Update COVID-19 in Indonesia: 29,521 confirmed infections, 1,770 deaths (5 June 2020)
05 June 2020 (closed)
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Ethnic and religious tensions have flared up in Indonesia ahead of the Jakarta gubernatorial election in February 2017. Meanwhile, global financial markets, particularly emerging market assets, have been plagued by heavy volatility ever since Donald Trump became US president-elect. It all leads to a situation in which investors prefer to seek safer haven assets, reflected by major pressures on Indonesian stocks and the Indonesian rupiah exchange rate (versus the US dollar).
Ahok's Blasphemy Case
There currently exists a relatively high degree of uncertainty about political stability in Indonesia as authorities seem vulnerable to threats and actions made by Islamic hardliners. A few days ago incumbent Jakarta Governor Basuki Tjahaja Purnama (often called Ahok) was named suspect in a blasphemy case by Jakarta's Police Department, a news story that made headlines across the globe.
After a manipulated video (surfacing on social media) showed Ahok insulting the content of the Quran, Islamic hardliners staged demonstrations to express their anger and demand the arrest of Ahok. The demonstration on 4 November 2016 in Central Jakarta was massive as between 100,000 and 200,000 protesters took the streets. In the evening hours this demonstration turned into riots. Ahok's manipulated statement was particularly sensitive to Muslim hardliners because the Jakarta Governor is a Christian and ethnic Chinese.
After the 4th November events, Muslim hardliners continued to call for more demonstrations to keep the pressure on. And not without success. While the unedited video of Ahok's speech clearly shows he is not criticizing the content of the Quran but rather people who use the Quran for political purposes, Jakarta Police still went ahead with the criminal investigation and named Ahok a suspect, implying he cannot leave the country while investigation is ongoing. Next week (Tuesday 22 November 2016) Ahok will be questioned by police interrogators. Currently, a team of investigators is collecting testimonies from experts and witnesses to prepare the interrogation.
Naming Ahok a suspect is both logical and yet alarming at the same time. It is logical that police go-ahead with the criminal case because it will prevent the outbreak of more anger and threats among Islamic hardliners. If police would have decided not to turn the case into a criminal investigation with Ahok as main suspect then it could have triggered another massive demonstration, and possibly a more violent one that is not only directed at Ahok but also against the whole Indonesian government.
However, it is also alarming because it shows Indonesian authorities are not in charge, instead they cave to the threat of violence expressed by Muslim radicals. And the question is 'where will this end?'. Will it become a court case and will Ahok need to be sent to jail, just to keep matters calm? Or will authorities flex their muscles and show that justice, law & order as well as the monopoly on violence are in the hands of authorities?
Hardline organization including the National Fatwa Guard Movement of the Indonesia Ulema Council (GNPF-MUI) and the Islamic Defenders Front (FPI) are eager to stage another demonstration on 2 December to demand the arrest of Ahok. These hardliners are also highly critical of Indonesian President Joko Widodo, who is regarded a friend of Ahok, because Widodo did not want to meet any of the Muslim representatives during the 4 November demonstration. Instead, Vice President Jusuf Kalla and several ministers sat down with these representatives. These hardliners now call Widodo's behavior "blasphemy against the ulema", while violence that occurred on the evening of 4 November is referred to as "slaughter of Muslims". Although videos clearly show that Muslim protesters started to provoke the police (before police started to use teargas), these radical groups are now busy encouraging religious tensions in Indonesia, a dangerous development.
Considering campaigning for the Jakarta gubernatorial election had just begun, the anti-Ahok protests are expected to be encouraged by certain sides with political interests. In next year's election Ahok is seeking re-election. In this race Ahok (together with his running mate incumbent Deputy Governor Djarot Saiful Hidayat) compete with the pairs (1) Anies Baswedan and Sandiaga Uno, and (2) Agus Harimurti Yudhoyono (son of former president Susilo Bambang Yudhoyono) and Sylviana Murni. On 15 February 2017 local people will vote for Jakarta's next governor.
Although opinion polls can be colored in Indonesia (as they are often conducted by organizations that have specific political interests or on the request of a certain political stakeholder), Ahok's popularity has - generally - declined over the past weeks.
Global Volatility Caused by Donald Trump
Meanwhile, Donald Trump's surprise victory at the 2016 US presidential election triggered severe volatility in global financial markets. This has a particularly big impact on emerging markets such as Indonesia as higher-yielding yet riskier assets are usually the first to be released by investors.
Currently, global investors believe the main consequence of a Trump presidency (and Republican-controlled Congress) is a strong and more protectionist US economy, causing funds to flow toward the USA, reflected by US stocks touching record highs and a significantly strengthening US dollar. Businessman Trump is eager to invest heavily in infrastructure, lower taxes, and scrap a lot of red tape to boost investment, boost economic growth and create employment. This would also give rise to accelerating inflation and thus a different monetary approach is required.
However, Trump has a controversial and impatient character. Considering he has already changed his mind on some topics it remains unclear to what extent he remains committed to the pledges he made during his campaign period. Such uncertainty makes safe haven assets a popular choice.
Investors are increasingly assuming the US Federal Reserve will raise its benchmark interest rate at the December policy meeting, a move that would prompt capital outflows from emerging markets.