A clear guide to the demonstrations, MSCI, haze and natural gas
In Indonesia, public frustration over the cost of living, subsidy cuts, government spending and the response to forest fires has spilled onto the streets. At the same time, concerns about the country’s stock market and a cut in natural gas exports to Singapore have drawn attention.
These may seem like separate issues, but they share a common question: Is the government putting people’s needs first, and how should the country’s budget and resources be used?
What is behind the protests?
In October, students took to the streets to protest rising prices, reduced subsidies and the government’s handling of forest fires. Some questioned whether the government was spending too much on its popular free school meals programme while leaving too little for disaster prevention and infrastructure.
Higher fuel prices and shortages of subsidised fuel have added to pressure on households. Young Indonesians have also voiced concerns about job opportunities, the cost of basic goods, teachers’ pay and government accountability. The protests reflect more than opposition to one policy: many people feel the government has not delivered the better living standards they had hoped for. CNA’s report, ABC’s analysis
The haze turns a domestic problem into a cross-border issue
Forest and peatland fires in Sumatra, Kalimantan and other parts of Indonesia have sent smoke across the country and into Singapore and Malaysia. Indonesian students have urged the government to declare the fires a national disaster and take stronger action.
Singapore has issued notices to Indonesian companies that may be linked to the fires, asking them to fight fires and prevent them from happening again. The notices do not, by themselves, establish that the companies are legally responsible. On October 27, Singapore and Indonesia agreed to set up a task force to cooperate on enforcement and company investigations. Singapore’s National Environment Agency, Associated Press
The issue is delicate. Singapore has a clear reason to protect its residents’ health and hold companies accountable for haze pollution. In Indonesia, however, Singapore’s legal action could be seen by some as interference in domestic affairs. The key question is whether cooperation between the two countries will lead to effective firefighting and prevention.
MSCI’s concerns are about transparency in Indonesia’s stock market
MSCI has raised concerns about the opacity of share ownership in Indonesia and possible coordinated trading. In October, it began consulting on a proposal to reclassify Indonesia from an “emerging market” to a “standalone market.” If that change goes ahead, funds that track MSCI indexes could pull money out of Indonesian stocks. Reuters report, Associated Press report
This is not the same as saying that Indonesia’s entire economy is in trouble. The main issue is whether investors can trust the transparency and fairness of its stock market. But if confidence weakens, capital outflows and currency pressure could add to concerns about the economy and make it harder for companies to raise funds.
The MSCI dispute has also caused friction with Singapore. A former Indonesian trade minister alleged that Singapore’s state investment firms, GIC and Temasek, pressured MSCI. Both firms denied the allegation. At this point, the allegation has not been established as fact. Associated Press
The gas export cut reflects Indonesia’s focus on domestic supply
In October, Indonesia cut pipeline gas exports to Singapore by about 31 million cubic feet a day. Indonesia said it needed the gas for domestic electricity demand and that the reduction remained within the limits of its contracts. The diverted gas is being sent to meet power needs in Batam and Sumatra. CNA report
Singapore has said it expects suppliers to honour their contracts. The cut is estimated to be less than 2 per cent of Singapore’s total gas demand, and officials say it is unlikely to have a major short-term effect on electricity prices. Singapore also imports liquefied natural gas (LNG), which gives it alternatives to pipeline supplies.
The decision reflects Indonesia’s effort to prioritise its own energy needs. Reliable domestic supply matters, but if existing contracts become less predictable, that could affect confidence in Indonesia as a trading partner. Both countries will need to balance domestic needs with their commercial commitments.
The bigger picture: domestic trust and international confidence are both at stake
In Indonesia, frustration is growing over prices, subsidies, public spending and the response to forest fires. The MSCI issue concerns transparency and investor confidence. The gas cut raises questions about energy security and the reliability of contracts. And the haze shows how an environmental problem can quickly become a diplomatic and legal issue with Singapore.
The relationship between Indonesia and Singapore is not simply one of confrontation. The two countries have agreed to work together on haze, are discussing the gas supply issue, and have faced unverified claims involving Singapore’s investment firms in the MSCI debate. Because their economies are closely connected, the challenge is to balance domestic priorities with regional trust and cooperation.
