Behind Indonesia’s success, a president who rules by consensus

When President Joko Widodo was re-elected for a second term in 2019, one of his first moves was to reach out to the candidate he had defeated. Photo; Bloomberg
When President Joko Widodo was re-elected for a second term in 2019, one of his first moves was to reach out to the candidate he had defeated. Photo; Bloomberg


  • Reconciliations in politics and labour-capital relations have helped the country up its performance.

To rework an old line, President Joko Widodo of Indonesia is a modest man with a good deal to be immodest about. This November, he will host the G20 summit in Bali. Dignitaries and leaders will see a country that is one of the surprise success stories of the developing world in the past couple of years, one that has come a long way since the overthrow of Suharto’s dictatorship in the aftermath of the Asian financial crisis a quarter of a century ago.

Since becoming Indonesia’s president in 2014, Jokowi, as he is popularly called, has lowered religious tensions and curbed the rising risks of religious fundamentalism. The once ferociously volatile rupiah this year is one of the best performing currencies against the US dollar with, until recently, relatively minimal intervention from the central bank. Helped by a commodities boom, which has boosted the country’s revenues from exports of nickel, coal and palm oil, the current account is in surplus. Nadiem Makarim, a startup billionaire with a degree from Harvard picked to be education minister by Jokowi in 2019, will soon seek to push through a more inquiry-based learning curriculum for government schools based on the International Baccalaureate system.

You might also like

Why the wait for new trade policy just got longer

Busted: The myth of India decoupling from global markets

Why market is unimpressed by Torrent’s Curatio deal

Meet the risky investor: Equity Intelligence’s Porinju Veliyath

Indonesia did better than expected in coping with the pandemic, both in health terms and in containing economic damage. It chose not to impose a national lockdown, leaving it largely to regional governments to respond when cases rose. The economy shrunk by just 2.1% in 2020, despite its dependence on tourism, and will likely grow by 5.2% this year. Jakarta is back to its natural state of seeming like a giant car park of mostly immobile cars amid gleaming skyscrapers and wonderful tropical topiary.

When he was re-elected for a second term in 2019, one of Jokowi’s first moves was to reach out to the candidate he had defeated in bitter elections in 2014 and 2019, former general Prabowo Subianto, and appoint him defence minister. This in effect neutralized the opposition. This coalition of interests, in a sense, mirrors the consensus-based approach of Javanese society. Prabowo has done a good job of the defence portfolio. The Financial Times recently quoted former Singaporean minister George Yeo as describing the approach as “democracy with Javanese characteristics": (The attitude is) “‘we will campaign like hell. We will call each other names, but when the ballots are counted and we all know what the relative proportions are, we will form a coalition cabinet… and you’ll get your share’," Yeo said.

This means Indonesia’s political scene is a good deal less divided than in the past, and New Delhi’s for that matter. One of Jokowi’s first moves in 2014 was also to push development down to villages by giving them control of small funds to decide for themselves how to spend it. Jokowi’s start in politics was running successfully to be mayor of Solo in 2005, and then going on to become governor of Jakarta, before he ran for president. But, the paradox has been that even as he has decentralized power in some respects in a geographical sense, under his tenure, Indonesia’s once respected anti-corruption agency has been weakened. Veteran political journalists in Jakarta describe Jokowi as personally incorruptible, just as Manmohan Singh was as India’s prime minister, but inclined to look the other way in the interests of keeping his coalition together as well as in allowing key lieutenants to centralize power. The weakening of a anti-corruption agency is “a key disappointment of his tenure," says James Bryson, director at investment advisor PT HB Capital Indonesia in Jakarta.

But as multinationals and small and medium enterprises from Korea and Taiwan have sought to diversify manufacturing and reduce dependence on China, Indonesia stands to be a beneficiary. Against the odds, the Jokowi government almost exactly two years ago enacted a law making it easier to hire employees and also let them go without companies being overburdened with heavy severance requirements. Bryson credits the administration with realizing that “there is competition for foreign investment." The country is being mentioned more and more as an alternative to Vietnam as companies diversify their operations out of China.

Indonesia is also seeking to learn lessons from the friendly relations between labour and capitalists in 20th century Japan, as the new reforms, which were expected to draw large labour protests, take effect. Arsjad Rasjid, president director of Indika Energy, a major coal exporter and chairman of the Indonesia Chamber of Commerce and Industry, says with pride that for the first time at a G20 meeting, there will be a joint communique by business and labour. The chambers of commerce have since the start of this year signed memorandums of understanding with six large trade unions. Among the goals are reskilling and upskilling, so workers can adapt to the digital age, and also moving accommodation for workers closer to factory clusters. “If we don’t do anything, there will not be an industrial revolution, but social revolution," Arjsad Rasjid says.

Jokowi has been active on the world stage. He travelled to Kyiv in June and then to Moscow to stress the need to open up wheat and grain exports and lift the sea blockade on Ukrainian grain to rebuild food security for the developing world. Long-time observers of the soft-spoken man who began his work life as a furniture factory owner would not be surprised by both the can-do spirit behind that initiative as well as its pragmatism.

Rahul Jacob is a Mint columnist and a former Financial Times foreign correspondent.


Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.


Switch to the Mint app for fast and personalized news - Get App