Indonesia

Anna Affranio published in Culture and society, Philippines, Indonesia

Water privatization: the different experiences of Jakarta and Manila

To remedy the problems with the water systems in the two capitals, municipalities chose to grant management to private companies in the 1990s. Despite similar premises, however, the two cities' experiment did not play out in the same way.

The privatization of public water service in the two Southeast Asian megacities dates back to the 1990s. At that time, heavyweight institutions such as the World Bank and many economists had pinned high hopes on the role that the free market could play in developing countries, and in strategic sectors such as water there was a prevailing view that privatization was the way to go. And so it was that many utilities were fully or partially privatized, often with the support of the United States or multilateral development institutions. 

Until that time, the water systems in Jakarta and Manila were entrusted to their respective municipalities and were in a very poor condition, with a very low user rate among the population. Jakarta's aqueduct system had originally been built by the Dutch at the time of their rule in the country, and obviously has not kept pace with the rapid growth of the metropolitan area, which now has a population of 11 million. Manila's water and sewage system is even older than Jakarta's, which was created in 1878 by the Spanish colonialists and designed for a city of 300,000 inhabitants, but now has more than 14 million.

The two cities' water system privatization schemes were initially very similar. In fact, in both cities, the metropolitan area had been divided into two sectors assigned to different companies, and in both cases the concession had an initial term of 25 years. The largest international water companies were brought in to provide technical assistance and financing schemes to Indonesian and Philippine government agencies in support of privatization programs, while service provision was assigned to large international conglomerates along with prominent and politically well-connected local groups, an essential element in obtaining privatization contracts. 

Water privatization in Manila began when then-President of the Philippines Fidel Ramos, in order to combat the water crisis that was affecting the capital city, issued a tender that was won by two companies-Maynilad Water Services in West Manila and Manila Water in East Manila. Despite some initial difficulties, exacerbated by the financial crisis that had hit Asia in those years, the two companies have to date achieved more than 94 percent service coverage in the city compared to 58 percent before privatization, and water leakages have been brought down to 27 percent compared to about 67 percent pre-privatization. For these reasons, water privatization in the Philippines is considered by many to be one of the most successful public-private partnerships in the world.

Differently was it, alas, for the Indonesian capital. Here, then-President Suharto, seeking to remedy the inefficiency of the public water delivery system in Jakarta, which did not allow equitable access to water for all citizens, granted the management of the water network to two foreign companies without any competitive bidding. These were the French Suez Environment, which together with the Salim Group (owned by a tycoon loyal to the president), had formed PT PAM Lyonnaise Jaya (Palyja). The other company, however, PT Aetra Air Jakarta, was formed by Britain's Thames Water together with Suharto's son. In the 25 years of the concession, the two companies have undergone numerous corporate changes and share divestments, and have made little progress in expanding service coverage, as well as in increasing efficiency but especially equity in terms of access to water among different strata of the population. According to the Jakarta Post, after nearly two decades, coverage has only reached 59 percent of the city's residents, despite average water rates being quite similar to those in Manila. In 2017 then, the two water companies were sued for failing to meet their contractual obligations, and the court ruled against them, threatening the end of the water privatization experiment in Jakarta, although the system will likely persist but in different ways. 

It remains to be seen, however, whether the Indonesian capital will be able, albeit with some delay, to replicate the successful example of its Philippine counterpart.

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Carola Frattini published in Economy and trade, Indonesia

Indonesia and palm biodiesel

Indonesia is the world's largest producer of palm oil. The question for Jakarta is: can the blend of diesel combined with 40 per cent 'cooking oil' help meet the government's targets?

Indonesia is testing a biodiesel blend to be used as fuel for cars, of which palm oil makes up 40 per cent. In particular, Jakarta is testing whether this combination of diesel and palm oil (also called 'cooking oil') can work at high altitudes. In fact, in general, palm oil tends to harden in colder climates. Blending biodiesel with palm oil is nothing new in Indonesia. The South-East Asian country currently requires cars to use a 30% blend (or 'B30' - 'B30 requirement'), and is trying to increase this to 40% ('B40' - 'B40 requirement'). To find out whether the tropical oil can adapt to higher altitudes, a few weeks ago the experimenters left Dieng, an active volcanic region in central Java, for a test tour. Therefore, in the coming weeks, six Toyota Innova minivans, fuelled with 40 per cent palm oil biodiesel, will be on a trial run on the island of Java. 

Should the tests yield the desired result, the government's target would be to increase the requirement from B30 to B40, and thus mandate the 40% 'cooking oil' blend of diesel. The consequence would be a redistribution of palm oil: palm oil exports would be reduced and there would be more local consumption instead. Indonesia's goal is precisely this: on the one hand to increase domestic consumption of palm oil and on the other hand to reduce imports of fossil fuels. In addition, a greater use of palm biodiesel would also lead to a reduction in emissions. Thus, the impetus for increased use of palm oil is the hope to reduce emissions, reduce fossil fuel imports and consume surplus palm oil stocks..

