Islamic fundamentalism is in retreat in its heartlands, Saudi Arabia and Iran. It just took a step forward in the biggest majority-Muslim nation, Indonesia. Or did it?
On Dec. 6, the Jakarta parliament unanimously passed a new criminal code that dictates a year in jail for sex outside marriage, and three years for “insulting” the president or various state institutions. Not a great look for a country that welcomed 16 million foreign tourists in the prepandemic year of 2019.
President Joko Widodo, better known as Jokowi, blocked similar legislation three years ago. This time, with 14 months left in his second and final term, he sat on his hands. “Jokowi is either so passive now, or he shares a distrust of how democracy has developed in Indonesia,” says Joshua Kurlantzick, senior fellow for Southeast Asia at the Council for Foreign Relations.
Religious hardball is nothing new in Indonesia, though. Jakarta’s governor, a Christian, was convicted of blasphemy in 2017, and spent 20 months behind bars.
The new code leaves up to three years for implementation, practically inviting court challenges and a quiet watering-down of enforcement, says Dedi Dinarto, lead Indonesia analyst at consultant Global Council. “The criminal code is a legal paper tiger, at least for now,” he says.
Extramarital sex offenses must be reported by a subject’s spouse, parents, or children, an apparent attempt to ring-fence pleasure-seeking tourists in Bali and elsewhere.
Investors should care because 280 million-strong Indonesia is the giant of a Southeast Asian growth belt that could pick up global slack as China slows. E-commerce/fintech powers are battling to cash in on a population that is 50% unbanked and shops at an archipelago of mom-and-pop stands. The race pits home-grown
GoTo Gojek Tokopedia
(ticker: GOTO.Indonesia) against Singapore-based
Alibaba Group Holding
(BABA) subsidiary Lazada.
Indonesia is trying to leverage its world-beating reserves of nickel, an essential component for some electric vehicle batteries, into a vertical EV supply chain. The world’s top two battery makers—China’s
Contemporary Amperex Technology,
or CATL (300750.China), and South Korea’s
LG Energy Solution
(373220.Korea)—both promised multibillion-dollar investments earlier this year.
Jokowi, in office since 2014, gained a reputation as a steady hand and restrained leader among authoritarian neighbors, delivering stable 5% economic growth and nudging his country up the value chain. Just weeks ago he hosted the global power elite at a G-20 summit. “Jokowi has done a commendable job over two terms,” says Jeremiah Silva, an Asian equities analyst at asset manager abrdn. “His efforts de-bottlenecking infrastructure make his successor’s job a lot easier.”
The new criminal code may tarnish that halo, says Lucas Myers, Southeast Asia program coordinator at the Wilson Center. The bogging down of Jokowi’s signature project, a new national capital called Nusantara, won’t boost the legacy. “A lot of Jokowi’s achievements have fallen flat, and now democracy has stumbled,” he says.
Jokowi’s reluctance to pick a successor for the February 2024 election, and speculation that he might run himself for vice-president, is contributing to a sense of lame-duck drift. Indonesia remains, for the moment, a relative progressive beacon compared to regional rivals for investment: Vietnam, Thailand, the Philippines, and Malaysia, Myers points out.
But Jokowi’s nation has shot, or at least grazed, itself in the foot just as it bids to punch up to its weight on the world stage.