Look east, towards Indonesia

The two eclectic democracies have more in common than India and China, yet they are only rarely hyphenated

pallavi

Pallavi Aiyar | July 1, 2015




Perhaps the most overlooked comparison in Asia is that between India and its civilisational sibling, Indonesia. These two eclectic democracies have more in common than India and China, yet they are only rarely hyphenated. While China’s per capita GDP in 2013 (adjusted for purchasing power parity) was at $9,800, the equivalent for India was a mere $4,000, putting it much closer to Indonesia’s $5,200. China is the global leader of merchandise trade, boasting a well over 10 percent share of world trade, while India’s share is only 1.6 percent and Indonesia’s is 1 percent.

On parameters of human development ranging from sanitation to malnutrition, India and Indonesia are once again closer to each other than they are to China. For example, around 37 percent of children under the age of five in Indonesia and 39 percent in India are stunted (or shorter than the World Health Organisation’s reference population), compared to less than 10 percent in China.

A list of the most fundamental challenges confronting India today could just as well be Indonesia’s. On the economic front they need to boost manufacturing competitiveness to create the millions of jobs required to ensure their young and growing populations become a demographic dividend, rather than a Malthusian disaster. Governments are tasked with attracting foreign investment and fixing creaking infrastructure even as they must assuage protectionist lobbies and battle entrenched corruption. Weak governance plagues both nations, as Delhi and Jakarta continue to debate the right power-sharing equation between the centre and provinces.

“Bhinekka Tinggal Ika” (multiple but one) the Indonesian national motto, is in essence identical to the Indian catchphrase of “unity in diversity”, and underscores their accomplishments in having woven together a unified tapestry out of the fractured ethnic and religious plurality of their societies. Nonetheless, ensuring the rights of minorities remains a fraught undertaking for both countries.

Compared to India, Indonesia is a relatively new democracy. General Suharto’s three decades-long dictatorship was dismantled in 1998. But already the two countries are political doppelgangers. A multiplicity of parties, noisy rallies, demanding trade unionists, and a free and assertive press are part of the public landscape in both nations; a far cry from the annual meetings of China’s National People’s Congress that are usually orchestrated into rigor mortis.

Last year’s elections saw the elevation of a new breed of popular leader in the two countries. Voters were clearly disenchanted with the traditional elite. Narendra Modi, whose family ran a tea stall, has risen from near the bottom of India’s caste and class hierarchies. Joko Widodo, universally known as Jokowi, is from a similarly underprivileged background. The son of a carpenter, he was a furniture seller, before becoming mayor of Solo, a mid-sized city in central Java.

These similarities should not obscure trenchant difference in temperament and policy inclinations that divide them. But it is these divergences that are what will make the India-Indonesia comparison so interesting to observe in the coming years.

As a leader, Modi is dominant and combative, while Jokowi is consensual and conciliatory. In his more than 12-year reign as chief minister of Gujarat, Modi acquired a reputation for governing with a firm hand, as he pursued an aggressive, pro-business agenda. And since taking charge of the country, he has ensured a concentration of power in the prime minister’s office. Ministers are left with little elbowroom and need to secure PMO approval before appointing key staff.

In contrast, Jokowi is unassuming in manner. As governor of Jakarta (a post to which he was elected in 2012) he avoided the tangible trappings of power like fancy cars and security detail. He often walked around public markets and squares listening to people’s concerns first hand, and was known for joining popular city events like rock concerts and marathons.

While Modi’s reputation in Gujarat was built on the back of large infrastructure projects, Jokowi’s is derived from his two-term stint as mayor of Solo, during which he was able to transform a formerly crime-ridden city into a centre for regional arts and culture. In Solo he demonstrated his mediation skills by developing a consultative approach to relocating street vendors away from a park in the city centre.

The Indian prime minister is an economic reformer with capitalist instincts. Modi’s achievements in Gujarat included attracting substantial investments into large manufacturing and power projects. He introduced business-friendly policies aimed at cutting red tape and making land acquisition easier than in other parts of the country.

As prime minister, he is yet to make any dramatic announcements on the reform front, but he has made a draft of more modest proposals, including relaxing foreign investment rules for insurers, military contractors and real estate companies. A broad tax overhaul is also underway. The Indian economy is buoyant and has matched China’s growth for the first time, in recent months.

Jokowi, on the other hand, is a communitarian. In Jakarta, as in Solo, he made community welfare a consistent priority. His sympathies lie with small business owners, like the street vendors of Solo. As governor of Jakarta, his flagship projects included a free healthcare card and education funds for the poor, the shifting of thousands of squatters out of flood catchments into low-cost apartments, and the restarting of a much-delayed public transport overhaul. As president he has widened the policy of smart cards for accessing free healthcare and education for the poor.

But under him Indonesia’s economy has only grown by 4.7% in the first quarter compared with a year ago, the slowest pace since 2009. And although the president has made rhetorical overtures to foreign investors indicating that Indonesia is open for business, many of his policies so far have been protectionist in intent and effect.