As already mentioned, a positive test result would also lead to less palm oil being exported and this would certainly have an impact on exports of the product. The Indonesian government's plan could cause prices to rise globally, resulting in higher oil prices. In fact, following the basic rules of economics, if there is less supply against more demand, the price of the product is bound to rise. This is not the first time Indonesia has tried to decrease palm oil exports. Already earlier this year, the country tried to ban exports in an attempt to reduce local inflation. As a result of this policy, palm oil prices had reached record levels. The country only changed its strategy when it found itself with far more palm oil stocks than its citizens could realistically consume. Exports then resumed and prices started to fall.

To understand whether there will be another decrease in exports from Indonesia, however, we have to wait for the end of the tests and the possible announcement of the Jakarta government on the implementation of the 'B40' requirement. The final results will come in around December when the trial is over. According to Dadan Kusdiana, Director General of New and Renewable Energy at the Ministry of Energy and Mineral Resources, the results of road tests so far indicate that the efficiency of this blend is generally comparable to the 'B30' blend. The ministry hopes for positive results so that the technical specifications for the 'B40 requirement' can then be formulated. As stated by Director General Kusidiana, with the B30 requirement, the Jakarta government's goal was to achieve an annual consumption of 11 million kilolitres. By October 2022, already 8 kilolitres had been used. If the B40 requirement is implemented, domestic use of palm biodiesel will increase by about 3.4 million to 3.5 million kilolitres. When B40 is in place, the government expects palm oil-based fuel use to rise to 15 million kilolitres per year.

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Redazione published in Indonesia, Politics and strategy

The impact of inflation on Indonesian politics

The freeze on fuel subsidies decided by Widodo's government has led to a price increase disputed by citizens. The economic situation can play a fundamental role in parties' choices for the 2024 elections.

Article by Aniello Iannone

On 10 September, the Indonesian government blocked fuel subsidies, causing prices to rise automatically. This decision led to turmoil and protests in Jakarta, where the population took to the streets for the choices of the government led by President Joko Widodo. Rising fuel prices, however, are not the only problem in Indonesia. From an economic point of view, the food sector has also suffered from a significant increase in prices without an adequate minimum wage increase. In this situation of economic instability, Indonesia is already beginning the long approach toward the next elections of 2024, between new and old players who will compete for the presidency.

The Indonesian economy is going through a phase of continuous and rapid price increases. Since last year, Indonesia has seen a 5% -10% increase in prices of essential goods called pokok (such as rice, oil, and eggs). This increase was recorded before the suspension of subsidies: oil prices soared in February, reaching almost $ 4 per liter. Increase that took place even before the war in Ukraine.

To understand how much the negative effect of rising prices is a problem for most Indonesian population. However, it is necessary to analyze the economic and social structure of the country. Indonesia has a population approaching 300 million, of which nearly 10% live in poverty, and 4% in extreme poverty, especially in areas such as Kupang in NNT or Papua. In addition, the average minimum wages in Indonesia are around $ 270 a month in Jakarta, the area with the highest minimum wage. In Yogyakarta, the minimum wage is around $ 100 a month, the lowest in the country. Prolonged price increases without adequate wage increases will weigh heavily on citizens.

The political situation: what does the post-Jokowi forecast? 

The complicated economic situation that Indonesia is facing must also deal with the first signs of a future election campaign and an unclear political situation. During Jokowi's second term, there were numerous protests against the government, especially against the law on labor reform, which among other things, modifies the regulations for minimum wages, or against the reform of the penal code. On 9 September, protests arose against the increase in fuel and the suspension of government subsidies.

The protests are the consequence of fragmented politics in Indonesia. At the moment, the PDI-P, Jokowi's party, seems to want to continue to bet on Puan Maharani for future elections, even if his popularity among Indonesians remains weak, especially among the lower middle class. Nevertheless, Puan is the daughter of Megawati Sukarnoputri, the leader of the PDI-P. The possible candidacy of Prabowo Subianto remains unknown. The former Indonesian general lost twice to Jokowi in the 2014 and 2019 elections. After the latter, he was incorporated into the government as Defense Minister. However, his future victory could mean a change in a conservative-Islamic key, given Gerindra's tendency to join forces with pan-Islamic parties. 

Two other protagonists could be Anies Bsweden and Ganjar Pranowo. Ganjar Pranowo, governor of Jawa Tengah, is second in the polls only to Prabowo. Ganjar is part of the PDI-P, but his popularity is high, unlike Puan, who is considered an elite figure. Anies Baswedan is instead the current governor of Jakarta: after declaring his willingness to run, he was contacted by the national democratic party NasDem of which he will be the candidate for the presidency. Anies, along with Prabowo and Ganjar, runs high in the opinion polls among the population.

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Annalisa Manzo published in Economy and trade, Indonesia

Indonesia: the alternative source of European imports

The war in Ukraine is deeply changing the directions of European imports, redefining the role of Jakarta in terms of energy and natural resources 

Indonesia's exports - particularly steel, coal and palm oil - hit a new all-time high in March, when the invasion of Ukraine triggered a rise in global commodity prices. It is estimated an increase in exports of 44.36% on an annual basis, for a total value of $ 26.5 billion last March. The largest economy in Southeast Asia recorded a trade surplus of $ 4.53 billion, beating all economists' estimates.

