JAKARTA (TheInsiderStories.com) – Entering 2018, Indonesia is openly speculating about what is popularly dubbed the ‘year of politics’. The times ahead will be occupied by the 2018 simultaneous regional elections and the presidential election and many policies that tend toward populism are expected to emerge during these two years.
A decade before becoming President, when he served as Mayor of Solo, Central Java, Joko Widodo implemented pro-poor reformist policies in areas such as healthcare, education, welfare, and infrastructure.
He gained a reputation as a leader who embodied both pro-investment and also pro-poor goals, and he was charismatic yet “down-to-earth” and humble. Under his tenure, Solo, his city, rose to the top rank in national governance and business attractiveness surveys, and Widodo gained national and international recognition.
By the end of his second term, Widodo’s popularity soared to the extent that in his reelection campaign, he received an extraordinary 90 per cent of the vote.
He rode that momentum from the post of Mayor of Solo to the governorship of Jakarta and then all the way to the Presidential Palace. In other words, Jokowi’s ‘technocratic’ populist appeal can only be understood when studied from its local beginnings.
If recent trends are any indication, the 2019 presidential elections in Indonesia will once again feature populist politics, though in what configuration it is still impossible to say. The expanded budget is also likely a strategic move ahead of regional elections in 2017 and legislative and presidential elections in 2019.
Today, President Jokowi’s popularity remains relatively high, especially for his technocratic agenda, such as his novel infrastructure development initiatives. At the same time, the sheen of his reformist and populist image has worn off somewhat, as he has become mired in the everyday politics of governing.
Lead Economist from Standard Chartered Bank Adrian Taloputra speculates that regional elections are viewed as a barometer of the results of the 2019 national elections, where victory for the majority party in government today is an indication of a high chance of the current government being re-elected.
Major political factors are likely to affect policy-making, and will be reflected in high social spending and subsidies in 2018,” he said Monday (22/1).
In the 2018 state budget, the government sets a moderate target for GDP growth, at 5.4 per cent, expecting investment and exports to spur the wheel of the national economy.
Despite rising commodity and oil prices early in the year, the government has decided to maintain electricity and fuel prices, which are major contributors to inflation, stable, at least for the first quarter of this year, a move aiming at boosting people’s purchasing power in a country where consumption accounts for over half of GDP growth.
The government set a 2.5- to 4.5-per cent inflation target this year, compared with a 3- to 5-percent target last year.
Meanwhile, the government has allocated Rp 2,221 trillion (approx. US$165 billion) for its budget in 2018, up around a modest 4 per cent from the 2017 one.
Finance Minister Sri Mulyani Indrawati has allocated more for social welfare and subsidies, amounting to Rp283.7 trillion (approx. US$21.2 billion) this year, increased 3.65 per cent over last year’s budget.
Moreover, it will focus more on fiscal stimulus for the people, in order to boost public purchasing power, especially for the lower middle-class segment. Therefore, the electricity subsidy budget has been raised 5 per cent to Rp94.5 trillion in the 2018 state budget.
The government also significantly raised expenditures for the Program Keluarga Harapan (Family Hope Program), a cash transfer scheme for the country’s poor families. The budget was raised from Rp1.7 trillion in 2017 to Rp20.8 trillion in 2018 and will now cover 10 million poor Indonesian families; hence, their purchasing power will improve.
DBS Group Research notes in a recent report that improving household consumption is very important for the Indonesian economy because of the strong link between them.
Household consumption accounts for about 55 per cent of the nation’s total economic growth, and therefore it exerts a major impact on the direction of the Indonesian economy.
Widodo’s social welfare narrative has been prominent since his 2014 campaign and most probably will remain so if he seeks reelection a year from now. After all, all parties gain when making social policy commitments, not just those that are leftist or part of a labor movement.
However, now the devil is in the realization of promises. There are three structural stumbling blocks that may hinder social welfare improvement, none of which can be solved overnight, or even during a one five-year term presidency.