Indonesia Update 2017. Globalisation, nationalism and sovereignty

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We are happy to report that the 2017 Indonesia Update is one of the most successful Updates we have ever conducted in regards with the quality of presentations, speakers and the number of participants. Held at ANU on 15 and 16 September 2017, the two-day conference was attended by 550 participants from Canberra, interstate and overseas, of which almost half are females. Around 120 government officers, more than 110 academics and 207 students attended the Update. Indonesian Ambassador to Australia, HE Mr Kristiarto Legowo attended both days of the conference. The Update was also attended by senior representatives from various embassies and from the Australian Department of Foreign Affairs and Trade (DFAT).

In his welcoming speech, Allaster Cox (DFAT) acknowledged the successful years of ANU Indonesia Project, which has fostered deeper understanding of Indonesia amongst the Australian constituencies.  The Project has played a vital role in giving Australia a framework for thinking about Indonesia – why Indonesia matters to Australia, and how it is changing. Work by the ANU Indonesia Project and its many collaborators  further strengthen Australia’s claim as the leading repository of knowledge about Indonesia outside the country. The Project provides independent, second track advocacy to policy makers, reinforcing the importance of quality research in contributing to stronger, evidence-based decision making. The Update conference in particular, brings together experts from both nations to provide informed analysis and varied perspectives on  economics and social forces driving Indonesia’s development.

Allaster Cox also reiterated the importance of this year’s conference theme of globalisation, nationalism and sovereignty. The world, and in particular the Asia Pacific region, is undergoing profound structural changes as the rise of new powers in Asia has global implications. The world is shifting to an era of greater multipolarity, when new and existing powers are competing for influence using a range of political, military and economic levers in different ways. Non-state actors, including corporations, civil society organisations, religious and secular foundations and a whole range of groups from human rights champions and terrorist cells are using the power of new technologies, including communications technology, to exercise power in ways in ways often beyond their size. How is Indonesia, one of the
World’s largest nations and the largest Muslim majority democracy, adapting and attempting to shape this new and emerging world order to advance and protect its interests and those of its diverse people? These are the questions the conference  explored during its two-day run.

This year’s Update was convened by three of Indonesia’s most prominent economists: Mari Pangestu (Universitas Indonesia), M Chatib Basri (Universitas Indonesia) and Arianto Patunru (ANU Indonesia Project).

DAY 1

POLITICAL UPDATE
Indonesia’s year of democratic setback: toward a new era of deepening illiberalism?
Vedi Hadiz during the Political Update, with Thomas Power and Helen Sullivan.

Vedi Hadiz during the Political Update, with Thomas Power and Helen Sullivan.

 

The first two sessions were the Political Update and the Economic Update, which were streamed live through Facebook. Vedi Hadiz (University of Melbourne) presented the topic entitled Indonesia’s year of democratic setback: toward a new phase of deepening illiberalism. Hadiz argued that Indonesian democracy had become more exclusive, and potentially not just in a passing phase. The arenas of conflicts and democratic setbacks include pressures on the Komisi Pemberantasan Korupsi (KPK – Corruption Eradication Commission), revisiting 1965, the mobilisation of Islamic identity as well anti-Chinese sentiment during the Jakarta Gubernatorial race, etc. This resulted in somber assessments of Indonesian democracy compared to 2014. On the other hand, liberal reformists are generally too weak and incoherent to pose a challenge. All these paint a bleak picture in the run up to the 2019 elections and a likely Jokowi vs Prabowo 2.0 face-off.

The discussant in this session was Thomas Power (ANU). According to Power, it is especially interesting to follow the events that Hadiz has described in relations to these deeper, structural phenomena, in particular the entrenched and competing interests of wealthy and powerful elites. Power agreed that the most troubling political development of the last year is not only the unprecedented sectarian mobilisation seen in Jakarta, but rather how the Indonesian democracy now seems to be caught in deeply illiberal forces. On the one hand is Islamic chauvinism and on the other is hyper-nationalism and the absent of credible liberal, pluralist alternatives. Power raised two issues: (1) the nature and the extent of elite support for sectarian mobilisation during the Jakarta election and (2) how Jokowi’s approach to the exercise of presidential power may have contributed to the polarised confrontational politics on display over the past year and whether these events mark a turning point in his approach to the presidency.

