ASEASUK Conference 2016 SOAS, University of London 16-18 September 2016 The Political Economy of Inclusion: Reform Challenges in Indonesia under Jokowi Convenors: Andy Sumner and Lukas Schlogl, King‟s College, London Achieving inclusivity for the whole population by sharing the benefits of modernization, is a key economic and political challenge in contemporary Indonesia. It requires sustaining a path of economic growth that reaches vulnerable and marginal groups while, at the same time, protecting and managing decentralization and ensuring democratic participation. This must happen in a context of widespread informality, a growing lower-middle class, budget constraints, a slowing economy and unequal regional capacity. This panel addresses key challenges related to inclusive growth and participatory governance in Indonesia. It delivers an update and assessment of the current administration‟s social policy agenda, considers the impacts of decentralization on welfare, examines questions of access to social policy provision and explores Indonesia‟s recent struggle with defending direct local elections. Panel Chair: Diding Sakri (King‟s College London) 1. Inclusive Growth under Jokowi Arief Yusuf (Universitas Padjadjaran) and Andy Sumner (King’s College London) 2. Not enough money to go around: Jokowi’s inevitable dilemma over budget allocation Kyunghoon Kim (King’s College London) 3. Decentralisation and distribution: A multi-dimensional taxonomy of Indonesian districts Dharendra Wardhana (King’s College London) 4. Who saved Indonesia’s Direct Local Elections? Social media engagement in the context of the ‘Pilkada bill’ Lukas Schlogl (King’s College London) Abstracts 1. Inclusive Growth under Jokowi Arief Yusuf (Universitas Padjadjaran) and Andy Sumner (King’s College London) In this paper we discuss the distributional pattern of economic growth under Jokowi. We discuss the current backdrop to any discussion of inclusive growth in Indonesia, which encompasses the rising inequality trend that Jokowi inherited. The recent period has also seen a rise by almost one million in Indonesia‟s official poverty count this period. Looking ahead, we note the distributional impacts of the slowing growth are likely to hamper future poverty reduction and impact on the distributional pattern of growth. However, such distributional impacts may be balanced in the medium term by the changes in 1 ASEASUK Conference 2016 SOAS, University of London 16-18 September 2016 social policy and budget reallocations under Jokowi and • if it moves ahead quickly • the major expansion of infrastructure and employment creation and multiplier effects it could generate. We discuss the policy changes the new president has put in place since last autumn and their distributional impacts. 2. Decentralisation and distribution: A multi-dimensional taxonomy of Indonesian districts Dharendra Wardhana (King’s College London) Indonesia has put in place a system of fiscal decentralisation to the district administrative level. However, most districts are still heavily dependent on the central government to fund their expenditures. A single formula currently determines allocations and fiscal gaps for every district. We develop a taxonomy of Indonesia‟s districts using the World Bank‟s INDO-DAPOER dataset and a Cluster analysis based on: (i) economic growth; (ii) human development; (iii) the quality of governance; and (iv) local autonomy. We consider the current allocation of central resources and an alternative based on the taxonomy developed. 3. Not enough money to go around: Jokowi’s inevitable dilemma over budget allocation Kyunghoon Kim (King’s College London) During his first month in office, Jokowi introduced Indonesia Health Card, Indonesia Smart Card and Family Welfare Fund, proving his commitment to improve social infrastructure. As we entered 2015, the Jokowi government rapidly shifted its policy focus to economic infrastructure. This is reflected in the 2015 revised budget with its capital expenditure increasing by 71% compared to the previous year. Also, the National Medium Term Development Plan 2015-2019 shows that the government plans to contribute 2,760 trillion Rupiah in economic infrastructure investment. Although the government has made some fiscal room by scrapping wasteful fuel subsidies, its inability to expand the tax revenue base and economic slowdown will limit the scope for expenditure increases in the future. Therefore the government will have to decide how to “split” its budget on social infrastructure and economic infrastructure in coming years. Spending priorities will be determined by four political-economic factors which are (1) government‟s view on direct and indirect effects of various infrastructures to economic performance, (2) the ability of the government and its contractors to effectively use the budget, (3) Jokowi‟s political clout and leadership in the coalition, and (4) expectations and demands of the society after the “honeymoon phase.” 4. Who saved Indonesia’s Direct Local Elections? Social media engagement in the context of the ‘Pilkada bill’ Lukas Schlogl (King’s College London) Direct elections of regional political representatives were introduced in Indonesia in 2001 and are considered a cornerstone of the country‟s decentralized democracy. In September 2014, a bill passed the Indonesian House of Representatives (DPR) which – albeit only temporarily, as it would turn out – abolished these local direct elections (known as „Pilkada‟). The legislation was welcomed by some as reforming a costly and „flawed‟ electoral franchise and attacked by others as a step back into the authoritarian „New Order‟ past. In a climate of partisan divide, the passing of the bill was followed by an outburst of public outrage as “the urban, social media-savvy members of the middle-class, vented their anger on Twitter” (Saragih 2014). A Twitter hashtag mocking then-president Yudhoyono (SBY) rapidly propelled to the top of Twitter‟s global „trending topics‟, a public list of „viral‟ topics of conversation. In response to this, SBY – whose party had been jointly responsible for the Pilkada bill – distanced himself from the bill and initiated a process to legally annul it. This annulment was, subsequently, reaffirmed by the DPR in early 2015. The present paper draws on data from „Twitter‟ to explore the „Pilkada controversy‟ and its extensive reverberations in social media. It traces the dynamics of Indonesian social media engagement and analyses the political response to online collective action. Special emphasis is given to the geo- 2 ASEASUK Conference 2016 SOAS, University of London 16-18 September 2016 demographic determinants and patterns of social stratification of political social media engagement. Attitudinal data from Twitter discourse is compared to data from representative public opinion surveys. 3 .