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Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
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Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
With fintech paving the way forward, traditional banking followed suit by revolutionizing its services. From 2022 to 2023, the banking industry’s fund distribution increased by 6.28 percent, source of funds increased by 6.33 percent, and total assets in the industry grew by 6.98 percent, reaching a total of US$8.22 trillion. Moreover, even regional banks have been benefitting from this wave of innovation. For the same period from 2022 to 2023, the regional banking sector saw a 7.67 percent in distributed funds, an 8.08 percent increase in source of funds, and a 7.52 percent increase in total assets, reaching a total of US$137.96 billion.
Innovations in Indonesia’s finance sector extend beyond financial services. On September 2023, the Indonesian monetary authority, Bank Indonesia (BI), introduced three pro-market monetary instruments that function as short-term fixed income securities with high coupon rates. The three instruments, SRBI, SUVBI, and SUVBI, were able to collect Rp 409 trillion (US$25.2 billion), US$2.31 billion, and US$387 million, respectively.
Particularly in the case of the SRBI, this instrument represented an innovative way to attract capital flow from abroad during a period of high credit costs and slow investment. Approximately 20.77 percent, or Rp 85.02 trillion (US$ 5.26 billion), of the total outstanding SRBI were owned by non-Indonesian residents, underscoring the SRBI’s success as a monetary instrument.
Even when compared to other countries in the same region, the Indonesian finance sector stands out for its stability against fluctuations. Throughout 2023, the global cost of credit was high due to hawkish Fed policies made to curb US inflation, resulting in a stagnation of capital flow on a global scale. Entering the second quarter of 2024, the composite index of many Southeast Asian countries such as Singapore and Thailand recorded price decreases compared to the same period last year, reaching -3.96 percent and -13.9 percent on the Straits Times Index (STI) and the Bangkok SET index, respectively. Meanwhile, the Jakarta Stock Exchange Composite Index (JKSE) recorded a price increase of 5.18 percent for the same one-year period.
In summary, the Indonesian financial sector stands out for its stability and consistency, maintaining growth through innovation even during periods of austerity or global uncertainty. This consistency is also reflected in its GDP, which grew by 7.4 percent from 2022 to 2023, contributing roughly 4.16 percent to the national GDP in 2023.
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The Attorney General’s Office (AGO) has struck a significant agreement with major cellular service providers in Indonesia, granting it access to users’ private information for law enforcement purposes. While the reasons for the deal look convincing, the development raises serious concerns about potential violations of fundamental citizen rights and may conflict with a Constitutional Court ruling regarding surveillance and wiretapping.
The strategic agreement came on the heels of public scrutiny over the AGO in May, when Indonesian Military (TNI) personnel were deployed to secure prosecutors’ offices nationwide and ensure operational continuity.
On June 25, deputy attorney general for intelligence Reda Mantovani formalized the collaboration by signing a memorandum of understanding with PT Telekomunikasi Indonesia, PT Telekomunikasi Selular (Telkomsel), PT Indosat and PT XL Axiata. Reda explained the cooperation was vital for the intelligence division, supporting law enforcement through investigations, security operations and engagement initiatives. This includes installing and operating surveillance devices and providing telecommunications data records.
The AGO asserts that Article 30B of Law No. 11/2021, which amends Law No. 16/2004 on the prosecutor’s office, provides the legal basis for overseeing multimedia activities. Reda also claimed that this collaboration guaranteed the collected data and information were of indisputable quality and validity, meeting the A1 intelligence classification.
With Telkomsel remaining Indonesia’s largest mobile service provider with 159.9 million subscribers as of September 2024, followed by Indosat Ooredoo Hutchison (100.9 million) and XL Axiata (93.3 million), the memorandum has ignited significant privacy concerns. The AGO’s wiretapping authority lacks independent oversight, increasing the risk of abuse of power, especially since the prosecutorial service operates as an executive branch instrument under the current administration.
The law equips law enforcement agencies, the AGO, the police and the Corruption Eradication Commission (KPK), with surveillance power, but so far only the KPK has remained free of abuse. The eavesdropping authority has proved to help the KPK catch big names who previously enjoyed impunity.
There were also reports of alleged abuse of wiretapping power involving the police, as in the instances of arrest or phone hacking targeting government critics.
House of Representatives Speaker Puan Maharani, from the Indonesian Democratic Party of Struggle (PDI-P), underscored the crucial balance needed between law enforcement efforts and protecting citizens’ constitutional rights. She further emphasized the importance of building public trust in legal institutions by ensuring adherence to legal boundaries.
In a similar tone, Nasir Djamil, a member of House Commission III overseeing the AGO, questioned the memorandum, recalling Constitutional Court Decision No. 5/PUU-VIII/2010, which mandates that surveillance and wiretapping must be governed by a specific law. He noted that despite multiple invitations to stakeholders, a proposed Wiretapping Law had yet to enter formal legislative discussions.
Moreover, this agreement threatens individuals’ personal data rights, which are legally protected by the principle of data subject consent. This means the AGO could access private data held by telecommunications companies under the pretext of law enforcement.
With approximately 300 million mobile users in Indonesia potentially affected, there is a real risk of mass surveillance being conducted without the tight regulations, court permission and limited timeframes that such actions should legally require.
