Indonesia 2012

Total score

55.54 change: 0.19

Quick facts

  • 248.6 million
Population growth:
  • 1.04 %
Unemployement rate:
  • 6.6 %
  • 1139 billion $
GDP growth rate:
  • 6.5 %
GDP per capita:
  • 4700 $

Score and comments

Political Freedom
Free and Fair Elections

Democratic legislative national elections have been held every five years since 1999, with the latest one taking place in 2009. The President and the Vice President, the House of Representatives, the Regional Representative Council and the local Houses of Representatives are all directly elected by the people. Elections have been largely considered free, fair and in compliance with democratic standards by all participants and observers. Still, some irregularities were reported, as the Indonesian Electoral Commission failed to register more than ten million potential voters during the 2009 election. As a result, the Supreme Court ordered a partial recounting of the votes. Indonesia enjoys a significant level of political pluralism and participation. There is a great variety of

non-governmental organisations and local interest groups involved in communal politics, and the rights of assembly and association are generally respected.

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Absence of Unconstitutional Veto Players

The elected government effectively holds the power to govern without any interference. However, there is another actor powerful enough to step in if it sees fits: the military. The Indonesian armed forces maintain the right to interfere with the government and its decisions if it feels that national unity and stability are under threat. Furthermore, some small radical Islamic groups strive to abolish democratic standards and replace them with a theocratic state. These groups have lately gained relevance and strength and are trying to coerce the government to pass legislation in their favour.

Freedom of Press

A broad spectrum of television and radio broadcast stations operate freely and independently in Indonesia for the most part. However, bloggers and online activists have been reported to face harassment. In one case, a woman who had blogged about her bad experience in a national hospital was given a six-month suspended jail term for libel. An increasing number of journalists have also been subject to attacks and violence. Moreover, foreign journalists are not allowed to travel to West Papua and report about the ethnic separatist insurgency without a special permit.

Rule of Law
Independence of the Judiciary

Although the Indonesian judiciary, particularly the Constitutional Court, has shown its independence in some cases, the court system remains largely marred by corruption and other weaknesses. Low salaries for judicial officials and impunity for illegal activities exacerbate the problems of bribery, forced confessions and interference in court proceedings by military personnel and government officials at all levels. In June 2011, the parliament passed a bill that curtailed the powers of the Constitutional Court, but the Court annulled the controversial articles in the law and managed to restore its powers. Nevertheless, the deterioration of the quality of the judiciary remains a cause for concern.


Corruption in Indonesia remains rampant. However, the Corruption Eradication Commission (Komisi Pemberantasan Korupsi; KPK), established in 2002, has been successful in a series of high-profile cases. To illustrate, in March 2011, former chief detective Susno Duadji was sentenced to three and a half years in prison for graft and embezzlement. Later that year, Democratic Party treasurer Muhammad Nazaruddin was charged with corruption related to preparations for the 2012 Southeast Asian Games in South Sumatra. In another case, Wafid Muharram, suspended Sports and Youth Affairs Ministry Secretary, received a three-year sentence for bribery. This has given rise to public expectations that acts of corruption, even if committed by senior officials, will be prosecuted. Nevertheless,

due to attempts by the ruling elite to weaken anti-corruption bodies, particularly an anti-corruption law passed in 2009, the authority and independence of both the KPK and the Anti-corruption Court have been eroded, and the problem persists. This explains why Indonesia continues to be perceived as having high rates of corruption, with it being placed at number 100 out of the 183 territories surveyed in Transparency International’s 2011 Corruption Perceptions Index.

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Protection of Human Rights

The human rights situation in Indonesia has improved over the last decade, along with its democratic consolidation, strong civil society and free media. Freedoms of expression and assembly are generally upheld, and academic freedom respected. However, some severe human rights concerns remain. For one, Indonesia still practices capital punishment. Security forces officers continue to enjoy relative impunity for abuses against civilians. Although many religions are recognised, religious minorities still suffer from discrimination and intimidation. Intolerance was also reflected in incidents of violence against Christians and Ahmadiyah, a so-called heretical Muslim group, which erupted during 2011. In sum, the human rights situation in Indonesia is not as precarious as in some

other countries in the region, but the country has yet to take the steps necessary to ensure greater compliance with international human rights standards.

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Economic Freedom
Security of Property Rights

A deficient legal framework, ineffective administration and patronage networks affect the security of property rights. In many cases, court rulings are arbitrary and judges tend to rule against foreigners in business disputes. The otherwise welcome decentralisation of mining rights, which now can be decided at regional and local levels, has often produced contradictory and confusing contracts which may lead to social conflict. The often unclear ownership of land rights also poses a problem, most notably for the rural population. The protection and enforcement of intellectual property is weak, which results in a growing market for counterfeit goods.

Size of Government: Expenditures, Taxes, and Enterprises

Government spending (including consumption and transfer payments) has decreased to 16.7% (down from 19.2%) of the GDP. Indonesia’s fiscal deficit has declined to 1% (from 2.6%), whereas its public debt is rather low, having fallen to under 30% of the GDP.

A fiscal reform brought taxes to average levels, resulting in a top income tax rate of 30% and a corporate tax rate of 25%. Other taxes include value added tax and property tax. Overall tax revenue equals 11.4% of the GDP.

Regulation of Credit, Labour, and Business

Indonesia’s financial system has been gradually restructured since the late 1990s. More than 120 commercial banks (four of which are state-owned) dominate the efficient banking system. Additionally, more than 1,800 (mostly smaller) banks cater to a predominantly rural clientele. The Indonesian Central Bank functions as a supervising and monitoring body. A weak regulatory framework impedes the freedom to start, run and close a business. Measures such as streamlining and simplifying the application process for businesses have had little impact so far. Starting a business takes 8 procedures and 45 days, which is more than the world average of 7 procedures and 30 days. Getting a business license requires a total of 13 procedures and 158 days. Closing a business is both

complicated and costly. The World Bank ranked Indonesia at the 129th place (2011: 126th) out of 183 countries in its 2012 Doing Business report. While restrictive labour regulations keep the non-salary cost of an employee at an average level, they also make his dismissal costly.

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Freedom to Trade Internationally

Indonesia’s weighted average tariff rate stands at 3.1%. To meet requirements of the WTO, ASEAN Free Trade Area and Asia-Pacific Economic Cooperation, Indonesia will have to continually reduce tariffs until 2020. At present, international trade suffers from a complicated system of licensing requirements, lacklustre implementation of trade policies, deficient enforceability of contracts and property rights, and a corrupt customs office.

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