Indonesia Political Risk Analyst

Kevin O’Rourke

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

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A soft crackdown -- issuing charges of money laundering and treason against key lieutenants organizing demonstrations for Prabowo - entails both risks and rewards for the government.  Demos outside election agencies mounted in size but are still relatively small.  After the official election result on 22 May protests could be larger.  A range of security officials issued stern warnings about "unconstitutional activity" and the Army chief cited 163,000 soldiers available in Jakarta.  Plans are afoot for a partial reshuffle in June or July before a full cabinet changeover after the 20 October re-inauguration.  A new BI policy permits electronic foreign-exchange trading.  The Anti-Corruption Commission issued warnings to state enterprises about graft in deals involving Chinese partners. Politics: The government named two prominent opposition activists as suspects on charges of money laundering and treason, while investigating a third.  The coordinating security minister formed a “team to monitor the statements of public figures”; he cited a need to prevent hoaxes and threats to public order, but critics decry the step as excessive.  A range of security officials issued sternly worded warnings about “unconstitutional” activities and the Army chief emphasized that 163,000 soldiers are available for duty in Jakarta.  Supporters of Gerindra Chair Prabowo Subianto have been demonstrating outside the offices of election agencies in Jakarta, with perhaps 2,000 attending today.  The administration’s ‘soft crackdown’ on agitators is a gamble.  It runs the risk of exacerbating matters by validating Prabowo’s complaints of heavy‑handedness and providing him with grievances with which to energize followers.  Alternatively, if authorities dismantle his organizational capacity by jailing key lieutenants, this could curtail the scope of demonstrations (Page 2).  President Joko Widodo described himself as “unencumbered” by electoral considerations in a second term and signaled the likelihood of a limited cabinet reshuffle after Idul Fitri (which occurs in early June) (p. 7). Justice: Members of the Anti-Corruption Commission (KPK) admonished state enter­prises to avoid graft and conflicts of interest – explicitly citing Chinese counterparts (p. 8).Policy News: A controversial revision of the Criminal Code (KUHP) is possible this year, potentially disempowering the KPK or further jeopardizing human rights (p. 8).  A new Bank Indonesia (BI) regulation allows electronic forex trading – a long­‑overdue step that will deepen the capital market and improve efficiency.  But e‑trading platforms will have a 49 percent foreign ownership limit (p. 9). Energy: Reports suggest that Shell may withdraw from the Masela gas block, which would undescore energy‑sector mismanagement.  But the rumor could be a tactic (p. 9).Economics: First quarter GDP growth fell slightly short of expectations at 5.07 percent year‑on‑year, with consumption growing by 5.0 percent.  No boost from campaign spending appeared.  Decision‑makers may have put spending on hold pending the election (p. 10).  The rupiah has been declining since election day, perhaps reflecting concerns about pro‑Prabowo protesters (p. 10).  Investment Coordinating Agency (BKPM) Chair Tom Lembong expressed optimism “as a pragmatist” about Belt and Road (BRI) projects.  He also underscored risks on the horizon due to Indonesia’s widening energy trade deficit (p. 12).

A soft crackdown -- issuing charges of money laundering and treason against key lieutenants organizing demonstrations for Prabowo - entails both risks and rewards for the government.  Demos outside election agencies mounted in size but are still relatively small.  After the official election result on 22 May protests could be larger.  A range of security officials issued stern warnings about "unconstitutional activity" and the Army chief cited 163,000 soldiers available in Jakarta.  Plans are afoot for a partial reshuffle in June or July before a full cabinet changeover after the 20 October re-inauguration.  A new BI policy permits electronic foreign-exchange trading.  The Anti-Corruption Commission issued warnings to state enterprises about graft in deals involving Chinese partners. Politics: The government named two prominent opposition activists as suspects on charges of money laundering and treason, while investigating a third.  The coordinating security minister formed a “team to monitor the statements of public figures”; he cited a need to prevent hoaxes and threats to public order, but critics decry the step as excessive.  A range of security officials issued sternly worded warnings about “unconstitutional” activities and the Army chief emphasized that 163,000 soldiers are available for duty in Jakarta.  Supporters of Gerindra Chair Prabowo Subianto have been demonstrating outside the offices of election agencies in Jakarta, with perhaps 2,000 attending today.  The administration’s ‘soft crackdown’ on agitators is a gamble.  It runs the risk of exacerbating matters by validating Prabowo’s complaints of heavy‑handedness and providing him with grievances with which to energize followers.  Alternatively, if authorities dismantle his organizational capacity by jailing key lieutenants, this could curtail the scope of demonstrations (Page 2).  President Joko Widodo described himself as “unencumbered” by electoral considerations in a second term and signaled the likelihood of a limited cabinet reshuffle after Idul Fitri (which occurs in early June) (p. 7). Justice: Members of the Anti-Corruption Commission (KPK) admonished state enter­prises to avoid graft and conflicts of interest – explicitly citing Chinese counterparts (p. 8).Policy News: A controversial revision of the Criminal Code (KUHP) is possible this year, potentially disempowering the KPK or further jeopardizing human rights (p. 8).  A new Bank Indonesia (BI) regulation allows electronic forex trading – a long­‑overdue step that will deepen the capital market and improve efficiency.  But e‑trading platforms will have a 49 percent foreign ownership limit (p. 9). Energy: Reports suggest that Shell may withdraw from the Masela gas block, which would undescore energy‑sector mismanagement.  But the rumor could be a tactic (p. 9).Economics: First quarter GDP growth fell slightly short of expectations at 5.07 percent year‑on‑year, with consumption growing by 5.0 percent.  No boost from campaign spending appeared.  Decision‑makers may have put spending on hold pending the election (p. 10).  The rupiah has been declining since election day, perhaps reflecting concerns about pro‑Prabowo protesters (p. 10).  Investment Coordinating Agency (BKPM) Chair Tom Lembong expressed optimism “as a pragmatist” about Belt and Road (BRI) projects.  He also underscored risks on the horizon due to Indonesia’s widening energy trade deficit (p. 12).   

'Soft Crackdown' / Demos Mount / Reshuffle Plan / SOEs + China V KPK / Lembong on BRI / E-Forex OK'd