#2 Inside Indonesia: A Nation Consolidating for the Future

Opening Note

The past week reminds us that Indonesia’s process of consolidation is far from linear. Protests erupted nationwide, sparked by inequality and elite excess—and what began as outrage at parliamentary perks has morphed into a broader contest over who controls the state and whether centralized reforms are legitimate.

In response, President Prabowo has moved quickly, cutting perks for lawmakers, mobilizing law enforcement, and re-emphasizing his war on corruption.

This newsletter continues to explain Indonesia’s choices from an Indonesian perspective—moving beyond Western clichés of reformasi and the dominant Western narrative of democratic fragility.

Law & Governance

Lawmakers’ Perks Rolled Back

Following massive protests over MPs’ housing allowances and salaries, Prabowo announced that several parliamentary privileges would be revoked. Parties apparently agreed to suspend overseas travel and high-cost housing subsidies, a rare and swift policy U-turn.

Crackdown on Unrest—Order or Overreach?

The government also ordered firm action against rioters and looters. Security forces detained thousands nationwide, with dozens killed or injured, sparking criticism from civil society groups about excessive use of force and risks of authoritarian drift.

Taken together, these moves reaffirm that central government is serious about restoring order—but they also magnify the tension between stabilizing reform and democratic legitimacy.

*Police form defensive line during a riot in front of House of Representatives building in Jakarta (Photo: Getty Images/Claudio Permana*)

Public Unrest & Demonstrations

From Student Sparks to National Flame

What began on August 25 in Jakarta—student protests outside the DPR building over MPs’ salaries—quickly spread to 32 of Indonesia’s 38 provinces. Clashes escalated: protesters burned regional parliament offices, blockaded transport hubs, and looted government buildings.

The violent escalation followed the tragic death of a ride-hailing driver, Affan Kurniawan, who was struck by a police vehicle. That incident ignited popular outrage, transforming a parliamentary perks protest into a broader social explosion of anger at inequality, corruption, and elite detachment.

“One Piece Flag” and Protest Symbolism

Some of the same symbolism from earlier protests re-emerged—most notably the “One Piece” pirate flag, signaling youth-led cultural resistance. While media has framed it as youthful whimsy turned political, its persistence suggests a form of expressive dissent that challenges conventional power without always aligning neatly with political parties or movements.

These developments make clear: even well-meaning central policies must reckon with how individuals and communities interpret legitimacy, equity, and voice.

Finance & Economy

Market Jitters Amid Political Turbulence

The unrest spooked markets. The Indonesian stock index dropped sharply, and the rupiah weakened significantly, prompting Bank Indonesia intervention.

The protests were explicitly tied to government austerity—public frustration over elite allowances and state-led consolidation fed the narrative that centralizing reforms are not just technocratic choices, but political ones with real human costs.

Budget Consolidation Feels Political Now

Cuts to regional funding, the free-meals program, and the sovereign AI fund—all framed in the prior issue as nation-building tools—are now being read through a political lens. Critics argue the budget realignment can reinforce elite control and weaken local autonomy, especially when political mobilization erupts in response.

*A visitor tracks stock activity via their device at the Indonesia Stock Exchange in Jakarta (Photo: AntaraNews/Sulthony Hasanuddin*)

Business & Strategic Deals

Danantara—and Political Control of SOEs

Amid the unrest, the government continues to push forward with Danantara, the sovereign wealth fund designed to consolidate state-owned enterprises and channel strategic investment under central oversight. Critics worry its structure concentrates too much power in the presidency, but from the state’s perspective, it is a tool for discipline, coherence, and national direction.

Loyalist Placements in SOEs: “Team Mawar”?

Although public reporting on Prabowo’s older military (retired) loyalists, specifically being placed in SOEs to fight corruption is limited, there is evidence that Prabowo has appointed trusted loyalists and young cadres into key SOE commissioner and oversight roles.

Danantara’s internal policy of prohibiting performance bonuses for SOE commissioners may reflect a deeper attempt to reduce rent-seeking behavior, enforce loyalty to reform goals, and centralize accountability.

In short: the state appears to be using its newly centralized institutions not just for investment returns, but for governance discipline in a time of political volatility and its battle against corruption.

Counter-Narrative Corner

Western outlets may focus on the violence, suggest democratic backsliding, or treat the protests as purely organic “anti-Prabowo” sentiment. But the Indonesian story is more complex: this week’s unrest reveals how centralization, reform and public frustration intersect.

From the state’s perspective, reasserting control—cutting perks, placing loyal commissioners, and consolidating SOEs—is now as much about repairing legitimacy as it is about efficiency. The challenge for Prabowo’s government is whether it can match centralized power with durable public trust.

Closing Reflection

Indonesia’s moment is fragile. Centralization and reform are accelerating—but so is public mobilization. The legitimacy of national consolidation will depend not just on institutional design or strong leadership, but on whether people feel included in the process.

If central authority is to heal, not alienate, it must prove that consolidation delivers fairness, accountability, and real improvements—not just control.

Sources:

1. Reuters – Deadly Indonesia protests force U-turn on lawmakers’ perks

2. Reuters – Explainer: What’s fuelling the rage in Indonesia?

3. Reuters – Indonesian police clash with protesters against parliamentarians’ salaries