Indonesia - the world's largest exporter of thermal coal - typically does not ship to Europe, but due to the new geopolitical issue, the demand for Indonesian coal is increasing significantly, as stated by Pandu Sjahrir, president of the Indonesian Coal Mining. Association. Germany is already positioning itself among the top European buyers. By 2023 it could become the second or third largest importer of Indonesian coal, after China and India.

The number of Indonesia's thermal coal shipments overseas is increasing following the European ban on the purchase of coal from Russia, which went into effect in August. Russia - the world's third largest supplier of coal - dominates sales in Europe, but the ban has also caused the interruption of some Russian gas supplies to the continent.

Now, with the European winter around the corner and the imminent need to meet home heating needs, Indonesian mines are aiming to increase their production. PT Bukit Asam - also known as PTBA - was among the first local players to ship coal to Europe. The company said it exported 147,000 tons of fuel to Italy from March to July, while negotiations continue with Germany and Poland to penetrate these markets at competitive prices. Bukit Asam produced 15.9 million tons of coal between January and June, 20% more than the same period in 2021. Bukit Asam produced 15.9 million tons of coal between January and June, 20% more than the same period in 2021. Also Bumi Resources - the largest Indonesian coal producer by volume - aims to increase production this year, following the start of negotiations with Germany, Poland and Italy. PT Adaro Energy Indonesia also has the same goals: to increase coal production from 58 million tons to 60 million in 2022, declaring that it has already shipped around 300,000 tons of coal to the Netherlands and Spain. Due to the spike in coal prices, these companies are also making huge profits. PTBA reported a net profit of $ 415 million in the first half of the year, up 246% compared to the same period in 2021, that of Adaro jumped seven times to $ 1.2 billion and that of Bayan Resources it nearly tripled to $ 970 million. Share prices have also risen sharply since the start of the year, reaching + 60%.

In addition to coal mines, Indonesia also holds the largest nickel reserves in the world. It is expected to supply most of the nickel needed by the thriving global electric vehicle industry over the next few years. The Indonesian government is pursuing an ambitious program to encourage the production of batteries and vehicles by foreign companies and position the country as a key player in the sector. Nickel processing projects are mostly led by Chinese actors, including the stainless steel giant Tsingshan and the battery maker, Contemporary Amperex Technology.

Recently, the Indonesian unit of Brazilian mining giant Vale embarked on three nickel processing projects worth a total of $ 8.6 billion with major partners, including the Chinese battery materials manufacturer, Zhejiang Huayou Cobalt, and the US automaker Ford Motor.

The protracted war in Ukraine will continue to open up new scenarios for Indonesia, which in the meantime confirms its privileged role for its wealth of mineral and natural resources. A new challenge for mining companies and for internal demand.

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Redazione published in Indonesia, Politics and strategy

Labor Reform and Criminal Code in Indonesia

The new Indonesian penal code is currently in its final draft in parliament, presumably coming into force before the end of Jokowi's term

Article by Aniello Iannone

During the Covid-19 pandemic, particularly during the massive first wave of the pandemic in Indonesia in 2020, the government enacted one of the most controversial labor reform laws, the Undang-Undang Cipta Kerja, known to most as the Omnibus Law. The Indonesian academic community and NGOs harshly criticized the new law.

The main reason for such criticism, which later turned into protests, was the corpus of the new law which discriminated against and damaged workers' rights. Passing the law unleashed demonstrations, particularly in Jakarta. For days the demonstrators took to the streets to condemn the Indonesian government's choice, so much so that the police had to intervene to stop the protests.

The protests against the labor reform were not the only ones nor the most violent. A year earlier, in 2019, violent protests broke out in the capital during the first draft revision of the penal code (Rancangan Kitab Undang-Undang Hukum Pidana or RKUHP). Protests erupted when a first draft of the law declared extra-marital or non-marital relationships a criminal offense. Furthermore, the draft considerably weakened corruption offenses, a sensitive issue in the country, given the high level of corruption. The protests delayed the reform, leading to a rethink by the government. During the massive 2019 violence, they were followed by the shout TolakRKUHP (reject the reform of the penal code). Without a clear revision of the reform, the possibility of new riots remains high.

The law of Indonesia through history 

Indonesian jurisprudence takes a lot from the Dutch colonial period. The Criminal Code is no exception. Although decades of the country's independence have passed, the penal system dates back to the Dutch period. Historically, the Indonesian legal structure can be divided into 4 main pre-independence and 4 post-independence phases (Sylvana et al., 2021): 

  • The pre-colonization period was characterized by the unwritten customary laws of a religious nature (Harahap, 2018)
  • In the VOC (Dutch East India Company) period, Western law first entered the archipelago with the establishment of the Statute of Batavia in 1642 and the Mucharaer Book of Law in 1750, which contained a collection of Islamic criminal laws, also maintained during the English period until 1810

Between 1814 and 1855, known as Besluiten Regering, Indonesian law was influenced by the Dutch monarchical constitutional system without fundamental changes to the penal code. The years ranging from 1855-1926, known as Regarding Reglement, coinciding with the transition from constitutional monarchy in Holland to parliamentary monarchy, show a reduction of the king's power over the colonies. At this stage, the penal code, like the entire judicial structure, begins to take shape with the creation of a penal code that will be extended to the entire Indonesian population of the time.

