In Indonesia, President Prabowo’s ‘Ivy League Mafia’ Echoes the Past

The latest institution of Danantara, Indonesia’s new sovereign wealth fund, has generated vital public curiosity but in addition a level of concern. Such reactions are comprehensible in a rustic with Indonesia’s advanced political and financial panorama, the place large-scale institutional improvements usually provoke skepticism and uncertainty. Nevertheless, you will need to acknowledge that sustainable nationwide progress requires daring and strategic shifts. Whereas Danantara might signify a departure from conventional financial administration, it’s not with out precedent. A historic perspective reveals a notable parallel in Indonesia’s previous that may supply worthwhile insights into the current.

Indonesia has traditionally turned to elite technocrats and centralized state energy in instances of wanted financial transformation. One vital case in its post-independence historical past illustrates this technique: President Suharto’s use of the so-called “Berkeley Mafia” throughout the New Order regime could be in comparison with President Prabowo Subianto’s institution of Danantara. Though the historic contexts differ – the previous rising from Chilly Conflict politics, recession, and hyperinflation, and the latter amidst world financial realignment and the rise of strategic sovereign wealth funds – each initiatives mirror a typical political and financial technique: entrusting nationwide financial transformation to well-educated, globally related elites below robust presidential management.

Danantara’s management has drawn explicit consideration on account of its tutorial pedigree: over 40 % are graduates of Ivy League establishments, whereas many others maintain levels from Western universities. This focus of elite schooling has led some observers to dub the group the “Ivy League Mafia,” echoing the circles of foreign-educated consultants that surrounded Suharto throughout his greater than 30 years in energy.

The Berkeley Mafia: Technocratic Stabilization within the Suharto Period

The occasions of late 1965 led to political upheaval and an financial disaster marked by hovering inflation, depleted reserves, and collapsed investor confidence. Normal Suharto emerged as a key determine, consolidating energy and turning to Western-educated economists, many skilled on the College of California, Berkeley.

Influenced by Western fashions selling fiscal self-discipline and world integration, the Berkeley Mafia carried out macroeconomic reforms that stabilized the forex, curbed inflation, and restructured the economic system. Supported by the USA, the World Financial institution, and the Worldwide Financial Fund, they laid the muse for Indonesia’s 5-Yr Growth Plans, which targeted on financial and industrial growth.

Whereas efficient in restoring stability and progress within the Nineteen Seventies and Nineteen Eighties, these insurance policies additionally enabled crony capitalism. Suharto’s regime concentrated financial energy in a small elite, facilitating corruption. The technocrats had freedom in shaping coverage however operated inside Suharto’s authoritarian framework – a mannequin seen in different fast-growing Asian economies at the moment.

Danantara: Nation-Constructing by Sovereign Wealth within the Prabowo Period

Quick ahead to 2025, and Indonesia is as soon as once more pursuing an bold financial transformation below President Prabowo. Danantara was created to unlock the worth of Indonesia’s state-owned enterprises (SOEs), entice funding, and lift GDP progress from 5 % to eight % by 2029.

Established by way of legislative modification and working below direct presidential authority, Danantara started with $20 billion in capital and manages the state’s stakes in main SOEs like Pertamina, the state energy utility PLN, and Financial institution Mandiri – probably overseeing as much as $900 billion in belongings.

Of the 22 members of Danantara’s administration crew, 9 are Ivy League alumni. A lot of the remaining crew maintain levels from different Western universities, reinforcing their world expertise. This Ivy League Mafia symbolizes Indonesia’s continued reliance on foreign-educated technocrats.

Just like the Berkeley Mafia, Danantara’s crew displays a technocratic resolution to developmental challenges. Within the Nineteen Sixties, Western-trained economists supplied credibility to draw international companions. In an analogous approach at present, Danantara’s elite crew intends to sign confidence to world buyers. In contrast to the reactive strategy of the Nineteen Sixties, nevertheless, Danantara is a proactive technique modeled after Gulf sovereign wealth funds, aiming to spend money on power, AI, meals safety, and important minerals.

Parallels in Technique and Construction

Regardless of totally different historic contexts, each the Berkeley Mafia and Ivy League Mafia share frequent parts

Each depend on elite technocratic management, within the type of internationally educated consultants with robust world networks.

Each function below centralized presidential oversight. Suharto saved management over the Berkeley Mafia whereas permitting autonomy – very similar to Prabowo with Danantara’s Ivy League Mafia.

