Indonesia became an electoral democracy in 1999 after the resignation of General Suharto. Since 2004, the president and the 2 legislative chambers of parliament are directly elected every five years. In 2014, both presidential as well as parliamentary elections took place. Indonesia has a diverse political landscape, including various religion-based parties. For getting seats in parliament a party has to pass the threshold of 3.5% of the popular vote. The parliamentary elections in April were characterised by a large number of political parties which contested the 560 seats in parliament. The outcome was considered to be an indicator for the July presidential elections. With 19.6%, the Indonesian Democratic Party of Struggle (PDI-P) won the majority of votes, followed by the Golkar Party
(14.6%) and the Gerindra Party (12%). The ruling Democrat Party led by president Susilo Bambang Yudhoyono only won 9.8% of the votes which meant a loss of half of its parliament seats. In July 2014, the country witnessed a close race between presidential candidates Joko Widodo (PDI-P; widely known under his affectionate nickname Jokowi), the governor of Jakarta, and Prabowo Subianto (Gerindra Party), a former general and political hardliner. Jokowi defeated his contender with 53.15% compared to 47.85% of the votes. In an appeal at the Constitutional Court Prabowo challenged the result, alleging systematic fraud and election manipulation. But although political analysts and observers noted minor irregularities, they concluded that the electoral process was by and large free and fair. Newly elected president Jokowi promises comprehensive political reforms including improvements in poverty reduction, healthcare, education and fighting the wide-spread corruption in the country. If he manages to fulfil his election promises, the elections could be a crucial step for the economic and democratic development of the island state.
Indonesia’s transition from a military rule towards a democratic country began in 1998 with former president Sukarno´s resignation from office due to popular uprising and a collapsing economy. The over 32-years-long Sukarno era was marked by authoritarian rule, wide-spread corruption, nepotism and heavy-handed tactics of security forces but also a more market-led economic development. Despite Indonesia’s remarkable democratic development since 1998, old structures of nepotism and corruption in politics and economy are still present to a certain extent. The army, for example, even though much less visible in Indonesian politics, still qualifies as a veto player. It retains the right to interfere with government decisions if it deems national security and stability under
threat. In conflict zones such as Papua, these broad prerogatives of the army have led to the undermining of civil liberties and political rights and shows civilian control over the military is clearly not established.
The press in Indonesia is largely free and a wide variety of newspapers, radio and TV stations operate in the country. Nevertheless, the government upholds provisions to curb freedom of expression based on grounds of blasphemy or religious defamation. Occasionally, website content is blocked if it is deemed to undermine principles of Islamic faith. With rare exceptions the provinces of Papua and West Papua, regions that see repeated outbreaks of separatist violence, are off limits for foreign journalists.
Indonesia’s social media community is among the largest in the world and constantly growing. The internet has become a major source of information and is increasingly used to voice public opinion. Social media played an important role during the 2014 election campaigns.
The Indonesian judiciary acts fairly independently but there are areas of concern. The army, big business and politicians still influence important court decisions. The recruitment and training process of judges has been criticised on several occasions as it fails to ensure that only the most qualified individuals enter the judiciary. Combined with comparatively low salaries and a deficient continuing legal education this has made judges somewhat susceptible to bribes when deciding the outcome of criminal and civil cases. The Constitutional Court has on several occasions demonstrated its independence. In 2009 it scrapped two articles of the election law which would have discriminated against former political prisoners of the Suharto era. And in 2011 it annulled controversial articles in a
law passed by parliament which would have curtailed the court’s powers. However, the most senior judge of the constitutional court was sentenced to life in prison in 2014. He sold verdicts pertaining to top election disputes.
