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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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After nationwide protests swept the country in late August, the demand for institutional police reform rose to the top of the national agenda following an incident where an armored police vehicle struck and killed a civilian during the demonstrations. Just two months later, President Prabowo Subianto responded by establishing the National Police Reform Acceleration Commission.
The new body consists of 10 individuals from diverse backgrounds that include notable Indonesian legal figures, namely former Constitutional Court chief justice Jimly Asshiddiqie, Coordinating Law, Human Rights, and Immigration and Correctional Services Minister Yusril Ihza Mahendra, and legal expert and politician Mahfud MD.
However, the body also includes National Police chief Gen. Listyo Sigit Prabowo and his three predecessors, Idham Aziz, Home Minister Tito Karnavian, and Badrodin Haiti. This has cast doubt on whether substantive changes can be achieved. Indonesian Legal Aid Foundation (YLBHI) Muhamad Isnur said that the presence of sitting and former police chiefs undermines public trust in the commission. "These are people who once led the police force and yet failed to implement many reforms," Isnur noted.
Reforming law enforcement institutions in Indonesia has always been a double-edged sword. Legally, the National Police is directly under the executive branch's jurisdiction, granting Prabowo authority to mandate changes. In practice, direct intervention carries repercussions that could destabilize his political capital.
Both the National Police and the Indonesian Military (TNI) have maintained a tradition of political involvement since the nation's inception. During the 2024 presidential election, reports from Tempo alleged that the police played an active role in securing the win for the Prabowo-Gibran Rakabuming Raka ticket, a claim both parties rejected.
Regardless, directly confronting the institution now could pose significant risks for the President ahead of the next election cycle. Curtailing police powers inevitably invites intense counter-lobbying and necessitates compromises, the inclusion of police chiefs in the reform team as an example, to ensure the institution does not lose its foothold in the national political sphere.
For the TNI, having a former army general as President has helped them maintain their standing amid the public's growing discontent with law enforcement. When journalists presented Prabowo with a list of demands in the aftermath of the August protests, he welcomed most reforms as "logical" while explicitly singling out changes to the military as "debatable".
More recently on Nov. 14, the Constitutional Court issued a ruling prohibiting active-duty police officers from holding concurrent civilian posts. Officers must now retire before assuming civilian roles in government or leadership positions in state-owned enterprises. According to official police data, over 300 active police officers currently hold such posts.
Among them are Corruption Eradication Commission (KPK) Chair Comr. Gen. Setyo Budyanto and National Narcotics Agency (BNN) Chair Comr. Gen. Suyudi Aryo Seto. Several high-ranking officers are also attached to the National Nutrition Agency (BGN), which oversees Prabowo's flagship free nutritious meal program that got an allocated budget of Rp 71 trillion (US$4.2 billion) this year and projected to rise to Rp 335 trillion in 2026.
Two members of the reform committee have released statements that appear to undermine the court's ruling. Coordinating Law, Human Rights, and Immigration and Correctional Services Deputy Minister Otto Hasibuan stated that the court's decision would be treated merely as "advisory input" for the police reform team. Activists strongly dispute this; Constitutional Court rulings are final and binding, taking effect immediately upon their delivery rather than serving as suggestions.
Furthermore, Law Minister Supratman Andi Agtas claimed that officers currently occupying civilian posts are exempt as they were appointed prior to the decision. While Constitutional Court rulings are generally prospective, applying to future cases, constitutional law expert Zainal Arifin Mochtar argued that such rulings "are not absolute, especially regarding ongoing implications". Commission head Jimly Asshiddiqie has also affirmed that the court's ruling is "final and binding".
While Prabowo has made efforts to listen to civil society demands, it remains to be seen just how far he is willing to go to overhaul an institution that wields such immense political influence, and to a certain extent he owes to.