  • The period of the Japanese occupation (1942-45). During this period, there was a dualism in the penal code, on the one hand, the Dutch system, on the other, and the Japanese system (Saleh & Pelengkap, 1981)
  • The Indonesian period. The problem of the dualism penal code was resolved after the replacement of the 1945 Constitution with the enactment of Law 73 of 1958, which took up Law No. 1 from 1946, declaring the Dutch penal system Indonesian, currently applied in the country (Bahiej, 2006) 

The reform of the penal code: rights, religion, and politics 

Analyzing the proposed reform of the penal code, the points that have seen the most criticism are mainly 14. In this analysis, we will consider only a few, especially those that most affect personal freedoms.

The proposal of the new penal code provides for an amendment to art: 218 to 220, 240 to 241, and article 273. The amendment introduces different penalties—for instance,3 to 4 months of detention in case of criticism against the President and Vice-President. In addition, in cases, criticisms against the authorities will be transmitted through social media (Article 240), a penalty of up to 4 years for defamation of the authorities.

In the Indonesian context, without an appropriate explanation in the law for "criticism and defamation," this regulation can be used to silence any criticism/opposition against the authorities. During the introduction of the Electronic Information and Transactions (ITE) law and the Omnibus Law, many academics were convicted of defamation of the authorities, even if they were only criticizing the ITE law and the more recent Omnibus Law.

Moreover, the Art. 273 places restrictions on student and social demonstrations, risking undermining a fundamental right transcribed in the constitution: the right to social demonstrations. 

Furthermore, the revision of the criminal law introduces stringent rules on religious issues. Starting from this point of view is necessary to analyze this part of the reform transversal. Indonesia has the highest percentage of Muslim faithful in the world. 87% of the population professes Sunni Islam mainly according to the thought of the two schools of thought present in the country, the Nahdlatul Ulama (the most widespread and most conservative current) and the Muhammadiyah (the most moderate current). 

Religion plays a pivotal role in Indonesian politics. In this sense, Indonesia is constitutionally not an Islamic but a semi-secular state. Professing a religion is mandatory, but no religion imposes itself on the other, constitutionally. The revision of the penal code emphasizes the role of religion. Art. 302 proposes detention for five years in case of blasphemy. Convictions for blasphemy are not new in the country; the best-known case is former Jakarta governor Basuki Tjahaja Purnama, Ahok.

Another criticism of a religious theme concerns art—304 of the reform. The article states that anyone who forces another person to change their religion risks a sentence of up to 4 years. A flaw in this law can be found not in the obligation to force a person to believe or not. The law's flaw is in how should be reported to the authorities, becoming a threat to freedom of expression. 

Furthermore, articles 415 and 416 condemn a penalty of up to one year for adultery and evading the marriage contracts. In particular, Article 416 condemns all who live "as" husband and wife but have not contracted marriage with imprisonment of up to 6 months.

Conclusion 

The new Indonesian penal code is currently in its draft defined in parliament, presumably entering into force before the end of Jokowi's term. However, the various criticisms and gaps within the new code could push Mahkamah Agung (the supreme court of Indonesia) to declare the revision of the penal code unconstitutional, which has already happened with the Omnibus Law. In cases where the Indonesian Supreme Court declared the law unconstitutional, but the law will pass by the parliament unleashed, violent protest riots in Indonesia are particular. 

 

Reference 

Bahiej A. (2006) Sejarah dan Problematika Hukum Pidana Material di Indonesia. SOSIO-RELIGIA, 5(2)

Harahap A. (2018) Pembaharuan Hukum Pidana Berbasis Hukum Adat. EduTech Jurnal Ilmu Pendidikan dan Ilmu Sosial, 4(2)

Sylvana Y., Firmansyah Y., Wijaya H., Angelika M,S. (2021). History of criminal law in Indonesia. Jurnal Indonesia Sosial Sains, 2(4) : 645-655

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Sabrina Moles published in Economy and trade, Indonesia

Thailand: opportunities for green energy made in Italy

Bangkok opens to energy cooperation with Rome. Southeast Asia's second-largest economy aims to break free from dependence on fossil fuels and increase renewables: what is the scenario opening up for Italian companies?

La Thailandia ha fame di energia. Ma non può continuare sulla strada dei combustibili fossili. Negli ultimi trent’anni Bangkok è stato uno dei principali motori dello sviluppo asiatico, trasformando il blocco ASEAN in una delle regioni più promettenti per l’economia di domani. Oggi la seconda economia del Sud-est asiatico ha bisogno di sostenere la propria crescita su basi solide, che dovranno partire da politiche energetiche lungimiranti e coerenti con gli obiettivi di riduzione dei gas serra previsti dall’Accordo di Parigi.