Each initiatives aimed to modernize Indonesia’s economic system, although the Berkeley Mafia prioritized stabilization, whereas Danantara emphasizes technological self-sufficiency and competitiveness.

Each leverage state belongings to attain their objectives. Suharto initially used SOEs to drive industrialization earlier than shifting towards the personal sector and international funding. Prabowo intends to make use of Danantara to strategically consolidate and optimize SOEs, whereas nonetheless attracting personal and international funding.

Lastly, each sought credibility overseas, hoping that worldwide credibility would increase funding. The Berkeley Mafia turned to Western governments and establishments; Danantara is partnering with Gulf funds and world capital.

Variations in Context and Execution

Nevertheless, necessary variations should even be famous.

The Berkeley Mafia operated below authoritarianism; Danantara capabilities in a democracy, albeit one with rising considerations about govt overreach.

The Chilly Conflict formed the Nineteen Sixties; at present’s world options multipolar politics, decarbonization, and financial nationalism.

The Berkeley Mafia’s agenda was largely reactive — to rescue a collapsing economic system. Danantara is forward-looking and strategic, designed to re-engineer Indonesia’s place in world provide chains.

The Berkeley Mafia operated in an period with restricted public scrutiny. Danantara, in contrast, triggered quick market reactions, reflecting investor considerations over governance and monetary affect.

Structural Dangers and Governance Challenges

Whereas each the Berkeley Mafia and Ivy League Mafia signify daring, elite-led methods for financial transformation, they aren’t with out severe structural dangers and governance challenges that might undermine their supposed outcomes.

The Berkeley Mafia was usually criticized for being elitist and indifferent from the realities of on a regular basis Indonesians. The Ivy League Mafia faces related considerations over opacity and SOE dividend redirection.

Below Suharto, the Berkeley Mafia confronted little oversight, resulting in concentrated energy. Danantara faces related dangers, as audit our bodies lack full authority. Guaranteeing transparency requires impartial audits, stronger legal guidelines, public reporting, and an oversight board.

Just like the Berkeley technocrats, Danantara’s leaders shouldn’t be punished for unforeseeable setbacks. But when efficiency repeatedly lags, they need to get replaced – not criminalized – to protect credibility and self-discipline.

Suharto’s developmental good points have been accompanied by entrenched patronage networks. With out strict safeguards, Danantara dangers related elite seize, particularly given its centralization of state capital and affect.

Each eras reveal the dangers of sidelining democratic or bureaucratic checks in favor of govt dominance. Centralized decision-making, even when environment friendly, can result in corruption or mismanagement with out institutional steadiness.

Danantara’s Strategic Sectors and Priorities

Danantara’s investments are positioned as nation-building instruments, not simply monetary strikes. They aim sectors that increase GDP and self-sufficiency amid world provide chain instability and ascendant useful resource nationalism.

In using Indonesia’s pure assets, the purpose is to maneuver up the worth chain by specializing in the home refining of mining and EV-related supplies like nickel, echoing Suharto’s Nineteen Seventies technique with oil and forestry.

With its emphasis on AI and tech infrastructure, Danantara seeks digital self-sufficiency, not like the Berkeley Mafia which targeted on foundational macroeconomic coverage.

Danantara is investing in upstream gasoline, pipeline infrastructure, oil refining, and renewables to place Indonesia as a regional power hub. The Berkeley Mafia leveraged Indonesia’s oil and gasoline assets to develop the economic system.

Danantara additionally features a concentrate on agriculture infrastructure and logistics, with the purpose of lowering meals import dependence and constructing rural financial resilience, which was additionally one of many Berkeley Mafia’s targets.

All of those sectors signify long-term strategic bets aimed not solely at producing returns but in addition at repositioning Indonesia inside world provide chains.

Echoes of the Previous, Aspirations for the Future

Danantara represents a pivotal second in Indonesia’s financial trajectory, echoing Suharto’s reliance on the Berkeley Mafia by Prabowo’s appointment of foreign-educated technocrats. This management mannequin blends historic continuity with fashionable funding methods, aiming to place Indonesia as a regional chief in sectors like power, AI, meals safety, and important minerals.

Whereas the Berkeley Mafia succeeded in stabilizing and rising the economic system, Danantara’s centralized strategy carries dangers of elite seize, political interference, and weak oversight. Public considerations about restricted auditing authority underscore the necessity for institutionalized transparency, together with impartial audits and clear reporting. The fund’s success hinges on its management’s capability to steadiness world greatest practices with home accountability and inclusive nationwide profit.