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ECONOMIC UPDATE
Effectiveness of policy reform in democracy and the regional autonomy regime
Raden Pardede presenting the Economic Update, chaired by Budy Resosudarmo and Riatu Qibthiyyah as discussant.

Raden Pardede presenting the Economic Update, chaired by Budy Resosudarmo and Riatu Qibthiyyah as discussant.

 

The Economic Update was presented by Raden Pardede (CReco Consulting) and chaired by Budy Resosudarmo (ANU). The main issue Pardede raised was the effectiveness of policy reform in decentralised Indonesia. Pardede concluded that while it is too early to say that Indonesia’s low  growth rate is the new normal, current data clearly showed limited improvement compared with 2016. Despite stable household consumptions, Pardede and his co-author Shirin Zahro (also of CReco Consulting) observed three important points: (1) the rise of online household spending especially in urban, upper income and young population groups, (2) the shift in household spending from basic household goods to  leisure goods and services, especially amongst the upper income group, and (3) the decline in the purchasing power of lower income group and informal workers.

Most of Indonesian economic data indicate a weakening growth of domestic demand while macroeconomic stability and financial stability remain intact. While monetary and fiscal authorities do not have much room to maneuver to stimulate the economy, policymakers turn to structural (deregulation) reform initiatives. However, despite initiative from the government to accelerate deregulation and administrative reforms, the effectiveness of these reforms is far from satisfactory,  mainly due to institutional capacity constraints such as inefficiency in bureaucracy and lack of coordination. In short, there are too many investment and economic policy packages yet the government is unable to implement them. Raden also pointed to the large costs of ‘political financing’ leading to rampant corruption by local government leaders, further eroding the government’s ability to effectively implement policy packages.

The discussant is this session is Riatu Qibthiyyah (Universitas Indonesia). Qibthiyyah was optimistic that despite mixed results, decentralisation is still key in Indonesia’s economic development and that the country should not go back to the previous centralised government structure. Qibthiyyah pointed out that the most important objective within the current government is the implementation of fiscal policy and suggested more focus should be given to existing policies such as structural reforms, fostering a healthy business climate and tackling corruption, rather than creating new initiatives.

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Globalisation, nationalism and sovereignty: the Indonesian experience
Ed Aspinall presenting new nationalism in Indonesia.

Ed Aspinall presenting new nationalism in Indonesia.

 

This session was chaired by Robert Cribb from ANU. The first speaker was Anthony Reid (ANU) who raised questions on economic sovereignty in a porous archipelago, where Indonesia’s geography has long seem to be at war with its politics. Reid illustrated how during the VOC trading era, monopoly could be profitable in the archipelago and that control of the Java Sea was both a right and a necessity for Batavia, at the time ‘Queen of the East’ for trade. This led to heightened support for sovereignty, and the problem remains in Indonesia where economic reality and political sovereignty continue to be be at odds. Reid argued that decentralisation was actually bringing back ‘normalcy’ to the ideas of sovereignty for the archipelago, one which the colonial powers had taken over.

Edward Aspinall (ANU) focused his ideas on the new nationalism in Indonesia, where one of its features is that is is remarkably under-theorised – an ideology  almost without ideologues. Indonesian nationalism is superficial in its intellectual terms, and characterised by two key themes: (1) a sense that Indonesia is threatened and beleaguered by hostile foreign forces, a feeling that borders on the paranoia, and (2) obsessive interest in national dignity. In this context, it is not hard to conclude that Indonesian nationalism is merely a manifestation of national frustration and failure.

The last speaker of the session was Shafiah Muhibat (S Rajaratnam School of International Studies), presenting a topic on Indonesia in the South China Sea. Muhibat explained that the recent renaming of the North Natuna Sea was an example of actions taken to demonstrate the government’s intent to defend Indonesia’s sovereignty over the Natuna islands and the water surrounding it, which has been a source of tension, as China’s nine-dash line overlaps with Indonesia’s exclusive economic zones (EEZ) in the area. Muhibat identified the role Indonesia had and could undertake to manage the dispute, particularly in the context of ASEAN framework.

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Nationalism in practice
Eve Warburton on resource nationalism.

Eve Warburton on resource nationalism.