Una nazione in crescita

With a growing GDP per capita ($21.05) and a population of about 66 million, Thailand quickly transformed into an upper-middle-income economy during the 1990s. Today, the export-driven growth model is threatened by a decline in private investment (16.9 percent of GDP in 2019 vs. 40 percent in 1997) and the climate emergency that threatens Thailand's ecosystems. Dependence on fossil fuels is another problem the country must address to secure the energy sector and create opportunities on the ground.

Today, Thailand's energy mix consists mainly of oil (40 percent), natural gas (31.2 percent), and coal (12.5 percent). During 2021, imports of these resources reached 75 percent of the total used, while the Ukraine crisis is exacerbating prices on fuels. Renewables are almost limited to hydropower plants, but government programs to raise the percentage of clean sources are growing. The 2018 Alternative Energy Development Plan promises to achieve 30 percent coverage of the energy mix by 2030 through the construction of new power plants. At the center of the energy transition will be mainly wind and photovoltaics, not excluding the potential of biomass and small-scale hydropower plants. Among the strategies listed, the Thai Ministry of Energy plans to increase access to the raw materials needed to implement a smart grid from green sources and the development of technologies and know-how essential to the construction of efficient, clean and safe plants.

Opportunities for Italy

Thailand plans to achieve carbon neutrality by 2065. Bangkok is aware of the challenges imposed by the energy transition, and is opening up to partnerships with external actors to succeed in developing a resilient energy sector. Thailand participates in ASEAN programs such as the Southeast Asian Energy Transition Partnership (ETP) and the ASEAN Centre for Energy (ACE). The country is now open to new opportunities for investment and cooperation under the strategic partnership with the European Union, which devotes considerable space to the topic of sustainable development and green technologies.

In this context there is also room for Italian companies interested in developing new projects with Thai partners. As speeches at the last Italy-ASEAN High-Level Dialogue organized by The European House-Ambrosetti pointed out, the energy sector represents fertile ground for birthing new collaborations and contributing to Thailand's energy transition. In recent years, the bilateral dialogue between Rome and Bangkok has intensified through a shared agenda of mutual economic cooperation and opportunity sharing in the context of climate challenges and sustainable development. Both sides aspire, as Ambassador Lorenzo Galanti pointed out, to the resumption of negotiations to facilitate technology transfer and exchange of knowledge and expertise in the energy sector.

The second meeting of the Italy-ASEAN Development Partnership was also held on June 10 with the aim of defining areas of practical cooperation from 2022 to 2026. These included the topic of clean energy, with Rome promising to support the energy development of ASEAN countries by providing know-how and safe technologies with low environmental impact. Today, trade exchange between Italy and Thailand has returned to growth after the pandemic pause. Italian exports in the first half of 2020 grew by 18 percent, while imports from Thailand reached +26 percent year-on-year. New plans for the development of technological cooperation, therefore, offer further prospects for growth in the relationship between the two countries.

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Redazione published in Economy and trade, Indonesia

Indonesia's digital race

From the beginning of the pandemic until the first half of 2021, 21 million new digital consumers have been added in Indonesia. Hence the boom in startups and unicorns

By Chiara Suprani

Indonesia, along with Vietnam and Singapore, is considered a tip of the golden triangle of startups in Southeast Asia. It is the birthplace of 13 unicorn startups, including a decacorn, 10 billion startup created when super-app Gojek merged with e-commerce giant Tokopedia. Gojek's multiservice platform became unicorn faster than Bukalapak or Tokopedia, and now operates in five ASEAN countries. Indonesia, the most populous country with the largest economy in the region, seems to have a special attractiveness and fertile ground for digital and tech growth. From the beginning of the pandemic until the first half of 2021, 21 million new digital consumers have been added in Indonesia, most of them from the hinterland. In fact, before the first wave of Covid-19 only 4 percent of Indonesia's population had access to stable internet lines. Now even outlying regions, thanks in part to the push from Jakarta, are more covered and the country has 350 million digital users. Last year, the gross merchandise value of the country's digital economy stood at US$70 billion, while the total value of the region was US$170 billion. Indonesia's interest in the growth of the digital and tech sector is given by reforms that fit well into the national context. This is evidenced, for example, by the rush of Bukalapak, a tech company backed by Microsoft and Ant Group, which has been propelled by the inclusion of 3.5 million warungs, family-run stalls, among its as yet untapped pool of businesses to go online. But the country sees a chance to expand its domestic market by opening up to foreigners: international digital nomad workers will be able to work in the country without paying taxes. The five-year visa granted by Joko Widodo's government aims to attract 3.6 million foreigners with digital work permits to the archipelago.

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Alessio published in Indonesia, Politics and strategy

Indonesia and ASEAN on the world stage.

