helm of the capital's government and for a few months also minister in Jokowi's administration, before moving to the opposition. 

Even if Prabowo is considered the favorite today, analysts question whether the ex-general will really be able to win over the voters who over the last ten years have wanted to reward Widodo's liberal and reformist agenda. If no one manages to obtain an absolute majority of votes on Wednesday 14 February, Indonesia will return to the polls in June for a run-off. In August, however, the capital will move from Jakarta to Nusantara, in Borneo: the last legacy of Widodo, who however hopes to see his political dynasty continue with his son as vice president.

Elections in Indonesia: the issues of the vote

The Indonesian presidential elections take place on Wednesday 14 February. The vote is highly anticipated to understand who will be Joko Widodo's successor

By Aniello Iannone

On December 12, the presidential debate in Indonesia brought together presidential candidates Ganjar Pranowo (PDI-P), Prabowo Subianto (Gerindra) and Anies (AMIN coalition composed of (PAN): the National Commitment Party, a moderate nationalist party and Islamic, and (PKS): the Justice and Prosperity Party, an Islamic political party that is based on the principles of Islam and seeks to implement policies in line with Islamic values ​​in society and government.The vice presidential candidate next in Anies Baswedan, Muhaimin Iskandar, is the secretary of the party.Finally, the (PPP): the Unity and Development Party, is a political party formed by Islamic organizations, whose policies are centered on the principles of Islam and active participation in nation building and development. ), who debated Indonesian political issues. Among the topics discussed were the fight against corruption, the protection of minorities, the Papua issue, the democracy index and economic development. Although the debate highlighted the differences in the candidates' programs, the ethical question, in particular linked to Gibran, Joko Widodo's son and vice-presidential candidate, added a unique complexity in view of the upcoming elections, among the most significant post-Soeharto.

Family matters

The choice of vice president plays a crucial role in Indonesian elections, particularly involving those who may not fully identify with the presidential candidate. This dynamic emerged clearly during the 2019 elections, especially after the scandal of the Ahok case, the former governor of Jakarta who in 2018 was accused of blasphemy, from which Joko Widodo had to face instability and political criticism, especially from radical Muslim groups in Indonesia, such as the Muslim Defense Front, who accused him of being a communist and of Chinese descent. The use of political identity in Indonesia partially reflects the country's historical and political process, not based on narrative ideology, but on political identity.

In this context, during the 2019 election campaign, Jokowi chose Ma'ruf Amin, a senior representative of the Indonesian Muslim organization, as a strategy to gain the support of a Muslim population skeptical of his party. This choice has proven effective, although it has prompted questions from nationalists who struggle to identify an identity connection between PDI-P and Ma'ruf Amin.

The political situation in Indonesia has reached partly paradoxical situations. After his defeat in the 2019 elections, Prabowo, the defeated candidate, surprisingly took over as Defense Minister in the Jokowi 2.0 government, a key role that helped reduce and weaken the opposition. This event, along with subsequent strategic maneuvers during the 2024 election campaign, raised suspicions about the direction of Indonesian politics. Jokowi's shadow is cast over the vice president elections, with Gibran, son, current mayor of Surakarta, proposed as vice president candidate.

Gibran, currently 36 years old, should not have been able to run as he is below the age limit allowed by the Indonesian constitution to become vice president, i.e. 40 years. However, through a legislative reform, Constitutional Court judge Anwar Usman, (husband of Idayati, sister of President Joko Widodo) initiated the initiative to change the rules to the advantage of Joko Widodo and Gibran. This maneuver resulted in the reduction of the minimum age to run for office from 40 to 35, with special provisions requiring at least one term as mayor. In practice, it is an ad-hoc law designed specifically for Gibran.

A few months before February 14, election day, the political landscape in Indonesia is preparing to face inevitable conflicts between coalitions and alliances. Joko Widodo always seems closer to the Gerindra party rather than the PDIP. If Prabowo-Gibran were to win, Joko Widodo is likely to take a key role, perhaps in a ministry, acting as a mediator between Gibran and Prabowo, forming a nuanced third term. However, the prospect of Prabowo-Gibran's victory raises not only political, but also social questions. Questions arise about what factors push the population to vote for a party composed of a person accused of human rights violations and crimes against humanity, like Prabowo, and a young man who grew up in his father's shadow.

This situation raises interesting questions about the political and social awareness of Indonesian voters. Entrusting political responsibilities to leaders with a controversial history and the promotion of a political heir become elements of profound reflection in the context of the country's democratic framework. It is hoped that the community will be able to weigh the weight of moral considerations and human rights in the context of their political choices, perhaps opening a new chapter in Indonesia's political history. The outcome of the upcoming elections will not only determine the composition of the government, but may also influence the international perception of Indonesia and its position in the global political landscape. There remains a big question mark over how Indonesian society will respond to this crucial challenge and how the election results will shape the country's future.

The World's Oldest Pyramid? In Indonesia

A team of researchers found that Gunung Padang was built primarily by human hands and found evidence that the structure was built in multiple phases, thousands of years apart

By Tommaso Magrini

A hidden pyramid on a hill on the island of West Java, Indonesia, may be the oldest in the world. This was revealed by an interdisciplinary team of archaeologists, geophysicists, and geologists in an article published in the interdisciplinary archaeological journal Archaeological Prospection. Gunung Padang, also known as the "mountain of enlightenment," is located atop an extinct volcano and is considered a sacred site by the local population. In 1998, Gunung Padang was declared a national cultural heritage. Over the years, there have been divergent opinions among scholars about the nature of the hill. Some argued that it was a man-made pyramid, while others claimed it was a natural geological formation. The research team discovered that Gunung Padang was primarily built by human hands and found evidence that the structure was constructed in multiple phases, thousands of years apart. According to the team, the oldest construction of the pyramid "likely started as a natural hill of volcanic ash before being carved and then architecturally wrapped" between 25,000 BC and 14,000 BC. This means that Gunung Padang is at least 16,000 years old. According to the study, the pyramid was completed between 2000 BC and 1100 BC. The team, which documented the site study, drilled into the mound's center, excavated trenches, and collected soil samples, among other things. This helped researchers dig into the early layers of Gunung Padang, more than 30 meters below its surface. "This study strongly suggests that Gunung Padang is not a natural hill but a pyramidal construction," the researchers state in the document. The team also found evidence of "a large cavity," possibly a hidden chamber, within the pyramid.