Indonesia's Chaotic Economics: Riots, Fury, and Hot Money
Author | Lingnan Renyuji
Editor | Li Xiaotian
The world's largest archipelagic country, spanning three time zones, consisting of more than 17,000 islands, home to 360 different ethnic groups, and using 719 languages - this is almost an impossible country to exist, let alone be unified. This is Indonesia, the largest economy in Southeast Asia, a "community of imagination" in the true sense.
Indonesia has always been known as the "Country of Ten Thousand Islands". With its geographical dispersion, cultural diversity, and long - term colonial rule and resource plunder in history, this country is like a "volcano" ready to erupt at any time: ethnic rifts, religious conflicts, wealth gaps, and power games are like undercurrents, and there are latent crises of division beneath the calm surface.
Protesters were dispersed by water cannons in Surabaya. The picture is from the Internet
At the end of August, this "volcano" finally erupted: the Bandung City Council building in West Java was set on fire, and the secretariat of the City Council building in Solo, Central Java, was burned down. A series of conflict events such as arson, marches, and demonstrations are taking place in Indonesia. The cause of the incident was that the media exposed that members of parliament could receive a monthly housing subsidy of about 50 million Indonesian rupiah (about 21,750 yuan, 10 times the minimum wage in Jakarta), which triggered public dissatisfaction; and a 21 - year - old deliveryman, Affan Kurniawan, was crushed to death by a police armored vehicle during a protest in Jakarta, intensifying public sentiment. The protest evolved from a peaceful march into a violent conflict. Until today, the conflict continues and has already caused at least 10 deaths.
Some people say that this is the most serious social unrest in Indonesia since the 1998 financial crisis, and similar to 27 years ago, the cause of the conflict is the huge gap between the rich and the poor, which forces the power of citizens to challenge the privileged class. This may also be an inevitable path for social progress.
"Indonesia is probably the most overlooked country in the world," Indonesian entrepreneur John Riady once said. Although it has a population of 283 million and is the fourth - most populous country in the world, and its economic volume ranks first in ASEAN, in the international political and economic landscape, Indonesia does not seem to have a position commensurate with its size. In the Chinese - speaking world, there are few research works on Indonesia. In the book Indonesia ETC: The Pearls Left Behind by the Gods, it was described that Indonesia is like a string of pearls scattered on the sea, not easy to form a complete image at once. In the early days, islanders in remote areas lacked the concept of "Indonesia", and violence and power finally built the perception of "country" among Indonesians from different islands.
The marine economy made Indonesians understand trade earlier, and civilization also grew on this "volcano". There is a transactional relationship between political power and religion here. Some people can sell their sacred mission to the highest bidder. This is the largest Muslim country, but it also has more than 20 million Christians. It is also one of the regions with the most developed pornography industry in the world (in the 1990s, the annual output value of Indonesia's sex industry reached a maximum of $3.3 billion).
Civilization is built in chaos, and business also thrives in chaos. In the vision of "Golden Indonesia 2045" put forward by the government, Indonesia hopes to become the fifth - largest economy in the world on the centenary of its founding.
In 2023, Indonesia's per capita GDP was about $4,940.55 (data from the World Bank), at a moderately high level. However, the young population structure has brought rare growth momentum to Indonesia. President Prabowo hopes to achieve an annual GDP growth rate of 8%, but currently it is only about 5%. It may be normal in Indonesia that plans cannot keep up with changes.
In 2023, Indonesia attracted $220.5 billion in foreign investment. The top three sources of investment were Singapore, China, and Hong Kong, China. However, it is worth mentioning that a considerable part of Singapore's investment actually comes from Chinese enterprises detouring through Singapore. So Indonesian senior officials often say directly that China is actually the largest source of investment in Indonesia. In fact, China has been Indonesia's largest trading partner for 12 consecutive years.
In the heat of the equator, there are countless mixed emotions surging, including positive expectations for the future and fears of contradictions and conflicts. The choice between development and risk is a business calculation that many Chinese businessmen who come to Indonesia to seek business opportunities have pondered countless times in their hearts.
Will a more civilized Indonesia arrive as scheduled?
The richest 10% of the population in Indonesia controls 30 - 35% of the national income, while the poorest 40% of the population only accounts for about 15% of the national income.
On the streets of Indonesia. The picture is from the Internet
There are wealthy people who take private helicopters to kindergarten every day, and there are also the middle - and lower - class people who ride motorcycles through the streets every day. Some foreign businessmen call motorcycle taxis "the flying casket". They are extremely dangerous, and taking one ride will give you a real feeling of "life and death are determined by fate in business abroad".
According to World Bank data, according to the typical poverty line standard for upper - middle - income countries (a daily consumption of 60 yuan), Indonesia's poverty rate is 68.3%. This group of people is not even visible. Simply from the data, the minimum wage standard in Jakarta is not much different from the average wage. The reason is that when calculating the average wage, usually only "full - time employees" are counted, while part - time and informal workers are ignored. More working people who cannot be counted are excluded from the average wage.
The gap between the rich and the poor in Indonesia has a long history, which is highly related to Indonesia's political form. In Lee Kuan Yew's World View, it is pointed out that "Indonesia is one of the most politically centralized countries in the world." For a country with such a dispersed geographical environment, the control between the central and local governments, and between unity and diversity, is a problem that successive Indonesian leaders have been constantly balancing.
During the Suharto era, important decisions related to the national economy were made by the president and his cabinet in the capital and implemented throughout the country by bureaucrats and representatives from the central government. Even if trade occurred in remote areas of Indonesia, an entry fee had to be paid to Jakarta. The tax revenue and profits obtained through the development of the country's rich resources naturally also had to be handed over to the capital, which would then decide how to distribute them.
