Will Kadin Be Caught Out?

Recently Indonesia’s peak national business association, Kadin, announced its lineup of new office bearers. Along with a fresh chairman in the person of Arsjad Rasjid, the chamber’s advisory board will now be chaired by Anindya Bakrie, and will include former industry minister Mohamad Suleman Hidayat.

These appointments were made against a background of internal politicking by both current and former ministers of state over several weeks. Political connections run deep in Kadin. Rasjid was a putative past contender for a Cabinet post, according to some media reports. Hidayat is a previous Kadin chairman who, after ending his single term with the chamber, was appointed industry minister in former president Bambang Susilo Yudhoyono’s second-term Cabinet in 2009. Anindya is the son of Indonesian billionaire Aburizal Bakrie, who served as economic co-ordinating minister for SBY in his first cabinet – just after finishing two terms as the chamber chairman.

President Jokowi is reported to have directly intervened in the election process and related internal decision-making to secure these new appointments. The rationale for this is not public, but it reflects an increasingly close alignment of interests between the Republic’s president, Cabinet ministers, and the upper echelons of the business community.

As other commentators have previously noted, it is not the first time that Indonesian presidents and parliamentarians have concerned themselves with Kadin, and it reflects a broader pattern in many other parts of Southeast Asia. For example, the National Chamber of Commerce & Industry of Malaysia was formed by federal government fiat in 1962, and at least two of its past presidents have been serving members of the Dewan Negara (federal Senate).

At first glance, it would appear to be a savvy move, ensuring that Indonesia’s peak business body is close to the national government, with benefits to both sides.

But is it?

Business groups — along with much of the rest of civil society — have an important role to play as an independent ‘friendly critic’ of governments in the region. Chambers frequently serve as an external source of policy ideas, critique existing policies and practices, and often suggest reform. They can also give governments deeper, more practical insights into the effects of their decisions on businesses.  In the Philippines, the obverse is true: some observers note that civil society and chambers of commerce have grown too close to the government to fulfil their ‘democracy-facilitating’ functions. Kadin has sometimes supported government policies that have turned out to be anti-industry, such as its initial support of the 2014 mining law bans on mineral exports. Although subsequently reversed, this policy led to resource-rich Indonesia being labelled at the time as one of the worst countries to operate a mining venture. In 2008, the government of president Yudhoyono stepped in to effectively help save the financial empire of former Kadin chairman Aburizal Bakrie. The tycoon had moved from his Kadin role to become a minister in the president’s cabinet; not all other Indonesian firms were so lucky.

Less well recognised is that business associations also play a role in promoting political pluralism. When chambers are run in an independent and non-partisan manner, they can foster openness and accountability in government, call maladministration to account, frequently advocate for reform, and serve to protect property rights and due process for the broader community. In this way, they help provide another locus of power and influence, and so have the potential to widen the scope of parties involved in public debate and decision-making.

Business groups — along with much of the rest of civil society — have an important role to play as an independent ‘friendly critic’ of governments. Chambers frequently serve as an external source of policy ideas, critique existing policies and practices, and often suggest reform.

This is especially important for associations representing the needs of small and micro-sized businesses. Indonesia has one of the biggest SME populations in the world, numbering over 70 million firms and sole traders. They employ most Indonesians, but they often find themselves without access to influence in many of the formal business groups that matter to the government.

Being able to talk to governments is important to the business community. But if the relationship with the public sector is too closely intertwined, then the legitimate interests of business operators can often be subsumed into the politics of the day.

Taking a partisan stance is not always something that chamber members want. Not all members of an association have the same political alignment, and many will object to their money and resources being spent to assist one side of politics alone.

Moreover, what happens when there is a change of government and today’s opposition becomes ministers? Will a new administration welcome a politically-aligned business group, or will they sideline it?  

Being too closely aligned to the government of the day is often problematic. It blunts the rightful role of business groups as an independent commentator. It can prevent valid criticism from being aired when policies aren’t working or corruption and maladministration needs to be called out. More soberingly, it can lead to a small group of officebearers having privileged access to policies, creating what the OECD has called ‘… self-interested organizations in pursuit of rents that do not enhance the broader public good …’. For these reasons, the idea of a cosy alliance is often avoided in many other countries.

Indeed, most nations that have an open economy and operate as successful liberal democracies have ensured a clear division between chambers and governments, with a culture of ensuring the two parties respect the boundaries. As Indonesia continues its journey toward becoming a major global economy, it will eventually need to also adopt best practice governance in business-political relationships.

Should Kadin effectively be part of the current presidential administration, as it now seems to be? The gain from any short-term involvement needs to be carefully weighed up against long-term costs here. It’s what businesses do every day in the marketplace, and it’s what they also need to do when walking the corridors of power. An honest voice for business works best when industry associations avoid drawing their leadership from amongst the ranks of past or present political players, and when governments avoid any perception of influencing office-bearer elections.

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