Indonesian President Widodo's trip between Kiev and Moscow launches the Southeast Asian region at the center of global dynamics

Editorial by Alessio Piazza

First Kiev, then Moscow. First talks with Volodymyr Zelensky, then talks with Vladimir Putin. Last week saw the visit between Ukraine and Russia of Indonesian President Joko Widodo. It was a diplomatic mission that put Jakarta at the center of international dynamics and thus the entire ASEAN area of which Indonesia is the main economy. Widodo said the Russian president provided him with "guarantees" on the safety of food and fertilizer transportation through sea routes "not only from Russia but also from Ukraine," according to the official Kremlin statement. The Indonesian president also said he had handed Putin a message from Ukrainian President Zelensky and was "ready to help establish contact between the two leaders" to ensure a step toward "a peace settlement and open dialogue." Neither side has further elaborated on the content of the message, and the actual negotiating prospects still appear unclear. But what is certain is that the trip in itself already represents a major turning point in foreign policy not only for Indonesia but for all of Southeast Asia. Indeed, Widodo became the first Asian leader to travel to Kiev since the beginning of the war. Of course, the main factor driving this important development was the fact that Indonesia holds the rotating presidency of the G20. According to some observers of Indonesian politics, the trip may also represent an attempt by Widodo to solidify his personal legacy. Even or especially in preparation for the G20 in Bali, which could go down in history as the final foreign policy brick of Widodo's decade. More in the immediate term, the most sensitive issue is the food crisis. Inflation is also hitting Indonesia, and the assurances received from the Indonesian president during his visit could calm a worried public. But the symbolic and political significance of the trip remains. Just with reference to the G20, Jakarta has been facing opposing pressures on the Bali summit for months. On the one hand to invite Putin, on the other to exclude him. Widodo has made it clear that the principles of neutrality and pacifism, pillars of the ASEAN way, still apply in Indonesia and in the region in general (as recently reminded by Italy-ASEAN Vice President Michelangelo Pipan). 

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Emilia Leban published in Indonesia, Politics and strategy

The challenges that Widodo still has to win

Infrastructure, manufacturing industries and human capital are the three guidelines that engage the Indonesian President in the second part of his last term.

At the height of his second and last term, Indonesian President Joko Widodo has a dense list of projects to be completed by 2024, when he will have to leave the leadership of the government. Known by Indonesians as "Jokowi", the President presents himself as a man of the people: he does not spare himself the visits to distant villages and even to the slums. "I have to meet people to know what they want," he told Nikkei Asia. This may be why its approval rating is almost always above 70%, as revealed by Indikator Politik Indonesia.

However, Widodo's undisputed ability to please Indonesians is increasingly being tested in the attempt to chase economic growth. While on the one hand he must secure the favor of his people, on the other he needs to attract investors and businesses. Indonesia is in urgent need of investment: its economy must expand every year in order to absorb an annual influx of more than two million new workers, while stagnant growth feeds the risk of social instability. 

During Widodo's mandates, GDP only grew by about 5%, when the President had promised at least 7%. To stimulate growth, Jokowi has decided to focus on three key policies, which will be the pillars of his government until the end of the second term: infrastructure, manufacturing industries and human capital. Working on these three aspects, Widodo is sure that "Indonesia's GDP in 2030 will be triple what it is now".

The construction of infrastructure such as roads, ports, airports and bridges was the hallmark of Widodo's presidency. In his first six years in office, 6,240 km of roads, 15 new airports and 124 new seaports were built. All projects that pale in front of Nusantara, the new capital that will replace Jakarta. A 30 billion dollar project to be built on the island of Borneo. According to the president, it is a necessary move to stimulate economic growth outside the populous island of Java, which today represents 60% of the country's GDP.

Another priority of the president is industrial reallocation. In particular, moving from processing to production, rather than focusing only on the extraction of raw materials. This policy was accompanied by a law prohibiting the export of unprocessed minerals, to incentivize foreign companies to move the processing of materials and the production of goods to Indonesia. Furthermore, starting from 2020, the export of nickel - essential for electronic devices - has been banned. Widodo, during his mandates, has insisted a lot on the importance of the export ban to generate new and better jobs, thus also focusing on the formation of human capital.

But the latter seems to be the weak point of Jokowi's presidency, which according to his critics would have been very unambitious in the development of human capital. Of course, some measures have been put in place, such as the undergraduate program for earning credits by doing internships at companies. Or the aid program to help low-income families pay their school fees. 

According to Indonesian political scientists, the main problem for Widodo is a classic of Indonesian politics: the lack of political continuity between different presidents, whose belonging to different parties and different ideologies might jeopardize the continuity of government policies. A risk that Jokowi will have to take, since some of his projects could be canceled when his successor takes control of the country in 2024.

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Agnese Ranaldi published in Economy and trade, Indonesia

Energy transition pushes Indonesian nickel

Nickel is one of Indonesia's leading products. Giacarta has promoted a "resource nationalism" policy to retain the wealth of mining in the country and boost internal growth. Chinese investors dominate the market, but Jakarta has to deal with the social and environmental costs related to the industry if it aims at creating a sustainable economy.

At the beginning of March, the price of nickel saw a 90% increase on the London Metal Exchange, reaching $ 100,000 per metric ton. As the extreme volatility of this metal does not affect consumers directly, unlike the appreciation of other commodities such as oil, it is a phenomenon to watch out for - especially for investors interested in Southeast Asian emerging markets.