Corruption remains a serious problem in Indonesia. Since its establishment in 2003, the Corruption Eradication Commission has prosecuted hundreds of cases of bribery, election manipulation and fraud. But evidence suggests that the commission has merely scratched the tip of the iceberg. In Transparency International’s 2013 Corruption Perception Index, Indonesia was ranked at number 114 out of 177 countries. The most common practices of corruption are abuse of office, money laundering and bribery. Although Indonesian law forbids payments to public officials to facilitate or speed up administrative processes, companies often report of being confronted by officials with demands for cash payments or gifts. The severity of the problem was underlined in a January 2014 report by the Jakarta
Post, a newspaper. It lamented that corruption among public officials had dramatically increased during the recent years. According to the newspaper, 222 corruption cases were filed in Central Java alone during 2013 (up from 215 cases in 2012, and 102 in 2011). They resulted in the conviction for corruption of 121 civil servants, 47 legislators, a company director, 11 regents, 40 entrepreneurs, 24 village chiefs, 20 regional and state enterprise employees, a village administrative staffer, a university rector, four judges, two mass organisation members and a university student.
Indonesia’s willingness to accept numerous recommendations from the 2013 UN Universal Periodic Review comes amid a growing set of checks and balances raises hopes regarding the long-term development of human rights protection in the country. Indonesia’s democratic consolidation has seen a rise in civic participation and a vibrant independent media landscape that reports freely on social and political issues. But some serious issues remain. Although freedom of religion is constitutionally guaranteed, its protection is somewhat deficient. Violence and discrimination against religious minorities such as Ahmadiyah, Bahai, Christians and Shia, is a recurring issue. Incidents of violence against minorities often go unpunished, with the perpetrators benefitting from inaction on the
part of the authorities. The implementation of some laws in line with Sharia in Aceh has also seen human rights issues in regional contexts distort national advances. The Aceh parliament was planning to pass a bylaw before the end of September 2014 that would punish by caning offences such as alcohol, gambling, intimacy between unmarried couples, and “being alone with someone of the opposite sex who is not a marriage partner or relative”. The bylaw would apply to both Muslims and non-Muslims in Aceh. A lack of accountability for abuses by police and military forces continues in Papua and West Papua provinces. There is no civilian jurisdiction over soldiers accused of human rights abuses. Military courts often do not properly prosecute incidents of abuse on the part of army members.
Property rights are generally respected and protected but a deficient legal framework, ineffective administration and patronage networks affect the security and enforcement of property rights. Court rulings can be arbitrary and judges tend to rule against foreigners in business disputes. Land ownership is often unclear, which poses problems for farmers. Indonesia ranked 90th out of 130 countries in the 2013 International Property Rights Index (down from rank 121 in 2012) by Americans for Tax Reform, an advocacy group. The indexes main concerns were a deficient legal and political environment as well as weak intellectual property rights protection (evident in a growing market for counterfeit goods).
Government spending (including consumption and transfer payments) has stayed at about 19% of GDP. Indonesia's fiscal deficit stands at 2.3% of GDP, whereas its public debt is rather low, having further fallen to 24% of GDP.
Taxes are on average levels. The top income tax rate is 30% and the corporate tax rate 25%. Other taxes include value added tax and property tax. Overall tax revenue equals 11.8% of GDP.
Indonesia’s financial system has been gradually restructured since the late 1990s. More than 120 commercial banks (including four state-owned ones) and more than 1,600 rural lenders operate in Indonesia’s banking system. Most of the lending activities, however, are done by 15 banks which account for about 70% of credit. The Indonesian Central Bank functions as a supervising and monitoring body. In 2014 it has released a number of regulations aimed at strengthening the banking sector and improving the competitiveness of smaller, local banks. According to the World Bank’s 2014 Doing Business report, starting a business takes 10 procedures and 48 days (slightly more than the 9 procedures and 47 days the World Bank detailed in its 2013 survey). Getting a business license
requires a total of 13 procedures and 158 days. Closing a business is both complicated and costly. While restrictive labour regulations keep the non-salary cost of an employee at an average level, they also make his dismissal costly.
Indonesia’s weighted average tariff rate stands at 2.6%. 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. Foreign investment in certain sectors of the economy is subject to government approval.
With the ASEAN Economic Community (AEC) a single regional market of more than 600 million people will be created by the end of 2015. The AEC will provide for a free flow of goods, services, investment capital and skilled labour.
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