US economy

Jokowi Eyes $7 Trillion Indonesia Economy With New Cabinet

(Bloomberg) — Indonesian President Joko Widodo is due to unveil his cabinet on Monday after pledging to put the world’s fourth most populous country on path to become a $7 trillion economy by 2045.

The president, who was sworn in for a second and final five-year term in office on Sunday, is widely expected to revamp his cabinet to include professionals, key opposition figures and industrialists and reboot his economic team as he seeks to boost investment and growth amid a global slowdown.

Widodo, 58, took the oath of office at the parliament hall in Jakarta in a ceremony attended by several heads of state and representatives from more than 150 countries. Jokowi, as the president is known, immediately urged lawmakers to overhaul myriad of laws hindering investment and job creation to rid the country of poverty and lift the per-capita income to 320 million rupiah ($22,656) by the time Southeast Asia’s largest economy marks a century of its independence in 2045.

“None of that will come automatically, and will not come easily,” Jokowi said in a speech after his inauguration. Indonesia must continue to innovate amid a world “full of risk, that is very dynamic.”

Facing a public backlash over key reform plans in recent months, Jokowi has already reached across the aisle to opposition parties and the nation’s political elite in a bid strengthen his ruling coalition. The president has made amends with Prabowo Subianto, his rival in both the elections and a former general, as he bids to build a grand coalition to see through tougher economic reforms.

The former furniture maker from Central Java was the first president to come from outside Indonesia’s elite or military and was returned to office following a landslide election win in April. Speculation has mounted in recent weeks about the possibility of Prabowo’s Gerindra party and former president Susilo Bambang Yudhoyono’s Democratic party joining the government.

The president may inaugurate the new cabinet on Wednesday, Mahfud MD, who has been offered a position in the ministerial lineup, told reporters after meeting Jokowi on Monday. Nadiem Makarim, the founder of Indonesia’s first startup unicorn Gojek, and touted as a possible minister, also visited the president’s office. He declined to say if he’s been offered a ministerial job.

He will be counting on new allies in parliament to also counter a push by the dynastic families, including some who backed his rise, to amend the constitution and gain greater influence over the government.

Biggest Challenge

“Jokowi’s biggest challenge in his second term will be managing a legislature that is dominated by establishment elites,” said Hugo Brennan, principal political analyst with Verisk Maplecroft. “Having Prabowo inside the tent would dilute the influence of political elites within Jokowi’s coalition that will seek to stymie his reform agenda.”

But including the main opposition party in the cabinet may deprive the young democracy of any mechanism for checks and balances on the government, Brennan said. It would also “fuel a culture of political horse-trading that undermines the policy-making process,” he said.

Jokowi has vowed sweeping reforms in his second term, insisting in an interview early this month he would seek to overhaul the nation’s labor law by the end of the year. The president said he would also move to open up the economy further with changes to Indonesia’s negative investment list, which governs foreign ownership levels across a myriad of sectors.

He’s repeatedly said the reforms were needed to support the economy which grew 5.05% in the second quarter, the slowest in two years. The International Monetary Fund, in its latest World Economic Outlook, revised down its forecast for Indonesian growth this year to 5% from 5.2% in July.

Infrastructure Drive

While Jokowi’s first tenure was dominated by an infrastructure drive, the second term must see a boost in “soft infrastructure” including legal reform, anti-corruption measures and education, Satria Sambijantoro, an economist at PT Bahana Sekuritas in Jakarta.

“If we are looking at long-term economic policy, especially amid the escalating global uncertainty, reform of the labor law is probably the low-hanging fruit for the president to start to achieve some of the long-term economic vision,” Satria said.

The president has also promised to gradually lower the corporate tax rate from 25% to 20% by 2023 to make Indonesia more competitive. Still, he is already facing public anger over some of his plans, with protesters rallying against the labor market reforms, a crime bill and legislation that weakened the nation’s anti-graft agency.

If Indonesia is to follow the likes of China and become one of the world’s biggest economies it must continue with reforms in areas like human resources, Satria said. “In the next five years, the president needs to focus not only on short-term economic policies but also on long-term policies.”

(Updates with comments from ministerial candidate on inauguration in seventh paragraph)


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