 

This session was chaired by Allaster Cox (DFAT). Jeffrey Neilson presented on the topic of food sovereignty where he pointed out the state of malnutrition and food vulnerability across Indonesia. Former President Susilo Bambang Yudhoyono pledged food self sufficiency in a wide range of commodities, almost all were not accomplished yet resulting the 2012 Food Law  (Undang-undang tentang Pangan). The Food Law defines food sovereignty (kedaulatan pangan) as “the right of the state and the nation to independently determine a food policy that ensures a right to food for the people, and which ensures rights for the community to determine a food system approach to their local resources.” Neilson contrasted the Indonesian state-centric approach to food sovereignty with the the global, peasant-based international food movement and food sovereignty ideas. Indonesia’s ideas to sovereignty, he argued, have led to policies benefiting large-scale estates and led to land grabs.

Eve Warburton  (ANU) presented the topic of resource nationalism and mineral export ban in Indonesia. Warburton has previously outlined the ‘new developmentalism’ paradigm of the Jokowi government, and this has included elements of resources nationalism. Recently, however, the relaxation of the ban on mineral ore exports have led to speculations that resource nationalism is being eroded. Warburton argued that this is not the case, and that the heightened role of state-owned enterprises means there is a need for a new business model, one that will further cement Jokowi’s nationalistic credentials. The Freeport divestment of ownership to the government indicates that this is a new path in the Jokowi era.

The last presenter of the session was Yose Rizal Damuri from Centre for Strategic and International Studies (CSIS) presenting on results of a survey of Indonesian millennials on their views of globalisation and nationalism in Indonesia. The survey shows that Indonesian millennials are open to foreign visitors, but less open to trade and investment, and does not view imports or foreign workers as beneficial.

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Poverty, inequality and gender issues
Janneke Pieters speaking on gender and globalisation.

Janneke Pieters speaking on gender and inequality.

 

Chaired by Robert Sparrow (Wageningen University), the first topic of this last session of the day was anti-globalisation, poverty and inquality in Indonesia by Arief Anshory Yusuf (Universitas Padjadjaran) and Peter Warr (ANU). They showed that poverty reduction has slowed between 2000-2015 compared to before their crisis, where the Gini index increased from 0.30 in 2000 to 0.41 in 2015, one of the largest increase ever recorded for any country. But is this because of anti-globalisation movement? The speakers argued that the direct impact of globalisation on poverty and inequality is relatively small, and therefore not the major cause of slow down in poverty reduction. However, protectionism (or in the words of the speakers, globalisation-reversal) affects Indonesia through several channels, e.g. hurting agriculture and unskilled labors and therefore rural poverty; harms Indonesian agriculture-based exporting sectors; and affecting the distribution of returns from mineral and food exports.

Janneke Pieters (Wageningen University) together with co-author Robert Sparrow explored the issue of gender, labour markets and trade liberalisation in Indonesia, questioning whether trade openness affects gender gaps in the labour market. Channels through which trade affects labor gaps include reduction in discrimination through increased competition; technological change; and sector reallocation, where some sectors expand and others contract. What is the evidence for Indonesia? Janneke revealed that recent trade patterns do not suggest improved opportunities for women, and that there are indications that Indonesia has missed the benefits of globalisation in this respect.

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DAY 2

The human face of globalisation
Anis Hidayah and Dominggus Elcid Li during the human face of globalisation session.

Anis Hidayah and Dominggus Elcid Li during the human face of globalisation session.

 

The first panelists of the second day of conference were Anis Hidayah (Migrant CARE) and Dominggus Elcid Li (Institute of Resource Governance and Social Change). Both speakers pointed to harrowing tales of Indonesian workers, both overseas and in Indonesia. Hidayah pointed to the feminisation of migration, where the demographics of female migrant workers are ever increasing, and that they are more vulnerable to gender-based violence. Further, the number of Indonesian citizens who became victims of modern slavery continue to rise, and in 2014 reported to be more than 700 thousand people! On the other hand, remittances from foreign workers reached US$8.9 billion in 2016. Yet, the government is largely putting migrant issues on the back burner. During the recent hyped visit of King Salman earlier this year, for example, with his entourage of ministers and princes, not one bilateral agreement involving migrant workers was signed, despite the fact that an estimated 1.2 million Indonesians currently work in Saudi Arabia.