Modi and Jokowi face a different set of political constraints. Modi might have risen from humble origins, but he is a political veteran with a proven knack for working party machinery to his advantage. Under Modi, the BJP won a landslide victory, giving them a clear majority in parliament. He can therefore operate on the basis of a strong mandate. And while he still needs to work with chief ministers of India’s multiple states, the prime minister has more of a free hand at the centre than any other Indian leader has had in decades.

In contrast, Jokowi is a comparative newbie to politics, having entered the fray as recently as 2005. Most importantly, his room for manoeuvre as leader of Indonesia is far more circumscribed than Modi’s is in India. Not only does he head a minority coalition in the national parliament, but as an outsider to the political establishment, it is difficult for him to strike the kind of deals he needed to achieve any of his policy objectives.

Perhaps his greatest challenge is that he lacks the support of his own party, the PDIP, which is headed by former president Megawati Sukarnoputri. The daughter of Indonesia’s first president, Sukarno, Sukarnoputri is loath to cede power to a man whom she considers an underling. She nominated Jokowi as the party’s presidential candidate with reluctance, only after it became clear that she had no hope of winning an election herself. But she loses scant opportunity to assert her authority over the president.

Jokowi spent more than a month earlier this year embroiled in a controversy over the appointment of a tainted police chief, an affair that has hurt his anti-corruption credentials and threatened to expose him as a lame duck. The president nominated Budi Gunawan, a powerful general, as police chief in January, a move widely believed to be at the behest of Sukarnoputri. Gunawan was a former security aide to Sukarnoputri and the two are known to be close.

But three days after his nomination, Gunawan was named a suspect in a corruption probe by the KPK, Indonesia’s anti-corruption agency. The police then arrested one of the KPK’s five commissioners, on perjury allegations relating to a five-year-old case, resulting in a prolonged showdown between the anti-graft agency and the police.

In the process Jokowi’s reputation took a battering. Following the corruption allegations the president suspended Gunawan’s nomination but did not drop it altogether for over a month. Gunawan was eventually installed as deputy chief of police. His handling of the Gunawan affair has alienated both popular opinion, as well as many of the political elite.

That Indonesian politics is currently confounded by the emergence of two centres of power, the president and the chairwoman of his political party, is a scenario that is not unfamiliar to Indians. But the difference between the UPA era and the current Indonesian political scenario is the fact that unlike former PM Manmohan Singh, Jokowi has strong grassroots support.

The desire to shore up this support, which had begun to wobble in the aftermath of the police chief fracas, goes some way in explaining the Indonesian president’s surprisingly hard-line stance on the death penalty. Prior to Jokowi’s election, Indonesia had rarely applied the death penalty for drug smuggling. Over the fifteen years before he took office, seven foreigners, and no Indonesians, were put to death on narcotics charges. But under him, in the past few months alone, 14 people have been executed for drug smuggling, including 12 foreigners. The killings were ordered in the face of desperate diplomatic appeals.

Given that Jokowi has always projected a liberal, humane image, the executions have surprised many analysts. But polls indicate that a large majority of Indonesians approve of the government’s decision. Ultimately, however, any approval resulting from the executions is only fleeting.

To retain broad-based support it is economic growth that Jokowi will need to deliver, something Modi also has to contend with. India and Indonesia both have a window of opportunity where tough decisions taken by their popular leaders could translate into long-delayed structural reforms, thereby realising the potential for much stronger growth than so-far actualised.

But it’s a slim window and the challenges – endemic corruption, inadequate physical infrastructure, uneven law enforcement, environmental degradation and underinvestment in health and education – are formidable. What both countries urgently need is a fillip to their manufacturing sector that will lead to the job creation necessary for their growing populations. Whether Modi and Jokowi are successful in achieving this goal will depend in large part on their skills in balancing protectionist lobbies and subsidy-habituated people with reforms aimed at cutting down on red tape.

A 50 percent fall in global crude oil prices over the past six months has helped ease the fallout of Indonesia’s decision last November to cut expensive fuel subsidies. The move could save Indonesia nearly $10 billion this year. India too, deregulated diesel prices last October and raised fuel taxes.

But it is the manner in which the saved funds are redirected and spent that will be crucial in determining whether there is a positive impact on economic growth. Earlier this year Jokowi was able to pass a forward-looking budget that increased the allocation for infrastructure by 53% – the biggest year-on-year increase in Indonesia’s history. However, spending has so far been stalled. Bureaucratic wrangling, and land acquisition issues go some way in explaining these delays, issues that resonate in India.

India and Indonesia are both at an inflection point. Which country will catapult to the next level, and which will fail? What kinds of compromises will be necessary and which trade-offs will prove disastrous? The answers will yield more insights than any India-China comparison. As anyone who knows China and India well can testify, comparing the Himalayan neighbours is likening apples to oranges. It is maritime neighbours India and Indonesia that provide the genuinely germane comparison, if only the policy establishments in New Delhi and Jakarta cared to look.

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