Jakarta. Photo: Didier Marti/Getty

PoliticsFebruary 27, 2019

Indonesia is the future. We’ve got to start paying attention

Guest writer

Jakarta. Photo: Didier Marti/Getty

New Zealand is underprepared for Indonesia’s rapid economic growth, and our nearest Asian neighbour is a potential close friend, writes Jordan King

Ask a New Zealander to discuss Indonesia and you may get a response about Bali, Bintangs, or perhaps West Papua or The Act of Killing. Or you might get no response at all. This is not unusual nor a condition specific to Aotearoa. Describing the nation’s global visibility Elizabeth Pisani, author of Indonesia Etc, quotes one Indonesia businessman who calls his country “the biggest invisible thing on the planet” for its lack of global cut through.

The exact number of islands which constitute Indonesia differs depending on whether you draw your measure at high or low tide: somewhere near 17,000 is the consensus. The nation is the world’s fourth most populous and is the third largest democracy. It is the largest Muslim majority country. Many economists predict Indonesia will be the world’s fourth largest economy in 2050.Geopolitics in our region are getting more complex, we need more close friends in Asia. A rising regional power with a nascent democracy and a comparatively free press is an ideal candidate.

The starting point for building a deep friendship is for New Zealand society to become intrigued about Indonesian politics and society. Muldoon’s mercantilist epithet – “our foreign policy is Trade” – must be banished. If you possess even a modicum of interest about the wider world there is much to find fascinating about Indonesia. Consider the upcoming general election to be held on 17 April. Vying to hold together and lead a nation of 240 million spread across 6000 inhabited island are two candidates. The incumbent Joko Widodo or ‘Jokowi’ the former governor of Jakarta and the challenger, former commando and Suharto-era general Prabowo Subianto.

This is their second fight, having first competed in the 2014 election. In that campaign Jokowi was characterised as ‘Obama-like’, promising to challenge Jakarta’s comfortable elite in the interests of the people. A key ingredient in Jokowi’s political marketing is his outsider status – the son of furniture makers in central Java he is the first President without an elite military, bureaucratic, or moneyed background. By contrast, Prabowo’s former father-in-law was the late General Suharto who ruled the nation for 31 years. Prabowo is pinning his hopes on Jokowi’s patchy economic performance.

Jokowi promised an annual economic growth rate of seven percent, however the reality has been closer to five. Average incomes in Indonesia significantly trail those of neighbouring Thailand and Malaysia. Many Indonesians do not feel significantly better off than they did four years ago. A falling rupiah and increasing cost of basic staples means there is currency in Prabowo’s pocketbook campaign strategy. Unless something extraordinary comes to pass this is unlikely to sink Jokowi. Indonesians appear satisfied overall with progress on health and education, and are comfortable with the current security situation. Inflation remains under control, and a flurry of badly needed infrastructure projects (15 airports, 24 ports, thousands of miles of new rail and road projects) are at least under way though there is always a low hum of consternation regarding corruption and the eye-watering price tag (US$355 billion) of these works. How do you make Auckland appear a beacon of organised and efficient transport planning? Spend three hours in Jakarta traffic attempting to reach Soekarno–Hatta Airport before your flight closes.

Another aspect of the election speaks to Indonesia’s remarkable demographic picture. Around 55% of enrolled voters on election day will be millennials. Indonesia has a young population with half of its 240 million citizens under 30. The average age in New Zealand is around 38 and rising. Growth predictions have Indonesia tracking for 300 million by 2035. There is significant pressure on policymakers to generate sustainable job growth and public services to produce work and wellbeing; spreading that growth beyond Java presents another challenge.

This trajectory obviously means the Indonesian market for services, technology and consumer goods is on the make. Internet figures are indicative. Uptake has doubled since 2014 driven in large part by urban millennials with newly affordable smartphones. Indonesia is now one of the biggest users of Twitter and Facebook. While our diplomats are very skilled I suspect Indonesian social media exuberance is behind the 244,000 Facebook ‘likes’ for the New Zealand Embassy Jakarta page.

From a social perspective, Indonesia is less conservative than is often portrayed. You will find bespectacled hipsters in Jakarta or Yogyakarta serving single-origin coldbrew as good as anything in Wellington. My preconceptions of Indonesia were excised when I became trapped in a moshpit of hijab wearing punk rockers in Bandung. For it turns out Indonesia has a vast underground punk scene – even Jokowi is a fan. Despite political and religious movements seeking to reshape and monopolise public morality, AUT researcher Sharyn Davies relates a general openness on sex and sexuality. Indonesia has a significant cultural history of gender fluidity and diversity.

How then to strengthen our relationship with Indonesia?

Three propositions come to mind. With more than 300 million speakers, Bahasa Indonesia is the fifth most widely spoken language in the world. Yet no New Zealand university offers an Indonesian language major at undergraduate level. All but one of Australia’s top ‘Group of Eight’ universities offer Indonesian language, society and culture programmes. If we value a closer relationship this must change. While much rides on New Zealanders becoming more ‘Asia engaged’ in general we need specialists immersed in the linguistic, political, historic as well as commercial nuances of Indonesia. We cannot produce specialists without building and sustaining spaces in our institutions to do so. AUT’s Indonesia Centre, a public outreach partnership with the Indonesian government, is a laudable step forward but a strong commitment to expanding linguistic and research capacities in our university system needs to come from our government.