DESBUMI (the Village of Care Program) is one of the responses to empower migrant workers where the village-based programs aim to protect migrant worker from the point of departure to the return home. Further, DESBUMI also encourages the active roles of local government in establishing and implementing good migration policies.

In his presentation, Elcid Li focused on the results of a research on human trafficking conducted by the Institute of Resource Governance and Social Change. Surprisingly, their research shows that Indonesian labor agencies are the largest perpetrators of human trafficking! Further, most labor agencies have retired or former high ranking police officials as directors, which makes junior officers have difficulty in investigating their violations. The East Nusa Tenggara (NTT) Province is particularly vulnerable to trafficking since the area is one of the poorest and underdeveloped in Indonesia. Cases of child trafficking is a particularly urgent problem, where hundreds of children are literally sold from NTT. What can be done? Elcid Li presented strategic policy options and stressed the need for all stakeholders to respond to the problem.

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Response to globalisation
Manggi Habir and Mari Pangestu.

Manggi Habir and Mari Pangestu during the session on response to globalisation.

 

The second session of the day was on responses to globalisation with Manggi Habir (Bank Danamon) and Titik Anas (Presisi Indonesia) as speakers. Habir focused on private sector impacts and responses to shifts in globalisation, where he outlined the good (improved standards, more choices, and new technologies) and the bad (the 1998 financial crisis). Currently, with few exceptions, the private sector of Indonesia has a more inward-looking stance, taking advantage of technological innovation and  largely still unexploited local markets.

Titik Anas delivered a presentation on cooperation in managing globalisation, focusing on multilateral and regional trade agreements, which are increasingly comprising a ‘full package’ of not only liberalising the trade and investment regime, but also development assistance and cooperation to assist member countries. Under ASEAN, for example, cooperation is being strengthened in the form of an ASEAN single windo, in visa exemption, and in small and medium enterprises development policies. Studies have shown that cooperation can accelerate integration.

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Concluding remarks: navigating the new globalisation
The last panel. Deasy Pane with Chatib Basri, Hal Hill and Danny Quah.

The last panel on navigating the new globalisation. Deasy Pane with Chatib Basri, Hal Hill and Danny Quah.

 

The last session in the two-day Update was a much awaited one and was chaired by M Chatib Basri. Hal Hill and Deasy Pane, both from ANU, presented the topic titled Indonesia and the global economy: missed opportunities? Quoting Basri (2012), Hill reminded that while Indonesia was born a free trader,  it had been consistently reluctant to accept globalisation despite being predicted to be the World’s 4th largest economy by 2050. Many factors affected Indonesia’s stance on  globalisation, including its historic legacy, ideology and geography, and the current outcomes were (1) the continuing macroeconomic-microeconomic policy divide; (2) the policy pendulum swinging from more open to less open; (3) the tendency for Indonesia to sit on the fence regarding trade and international negotiations; and (4) the struggle to develop a coherent industrail policy. Deasy Pane outlined the case study of Indonesia and East Asian industrialisation.

In summary, when Indonesia has embraced globalisation through effective reforms, the effects had been broad-based and beneficial. However, when reforms slowed, so did growth, job creation, and poverty reduction. Although the current global environment is difficult and uncertain, reform-oriented countries are still growing slowly and an effective political strategy for faster and more inclusive growth would be to combine open economic policies with a strong social policy agenda.

The last presentation was by Danny Quah (National University of Singapore) who demonstrated a very sharp and strategic summary of trade, globalisation and sovereignty. Quah reiterated the important questions raised during the two-day Update conference on the impact of globalisation to the economy. The traditional or conventional question is ‘what can globalisation do for us’. However, the experience of glibalisation has demonstrated to be different for rich and poor – not just people, but also countries, with some benefiting and other hurting from globalising trends. The question is then: is globalisation still on offer, especially in view of its downsides? Quah suggested that yes it is, but Asia and ASEAN should lead in defining this turning point of what globalisation means in the future, especially since the World’s traditional leaders of geopolitics has proven can not now be relied upon to lead in this matter.

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Summary written by N Muliani and L Napitupulu.

The Update proceedings will be published in an edited form by May 2018.

Videos and presentations are available to download from the 2017 Indonesia Update page.

 

We would like to thank Giovanni Armando for all images in this page.