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The specter of Chinese investment looms over Indonesia's election

Key Points
  • Like recent elections in many emerging countries, the issue of China's influence on local politics and businesses is under intense scrutiny in Indonesia.
  • During his term, President Joko Widodo actively courted Chinese investment to push through large infrastructure projects in the sprawling archipelago that is Indonesia.
  • Criticisms of deals with Chinese firms include excessive foreign interest, debt and a lack of local employment from the projects.
Motorists pass electoral posters in Central Java Province ahead of the presidential and legislative elections. Indonesia is set to hold simultaneous presidential and parliamentary elections on April 17.
WF Sihardian | NurPhoto | Getty Images

Economic nationalism and issues of religious identity are at the forefront of Indonesia's upcoming elections as the world's largest Muslim-majority country goes to the polls on Wednesday.

Incumbent President Joko Widodo, also known as Jokowi, is seeking a second term as he faces off against Prabowo Subianto, a retired army general and ex-son-in-law of the country's former dictatorial President Suharto.

The China equation

Like recent elections in many emerging countries, the issue of China's influence on local politics and businesses is under intense scrutiny in Indonesia. And, from the perspective of foreign investors including Beijing, one candidate is clearly less supportive.

"Prabowo is an ultra-nationalist who during the election campaign has repeatedly blamed foreign investors and other countries for the ills facing Indonesia," said Peter Mumford, Southeast and South Asia practice head at Eurasia Group, a risk consultancy.

Jokowi, meanwhile, actively courted Chinese investment during his term to push through large infrastructure projects in the sprawling archipelago that is Indonesia.

Several of such China-linked initiatives have sparked criticism from public quarters, including a multi-billion high-speed railway between Jakarta and the city of Bandung in Java and local projects like power plants.

"Prabowo has been very critical of Chinese investment in Indonesia, and his supporters have repeatedly whipped up anti-(ethnic) Chinese sentiment," said Mumford.

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Criticisms of deals with Chinese firms include excessive foreign interest, debt and a lack of local employment from the projects. Some Chinese companies are seen to be sending lower-level employees from China to work on Indonesia projects rather than hire locals, said Made Supriatma, who is a visiting fellow at the ISEAS-Yusof Ishak Institute's Indonesia Studies program.

Prabowo said in a televised debate with Jokowi on Saturday that the massive infrastructure development is a one-way street.

"This nation doesn't produce anything — it only receives other countries' products," he said, according to a Nikkei Asian Review report.

In return, Jokowi said that Indonesia "can't just export goods without building the necessary infrastructure."

Still, it was not clear that Prabowo was tapping into some widespread grudge against China. In fact, a summer 2018 survey conducted by the Pew Research Center found that 53 percent of Indonesians held favorable views of Asia's largest economy. That figure was, however, down from 66 percent in 2014 when the last election was held.

Prabowo is riding on concerns about Beijing's influence and Indonesia becoming economically dependent. He's vowed to review Chinese investment in much the same way that neighboring Malaysia's current prime minister, Mahathir Mohamad, did during his own time on the campaign trail.

This election will define the role of Islam in Indonesia.
Made Supriatma
visiting fellow at the ISEAS-Yusof Ishak Institute's Indonesia Studies program

That rhetoric is causing some discomfort for foreign investors.

There is now "unease over Prabowo's aggressive economic nationalism. He has talked of reviewing Chinese investment projects in the country, which could lead to a slowdown in infrastructure spending," said Capital Economics in recent note.

In particular, "ties with Beijing may be worse under Prabowo than a second-term Jokowi presidency, said Eurasia's Mumford.

Rhetoric aside, pragmatism would probably rule once Prabowo takes office — should he win the election, said Mumford.

That's especially since Prabowo's family businesses have formed joint ventures with foreign firms, "so he is clearly not completely averse to investment from overseas," said Mumford.

Nevertheless, Mumford added, "Prabowo would on balance be negative for foreign investors, especially as he would also place less emphasis than Jokowi on improving the business environment by streamlining licensing and permit approvals."

Religion in race

Another area of interest for election watchers is that Jokowi and Prabowo are facing off in a campaign that has become increasingly focused on religion, according to Supriatma.

"The two candidates are not so different in that their (general) approaches to the economy and policies are not so different, so they try to draw contrast among themselves through religion," said Supriatma.

Prabowo, in particular, is challenging Jokowi's presidency by positioning himself as a "defender" of Islam, said Supriatma.

The former general has formed a pre-election pact with hardliner Islamist groups, which included a promise to rehabilitate Rizieq Shihab, the leader of the extremist group known as FPI or Islam Defenders Front, who is currently in self-imposed exile in Saudi Arabia.

Jokowi himself has chosen a conservative Muslim cleric as his running mate to boost his own religious credentials. That has disappointed some of his supporters as Jokowi campaigned as a progressive in 2014.

That comes after Chinese Christian politician Basuki Tjahaja Purnama, also known as Ahok, lost the Jakarta governor election in 2017. He had ignited a series of highly charged protests for purportedly insulting Islam and was later found guilty of blasphemy. Although there are seen to be tensions in Indonesia against ethnically Chinese citizens, in the case of Ahok, much of the anger against him is because he is a Christian, according to Supriatma.

"This election will define the role of Islam in Indonesia," said Supriatma.

If Jokowi wins, the Southeast Asian country will likely continue its path as a Muslim-majority country with moderate leanings, he projected, adding that a Prabowo government would be less predictable.

"The Islamization of politics is likely to remain an issue under either a Jokowi or Prabowo presidency, even if not posing a severe threat to Indonesia's secular democracy," said Eurasia's Mumford.