Nickel is one of the most volatile metals, since its extraction and processing methods are not as standardized as that of other minerals. The production technologies are diverse, as it is also traded in the form of by-products such as iron nickel or pig iron - metals less refined than class 1 (99.8% pure) traded on the London Metal Exchange. Much of the nickel is extracted from laterite, of which some areas of Southeast Asia are rich, and from sulfide deposits. Unlike the latter, laterite is not so scarce, and it is a fundamental resource for the electric vehicle industry. For this reason, a large part of the investors employed in the automotive sector are interested in the fluctuations of nickel, to capitalize on those opportunities provided by the economies of Southeast Asia.

One of the main nickel producers in the world is Indonesia. According to the consulting firm McKinsey&Company, Jakarta averages 27% of the global nickel supply, and some analysts believe the country could increase its share of world production by up to 60% within the next eight years. "By 2028, we expect Indonesian (nickel) production to exceed total world production in 2020 by 2.5 million tonnes," said representatives from Macquerie, an Australian-based financial services institution. The increase in the supply of machined nickel is deemed to be seen as a victory for the Indonesian government, that has been committed for years to outlining regulatory measures that free national economic growth from the dominant role of exports of raw materials. The first crackdown was introduced in 2014, then eased in 2017 and re-established last year. The so-called "resource nationalism" promoted by Joko Widodo's government aims to encourage mining companies to invest downstream of the production process, limiting the export of raw ore and instead enhancing the value-added stage. Although the goal was to prevent the wealth carried by exports of crude metals from ending up in overseas refineries, many foreign investors have been involved in this transition.

China dominates the nickel industry in Indonesia. Indeed, Beijing boasts the largest automotive market in the world, and has seen impressive growth in the sale of electric vehicles in recent years - another factor that has contributed to the rise in the nickel’s pricel. However, it does not have a large availability of mineral deposits: the country's laterite reserves constitute only 3% of the world total. For this it must draw on the resources of its regional neighbors to support the internal development of the sector. Much of Indonesia’s nickel processing business is concentrated in Sulawesi, where the Chinese company Tsingshan operates Indonesia’s Morowali Industrial Park. Morowali is an Indonesian county with fewer than 200,000 residents, but it has attracted billions of dollars in Chinese investment in recent years. Battery material companies Zhejiang Huayou Cobalt, Eve Energy and Guangdong Brunp Recycling Technology injected up to $ 4 billion into the county in 2021 alone. Tsingshan founded Morowali Industrial Park in 2013. Today the plant belongs for 49,69% to the Chinese company Shanghai Decent Investment Group, 25.31% to Indonesian Bintang Delapan Group and the remaining 25% to their joint venture, Sulawesi Mining Investment PT. The project was included in the Belt and Road Initiative global development strategy launched by the Beijing government in 2013.

Although the interests of Beijing and Jakarta intersect in the nickel processing sector, and many proponents of the Paris climate accords view this agreement as an important step towards more sustainable forms of transport, Indonesia faces some contradictions. The recent Omnibus law promulgated by the Indonesian government for job creation affects Jakarta's performance against ESG (Environmental, Social and Governance criteria) standards, especially with respect to public participation. According to Angela Tritto, a researcher at the Hong Kong University of Science and Technology, environmental impact assessments can only be challenged by people "directly affected" by the negative externalities of projects. Often these people do not have sufficient financial resources to engage in lawsuits. Additionally, two reports appeared last year by AEER and the Rosa Luxemburg Foundation warned of the dangers of deforestation and flooding that often accompany mining initiatives in Indonesia, as well as the onerous shifts that the workers are forced to endure without receiving adequate compensation. The Indonesian primacy of nickel’s supply entails various social and environmental costs: this is why investments in the sector should take into account that the transition to electric vehicles alone is not enough to guarantee sustainability.

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Fabrizia Candido published in Economy and trade, Indonesia

The Indonesian government tightens regulations on digital platforms

Hard times for online platforms in Indonesia: new measures should take effect in June 2022 and will require Internet system operators to remove content deemed "unlawful" by the government in record time.

Four hours. This is the maximum time given to digital platforms by the Indonesian government to remove "unlawful" content on requests labeled as "urgent." Any other type of request, which can be forwarded by any government agency, must be fulfilled within 24 hours. These are the new measures arranged by the Indonesian government and they should be implemented in June 2022, according to an exclusive Reuters report.

The regulations, which authorities believe are necessary to ensure that the network is completely free of "unlawful" content, are among the strictest in the world for social media, following the harsh crackdown on online content that has alarmed activists in several Asian countries. 

How will it work?

  • The measures will apply to all Internet and digital platforms classified as "Internet system operators," from social media giants to e-commerce, fintech and telecommunications companies.
  • According to government officials, the government's "urgent" requests would include content perceived as sensitive in fields such as "security, terrorism and public order, child protection and pornography."
  • After receiving an official complaint, companies will be fined for illicit content, and fines will increase proportionally until the content is taken down from the platforms, according to three sources and a governmental document examined by Reuters.
  • Fines will be determined by the number of local users of the company in question and the "content severity." The amount of the fines has yet to be finalized, but it could reach millions of rupiah (1 million rupiah = $69.71) per item of content.
  • Platforms that fail to comply with government requests on many occasions could be blocked in Indonesia and their staff might face criminal sanctions.

