On the way to IGARI MH 370 was still squawking, the indonesian contact was probably a secondary radar contact. Then MH370 went dark and I doubt that Indonesia has a primary radar looking that far.
But they sure would see an aircraft on primary radar passing within 40 NM of their landmass over open sea. To assume they saw that aircraft, did not act and are now hiding the fact that they saw it is imho less probable than the assumed turn to south happening later, at another altitude, or not at all. That is my take.