The second proposition relates the media and the public sphere. We have existing programmes, through the Asia New Zealand Foundation, which provide established journalists and students with opportunities to visit Indonesia. The Foundation has also established the Asia Media Centre to journalists for access information and expertise on Asia and Asian peoples. Such programmes are vital. What we need, however, is for our large broadcasters – particularly our state-owned institutions – to produce greater amounts of content. Certainly on Indonesia, but to educate and inform on Asia in general. Again, such a project requires consistent institutional commitment and resourcing. Our SOE model, particularly with respect to television broadcasting constrains rather than enables such a commitment. Other nationally important imperatives – like building a cosmopolitan understanding of Asia need to be valued as much as commercial imperatives. Having lost Asia Downunder on TVNZ in 2011 and Asian Report on Radio New Zealand in 2013 we’ve gone backwards.

The last proposition is about increasing flows of people, particularly in pursuit of education but also of public servants, technical experts, sports groups, and artists. A stronger friendship requires greater flows in both directions. On the education front a tension exists between the logic of New Zealand’s education export market and a more cooperative, assistive way forward. We should tread carefully, tempering an interest in attracting fee-paying students by providing opportunities for Indonesians to study in New Zealand with support through greater provision of scholarships. Particularly Indonesians with established careers in public administration, civil society leadership, and business who are seeking postgraduate training and will go on to lead in their field. Like any friendship fond memories, new knowledge and shared experience produces enduring warmth and goodwill. It is time for New Zealand to put in the effort. It will doubtless be worth it.

Jordan King is a PhD Candidate at the University of Auckland and a member of the Asia New Zealand Foundation Leadership Network

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What does a Capital Gains Tax mean for you? Photo: Photo NZ

PoliticsFebruary 27, 2019

Labour is buckling on capital gains tax. So much for transformational.

Guyon Espiner

Guest writer

What does a Capital Gains Tax mean for you? Photo: Photo NZ

It’s our job to be fair, went the old ad campaign from the IRD. It’s my job to be kind, goes the on brand message from the Prime Minister. So we’re heading for a kinder and fairer tax system then? Guyon Espiner, writing for RNZ, is skeptical.

But when it comes to making changes to a tax system, tax is politics. And that’s where we find ourselves with the capital gains tax (CGT).

You know those two months in New Zealand politics when, having listened, deliberated and voted, we then sit back, speculate and wait for Winston Peters to tell us what is actually going to happen?

Well, turns out that’s not only the post-election period. Half way through the election cycle, here we are again. And the same strategies are at play.

The Greens showed their cards before the game started, saying that the government didn’t deserve to be re-elected unless it enacted a CGT. Reveal your hand, lose your leverage.

So guess who holds the whip hand? Actually, no you don’t get extra tokens for that answer.

Already Jacinda Ardern is buckling. On Monday she opened her press conference with a long plea not to listen to opposition attacks but her main goal was to soften the ground for exemptions.

Farmers and small business people would be top of mind when preparing the government’s response, she said, going some way to alleviate concerns recently expressed by Peters.

And yes you can argue that’s MMP in action. But we can run into real trouble by granting concessions in the tax system in order to please constituencies.

Fairness and kindness are subjective concepts so tax systems have to have strong and consistent principles underpinning them. That’s why GST works. No exceptions. Even drug dealers pay GST, as David Lange famously observed.

Australia’s GST system is messy because of its exemptions and our own politicians routinely attempt to win votes proposing them.

Labour wanted to exempt fruit and vegetables in 2011 but eventually ditched the policy.

New Zealand First policy at the 2017 election was to exempt ‘healthy food’ from GST. “Ask your grandmother” was the response from Peters when asked which foods would qualify.

Needless to say, grandma was not called for during the coalition negotiations. The policy was shelved, presumably next to the items your grandparents would recognise.

We are heading into that territory now with the CGT where you puncture the IRD’s net with such large holes that it becomes useless. In fact, it started before the Tax Working Group even got underway.

There are about 1.8 million homes in New Zealand. More than 1.2 million are owner-occupied and about 600,000 are rentals. But ‘the family home’ was ruled out of a CGT from the get-go. Why? Not out of fairness or kindness but because it affects 1.2 million households, making it a giant vote loser.

Sell an Auckland villa and get $3 million tax-free to live in South America? No problem, as long as it’s the ‘family home’. No one believes that is ‘fair’. But no government wants to lose an election over it.

Of course, if you leave out most of the homes in New Zealand from a CGT then it’s not going to have much impact on housing affordability.

I don’t know about you, but nearly every conversation I’ve ever had about CGT – usually with friends in Auckland frustrated about how hard it is to enter the market – has focused on housing affordability.

But according to the TWG report, backed up in media statements by Grant Robertson, its proposal will have only a minor impact on housing affordability.

At that point, you have to ask, what is the point? Raise more revenue so we can pay for schools and hospitals? That might be nice but we’re also told it will be revenue neutral, meaning tax cuts balance out any tax increases.

It sounds as though after all the pet constituencies are protected we may end up with a CGT on residential investment properties only.

Will that mean a ban on BBQs, boil up and beach cricket? No. I think the Kiwi ‘way of life’ will continue.

But after all the agony Labour has been through over the CGT that outcome means ending with a whimper rather than a bang.

It might be kinder on the coalition’s constituencies and fairer for Labour’s re-election chances but it’s not the transformational government we were promised.