Indonesia’s political economy at a crossroads: Growth, power, and the limits of developmental pragmatism

Fawaz Muhammad Khaer ()
Additional contact information
Fawaz Muhammad Khaer: The School of Social and Political Sciences, the University of Edinburgh

Journal of International Political Economy and Strategy, 2026, vol. 1, issue 1, 32-40

Abstract: This opinion article argues that the central problem in Indonesia’s contemporary political economy is not the absence of growth but the political organization of growth. Indonesia entered the Prabowo era with enviable macroeconomic resilience: output expanded by 5.11% in 2025, poverty and inequality both declined, unemployment remained below 5%, and Bank Indonesia maintained the policy rate at 4.75% while continuing to frame inflation and external stability as manageable. However, these achievements coexist with enduring weaknesses in the rule of law, corruption control, democratic accountability, tax capacity, and market contestability. In my view, Indonesia’s greatest risk is not a sudden collapse but developmental stagnation disguised as success: respectable headline growth resting on concentrated power, commodity-centered industrialization, and discretionary state activism. The continuity from Jokowi’s developmentalism to Prabowo’s more assertive state activism is real, but continuity alone will not deliver inclusive prosperity. Indonesia does not need a retreat from industrial or social policy but a more democratic and rule-bound version of both. This means linking downstreaming to productivity and innovation, expanding services-sector competitiveness, strengthening the tax state, and rebuilding institutions that can discipline rent-seeking without paralyzing development.

Keywords: democracy; developmentalism; Indonesia; industrial policy; oligarchy; political economy (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journal.privietlab.org/download.php?id=13427 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:prv:jipesp:1800

Ordering information: This journal article can be ordered from
https://journal.priv ... ES/article/view/1800

Access Statistics for this article

More articles in Journal of International Political Economy and Strategy from Privietlab Research Center
Bibliographic data for series maintained by Mochammad Fahlevi ().