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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 appointment of Thomas Djiwandono, a nephew of President Prabowo Subianto , as deputy governor of Bank Indonesia, has raised the specter of nepotism making a comeback in Indonesian politics.
With the mounting open criticism against Bank Indonesia Governor Perry Warjiyo, coming from no less than Finance Minister Purbaya Yudhi Sadewa, many speculate that Thomas is being lined up to take up the top job, a move which would undermine the central bank’s independence guaranteed by law.
Further fueling concerns about nepotism are rumors that Prabowo is about to name Thomas’ brother, Budisatrio Djiwandono, as foreign minister.
Thomas, 53, had served as deputy finance minister and is an economist by training, so he is not without the credentials to run Bank Indonesia if that is the intention.
Budisatrio, 44 years, is a member of the House of Representatives for Gerindra, the political party founded and chaired by Prabowo. He has had some exposure to international affairs as vice chair of House Commission I that deals with foreign policy.
Both are graduates of United States universities and are sons of economist Soedradjad Djiwandono, who served as Bank Indonesia governor from 1993 to 1998. He is married to Prabowo’s eldest sister Bianti.
Irrespective of their qualifications, the appointment of the president’s close relatives to strategic positions raises serious questions about potential conflicts of interest, and historically, there are moral and ethical issues.
This is a throwback to the nepotism that was widely practiced by Soeharto who ruled the country for over three decades. When he was forced to step down in 1998, the student-led movement coined the phrase “anti-KKN” (corruption, collusion and nepotism) as their rallying cry.
Laws have since been enacted to prevent corruption, including the establishment of the Corruption Eradication Commission (KPK), but curtailing collusion and nepotism has relied largely on moral and ethical guidance combined with public pressure.
Nearly three decades later, the anti-KKN demand seems all but forgotten. Corruption is still rampant in spite of the KPK sending people to jail. Collusion underpins Indonesia’s largely transactional politics. And nepotism is back, with a vengeance.
Prabowo’s predecessor Joko “Jokowi” Widodo, president from 2014 to 2024, set the tone for nepotism making its return. In 2023, he got the Constitutional Court to bend the electoral law age restriction that allowed his son Gibran Rakabuming Raka to contest the presidential race as running mate to Prabowo 2024 athough he was four years short of the minimum age of 40. The court at the time was chaired by Anwar Usman, who is married to Jokowi’s younger sister.
Once this is tolerated, there is no stopping nepotism, especially if it is committed by the nation’s highest office holder. And this gives a cue for others down the ranks that they too can follow the practice with little repercussions.
Prabowo’s decision in November to award the national hero status to the late Soeharto, despite widespread objection, smacked of nepotism given his connections to the former first family.
He was once married to Soeharto’s second daughter Siti Hediati “Titiek” Hariyadi. Although separated, Titiek is now an elected House member representing Gerindra.
Their 41-year son, Didit Hadiprasetyo, has kept out of politics and kept a low profile. A fashion designer by profession, he has been seen accompanying the President in some foreign trips.
Prabowo’s younger brother Hashim Djojohadikusumo has also been seen attending some Cabinet meetings. A businessman by training who bankrolled Prabowo’s four election campaigns before the 2024 victory, Hashim was appointed as the president’s special envoy for energy and the environment and led Indonesia’s delegation to the last two series of United Nations Climate Change Conferences (COPs) in Azerbaijan and Brazil.
Hashim’s appointment in the government and Titiek’s role in Gerindra did not spark much controversy, but the appointments of Thomas and Budisafrio, if rumors proved true, could open the floodgates for more widespread nepotism practices beyond the first family.
Before long, nepotism will become normal as it was during the Soeharto years.
