September 26, 2019

Violent Protests in Indonesia Signal Tough Road Ahead for Jokowi
(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.Indonesian President Joko Widodo is faced with a delicate balancing act as he heads into his second term, trying to appease the country’s conservative ruling elite while managing an outbreak of protests and violent civil unrest.The latest conflict came this week as thousands of demonstrators took to the streets of Jakarta as part of countrywide protests aimed at forcing the government to reconsider legislation rights groups say will curtail civil liberties. Their demands have expanded to include the two other major headaches for Jokowi, as Widodo is known.He’s now facing growing calls to end the forest fires that have sent hazardous levels of pollution into Malaysia, Singapore and Thailand as well as pressure over fresh police and military clashes with separatist forces in the restive province of Papua in which at least 30 people were killed.The tension highlights enduring complications for a president who’s had difficulty wrangling support from the very coalition that got him elected. And it poses a risk to investor sentiment at a time when the government is trying to shore up confidence in Indonesia’s $1 trillion economy, with some foreign businesses worried that conservative amendments may overshadow more pressing reforms, like Jokowi’s promised overhaul of the country’s restrictive labor laws.Jokowi said he will meet with representatives of the protesters on Friday to discuss their demands. The government will also take into account the feedback it had received on the anti-corruption law and the demands to revoke it, the president said in Jakarta on Thursday, urging demonstrators to refrain from violence.Difficult PassageNavigating Indonesia’s tricky parliamentary system -- where agendas are set through the committees and commissions that often work at cross-purpose with the president and the government of the day -- means reforms can face a difficult passage.“He doesn’t control any of his coalition, not even his own party. He never has and he never will,” said Aaron Connelly, a research fellow on Southeast Asian politics at the International Institute for Strategic Studies. “He will have to secure the support of individual patronage networks, many of which cross parties, on a variety of issues. It will be hard work.”Despite the challenges, the government has rolled out a series of reforms designed to boost investment and growth, including slashing the corporate tax rate from 2021 and waiving income tax on dividends obtained domestically for some companies.And so far, market reaction to the protests has been muted, with stocks this week little changed and the rupiah down 0.7%, in line with other emerging market currencies.But for the fourth day in a row, thousands of students rallied in cities across the country against the legislation that seeks to outlaw sex outside of marriage and same sex relations, while also cracking down on freedom of expression and certain ideologies. While Jokowi yielded to public pressure to urge the government-backed bill be delayed, it could still become law.Protesters also want the government to revoke a law passed last week that critics say undermines the independence of Indonesia’s anti-graft agency. Jokowi last week defended the passage of that legislation, saying the establishment of a supervisory board to oversee the commission, known as KPK, will minimize the potential misuse of authority.Fraught CampaignThis follows an election campaign in which Indonesian identity politics were front and center, with an opposition led by former general Prabowo Subianto invoking religious nationalism to appeal to the electorate. While Jokowi emerged as the winner, it took the support of Islamist groups and high-profile cleric Ma’ruf Amin as his running mate to overcome questions about religious piety in the world’s largest Muslim-majority nation.“Jokowi’s real opposition, ironically, is his own party,” said Achmad Sukarsono, a political analyst at London-based consultancy group Control Risks. “The only reforms that Jokowi can launch are those that the ruling PDI-P and its allies can accept while he will have to follow a pace that the political elites are comfortable with,” Sukasarno said.With the crime bill still under consideration, Jokowi is facing questions over why his government was pursuing such legislation while it had a positive story to tell with tax reform and the regulation of foreign workers, said Lin Neumann, managing director of the American Chamber of Commerce in Indonesia.“It sends a message that is kind of disquieting,” Neumann said. “A change as sweeping as the criminal code reform should be done deliberately and with great consultation with the business community to avoid any obstacles to the investment climate.”\--With assistance from Arys Aditya.To contact the reporter on this story: Philip J. Heijmans in Singapore at pheijmans1@bloomberg.netTo contact the editor responsible for this story: Ruth Pollard at rpollard2@bloomberg.netFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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