Implications:

  • Indonesia is one of the top 10 global markets by number of users for social media companies, including YouTube, TikTok, Twitter and Facebook, Instagram and Whatsapp (Meta).
  • Some executives of online companies briefed on the plans reported that the measures will be hard to comply with, raise operating costs and could undermine the freedom of expression of citizens living in the world's fourth most populous country.
  • The new regulations will mostly affect social media companies, which see Indonesia's young population (270 million people) as a huge growth opportunity.

Background:

  • In the 2014 and 2019 presidential election campaigns, social media platforms allegedly promoted the spread of rumors and "fake news," largely aimed at current President Joko Widodo. In the riots that followed the 2019 elections, authorities blocked access to social media.
  • In the same year, during demonstrations in Papua, the country's easternmost region, Indonesian authorities cut off Internet access, presumably to avert violence that could have been triggered by the rapid spread of misinformation online.
  • Ministerial Regulation 5 (MR5), which was enforced in November 2020 with little consultation, requires all private digital services and platforms to register with the Ministry of Communications and Information Technology and agree to provide access to their systems and data as specified in the regulation. Those who do not register by May 24 will be blocked in Indonesia.
  • Last October, the Constitutional Court ruled that blocking Internet access during periods of social unrest was not against the law.

A comparison: 

  • In comparison with Indonesia's proposed measures, social media companies in Vietnam are required to take down offensive content from their platforms within one day after receiving a request from official authorities, while India gives companies 36 hours with possible criminal sanctions for non-compliance.
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Cecilia Snider published in Economy and trade, Indonesia

Indonesia-EU trade relations

Indonesia is proving that it has what it takes to play a key role in the post-pandemic economic recovery and that it is ready to work with Europe in key areas for the country’s development.

Strengthening the partnership between Europe and Indonesia to better seize all the opportunities of the global economic recovery; this is the focus of the two-day 'Indonesia-Europe Business Forum 2022 ‘Enhancing Partnership for Stronger Economic Recovery', which took place on March 1st and 2st. Senior representatives from the business and political communities attended the online event, with the aim of presenting the potential for partnership between Indonesia and Europe with a particular focus on the following areas: exploring a potential collaboration in the global health architecture and the pharmaceutical industry; promoting trade and investment in renewable energy; and strengthening global trade and supply chain resilience.


The Forum was opened by the Minister of Foreign Affairs of the Republic of Indonesia, H.E Retno L.P. Marsudi. To begin with, the Minister took a position on the war in Ukraine, stating that "the Russian invasion violates international law and respect for the sovereignty and territorial integrity of each State”. The Indonesian diplomat hopes for a peaceful resolution of the conflict, despite the negative economic impact of this crisis. In terms of economic recovery, efforts are moving in the right direction in both Indonesia and Europe. Indonesia has 53 per cent of its population vaccinated and the partnership with Europe has helped Jakarta's economy a lot, today the European Union is Indonesia's fifth largest trading partner. In addition, Jakarta aims to become an increasingly important regional hub in the manufacturing and digital sectors.

The partnership with Europe must therefore develop on three main levels: the health level, helping Indonesia to succeed globally; the technology and digital economy, where Jakarta has already registered eight unicorns, estimated to reach 150 billion in 2025; and finally, the environmental level, driving the sustainable energy transition to achieve zero emissions by 2060. 

Then, the Indonesian Minister for the Coordination of Economic Affairs also stressed Jakarta's willingness to strengthen its engagement with Europe through bilateral and multilateral forums. Moreover, the growth figures for 2022 look encouraging: the Indonesian government expects a 4-5% increase and that, of the total 31.3 billion foreign direct investments, 2.4 billion will come from European countries. In addition, reforms are planned to accelerate investment in the new capital Nusantara.

Among the Italian representatives, Barbara Beltrame Giacomello, Confindustria's Vice-President for Internationalisation, stressed the importance of this meeting to make the most of the economic opportunities between the two countries. "Indonesia is a key trade partner for Italy, before the health emergency the investment flow between Italy and Indonesia was €3.1 billion and in the first ten months of 2021 the trade recovery was +21.5% compared to the decline in 2020." The Vice-President further reaffirmed, "These are encouraging numbers but there is further potential to strengthen cooperation, especially in high-value goods. In addition, to increase economic relations we need to focus on investments in advanced 4.0 technologies, which are key steps, especially for the growth and development of Small and Medium Enterprises. Europe and Indonesia are working hard to implement reform packages to increase productivity and modernisation. 

As for Italy, the industrial system has implemented reforms thanks to the PNRR and this is the time to support companies in internationalisation, with the aim of creating smart production for the ecosystem with a view to cooperation at international level. Finally, the Vice-President said that "the future of our relationship with Indonesia depends on how we match our weaknesses and strengths: if we succeed, our economy will play a major role in future growth at European level. This event is a great start to explore new approaches to working together, sharing expertise for sustainable, long-term growth."

In conclusion, the outcome of the two days of meetings can be considered more than positive. The Forum served as a platform for fruitful discussions between policymakers, business leaders and other stakeholders. Indonesia and Europe, in line with the main objective of this year's G20, showed their readiness to engage in new partnerships to achieve a stable and sustainable post-pandemic global recovery. 

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