Change occurred at the end of the 20th century. In 1999, Habibie, who succeeded President Suharto, decentralized power from Jakarta to local areas, delegating power to about 300 county governments across the country. Local autonomy alleviated the pressure of separatism and made economic development more balanced. In 2002, Indonesia amended its constitution to allow the people to directly elect the president. After the elected Susilo took office, Indonesia's annual economic growth rate averaged 5.7%, 4 - 5 times higher than that of the United States and the United Kingdom during the same period.
On August 26, 2019, after being successfully re - elected, former Indonesian President Joko Widodo announced that the capital would be moved from Jakarta on Java Island to East Kalimantan Province in Borneo. By "artificially diluting" the magnetism of this megacity, it would relieve the pressure on Jakarta and leverage the re - balance of the country's regions with the new capital.
However, the inertia and corruption problems caused by long - term centralization have not been eradicated in the process of decentralization. Lee Kuan Yew's World View states: "Provincial leaders also want to get some benefits. Corruption makes the whole system full of loopholes. If one yuan is spent, one corner is embezzled here and two corners are lost there. As a result, when the money reaches an ordinary worker or a foreign investor who wants to make a profit, there is little left."
Around 2010, Indonesia's Gini coefficient was 0.41. In recent years, through poverty alleviation, education, and cash transfer programs (such as PKH), the Gini coefficient has decreased, but it currently remains at around 0.37 (2023 data). This is part of the slow progress in the face of internal problems.
If you happen to stop in Indonesia, it's inevitable that an Indonesian will ask you "Where are you from?" This hospitality and enthusiasm do not come from the extroversion of all Indonesians, but from the inertia formed in trade.
In the 7th century, Persians once ruled Indonesia, followed by Arabs. Then the Chinese appeared in the 12th century, and later, in the 15th century, European Christian merchants set their sights on the spices in Indonesia. Therefore, if you feel a kind of flirtatious hospitality on an Indonesian island, don't be alarmed. This is a trading habit formed by Indonesians over the years. They want to know what kind of business they can do with this stranger and what to buy.
In this largest island country in the world, whose territory spans Asia and Oceania, business is a self - contained connection. "July is the season for drying clove buds. If you are sailing near a small island in the Maluku Islands in this world and happen to catch a gust of wind on the sea, you may smell the Christmas atmosphere before you even see the land," Elizabeth Pisani described in Indonesia ETC: The Pearls Left Behind by the Gods.
Indonesian women are picking clove buds. The picture is from the Internet
In the 15th century, spices were indispensable in European kitchens. In an era lacking preservation technology, spices were the key to preventing food spoilage and also the main source of stimulating taste buds. Indonesian islands are full of spices. Therefore, in the 17th century, Dutch merchants established the Dutch East India Company and conducted trade on various islands. Therefore, communicating with visitors from different regions became a survival rule for Indonesians.
Business has influenced the religion and language of the Indonesian archipelago. It is a force that promotes the unity of the Indonesian islands and also the driving force for Indonesia's continuous progress.
After entering the modern era, more Chinese entrepreneurs have set their sights on Indonesia. It is reported that the arrival of Chinese enterprises has helped solve the high unemployment rate and alleviated social contradictions in the local area.
Indonesia Tsingshan Industrial Park
In 2014, the Indonesian government implemented a nickel ore export ban, forcing enterprises to carry out local processing. Against this policy background, China's Tsingshan Holding Group took the lead in establishing a nickel smelting base on Sulawesi Island. In just a few years, Tsingshan and its partners dominated the nickel - iron and stainless - steel industrial chains in Indonesia, laying the foundation for the subsequent new - energy vehicle battery industry. At the same time, Sinopec and CNOOC also increased their oil and gas investments in Indonesia, ensuring diversified channels for China's energy imports.
In 2015, China Railway Construction Corporation and CCCC won the bid for the Jakarta - Bandung High - Speed Railway project. This is the first high - speed railway in Indonesia and even in Southeast Asia, symbolizing the important implementation of the Belt and Road Initiative in the local area. Although the construction of the high - speed railway was postponed several times, it was finally opened to traffic in 2023, regarded as a window to showcase China's speed.
In addition, one of the problems faced by Indonesia is its infrastructure construction. Only by connecting the main population - concentrated areas can the growth of one region drive the growth of another. Building cross - sea bridges between islands can connect the scattered areas into a whole and further promote economic potential.
On the other end of infrastructure is the communication network. Huawei and ZTE have deeply cultivated the Indonesian market, covering almost the underlying architecture of Indonesia's communication network from the laying of 4G base stations to 5G experimental projects and then to data center cooperation.
After 2018, the focus of Chinese capital in Indonesia gradually shifted to the consumer end. Alibaba invested in Lazada, Tencent took a stake in Sea Group (the parent company of Shopee), and ByteDance built TikTok Shop into the most promising social e - commerce platform in Indonesia.
Fintech has become a supporting facility. Ant Group invested in the local e - wallet Dana, promoting the popularization of cashless payment. Now on the streets of Jakarta, snack stalls and motorcycle taxi drivers are used to collecting payments with QR codes.
As the Indonesian government vigorously promotes the "National Electric Vehicle Strategy", Chinese car companies have welcomed new opportunities. BYD and SAIC have successively announced plans to build factories in Indonesia. The joint factory of battery giant CATL and Tsingshan has also been put into mass production, directly binding the new - energy vehicle industrial chain in Indonesia.
The consumer manufacturing industry is also relocating. Shenzhou International has transferred part of its textile production capacity to Indonesia. Haier, TCL, and Gree have built factories there to serve the Southeast Asian market nearby.
In the past decade,