JAKARTA (TheInsiderStories) – President Joko Widodo’s second-term leadership was approved by the General Commission through an official announcement late last month after he won a lawsuit filed by the Prabowo Subianto-Sandiaga Uno camp at the Constitutional Court.
In the period leading up to his inauguration in October, or as a “transition” period, Widodo seems to have begun to show his power to execute more appropriate economic growth programs. One of them looks at the way he works which evaluates the performance of his assistants in the first period while throwing discourse on the change of cabinet in the second period.
In fact, according to analysts, in the second period, Widodo would be bolder in executing non-populist economic policies as long as they could make the economy stronger. We know, since last year, the Indonesian economy has weakened, not only because of the global turmoil but because of the non-flexible domestic policy management of investment and the implementation of regulations.
Locals media reported that the government will make a breakthrough by introducing an economic policy package, to counteract the global economic slowdown that has spread to the Indonesian economy. The method is to revive the domestic industry to increase employment and export through a series of incentives and improvements to regulations that have hindered it.
In the previous period, analysts considered that various government policy packages were not enough to kick in because the implementation of the package was still hampered by layers of legislation. That is why foreign investors are loosely investing their capital in Indonesia, and prefer Vietnam, the countries that have benefited from the coming US-China war.
The discourse of changes in economic policy has returned to blow after the “wong cilik” complained about the problem of the trade balance deficit, which significantly affected the current account deficit (CAD) in the first half of 2019.
It’s not just a discourse because people are waiting for a new design from their government that is more passionate about encouraging the growth of the export and import sectors, from those who have often experienced deficits, to improve the trade balance and strong economic growth targets towards “Visi Indonesia 2045”. At that time, Indonesia projected to become the fourth largest economy in the world with high GDP.
On several occasions, Widodo began to admonish his ministers about the declining performance of trade due to the lack of breakthroughs in investment and licensing. According to the statistics agency, the value of exports from January to May 2019 decreased by 8.61 percent (yoy), while the value of imports dropped by 9.23 percent (yoy). Overall, national trade during January-May 2019 has a deficit of up to US$2.14 billion.
Widodo’s concern at the end of his first period of leadership was quite reasonable because he certainly did not want to repeat the same mistakes anymore, as seen from the criticisms directed by his opposition.
At the beginning of his administration, Indonesia’s economic growth was 4.8 percent. With various policies and breakthroughs, the government is able to boost economic growth to reach above 5 percent. But the achievements of government work in the economic sector were not optimal at that time.
Therefore, in the future, the government will focus on preparing a new economic policy package, with the main goal being exported and accelerating investment permits.
The president will also look for new opportunities for exports following a trade war between the US and China. He considered that the opportunity for the entry of Indonesian commodities into the US is quite large given the restrictions on Chinese products. Vietnam has taken a step faster to capture this opportunity.
Widodo also plans to provide incentives for all exporters at all levels, including Micro, Small, Medium Enterprises (MSMEs) players, especially textile and furniture industry entrepreneurs.
Even if it is done, Widodo is likely to implement a crazy policy like the first time he was elected in 2014 by increasing the price of fuel oil, but the impact is good because the incentives are used for infrastructure that is very important in driving the economy.
Several international analysts such as Moody’s Investors Service also considered that Widodo would almost certainly focus on a number of reforms on infrastructure and human resource development, and gradual bureaucratic cuts to support investment and growth, as well as financial market stability, and positive credit.
Having previously implemented a number of major reforms, including the dismantling of fuel subsidies, holding a tax amnesty policy, enacting land acquisition laws, and removing some rules and conditions that hinder the infrastructure sector, Widodo will probably focus on implementing reforms, though gradually, and streamlining complex regulations to encourage investment.
To deal with structural constraints stemming from infrastructure inequalities, regulations that are still limited, and a lack of human resources are likely to remain a priority for the government policy of the second period.
The International Monetary Fund (IMF) projects, with a mix of policies that address infrastructure inequalities, reduce the dominant role of state-owned enterprises, reduce trade and investment barriers, and encourage human resources to enable Indonesia to achieve real GDP growth potential of 6.5 percent in 2022, two years before the end of his rule.
There is nothing new in his economic policy because he and his economic team will strengthen and deepen the implementation of policies to maintain financial market stability. Because, with foreign investors holding around two-thirds of Indonesia’s government bonds, a stable policy direction, and fiscal discipline will help prevent disruptions to the currency and capital markets, supporting the smooth availability of financing.
For this purpose, Widodo did not see his old policy as mischief, but more because the ministers’ managerial were minimal. Therefore, in addition to continuing his old policy, he wanted to choose a minister who was able to execute programs quickly and accurately.
Because the certainty of regulations issued by the government will give confidence to the market. So far, we have seen that there are differences in data and ideas among the ministers, although this is reasonable, he gives doubts to businesses to invest and produce. For example related to airline ticket rates, online motorcycle taxi fares, e-commerce taxes, others.
In the past few days, Widodo’ fast pace began to appear. Some regulations in the financial sector were revoked, rather than policies in the investment and licensing sectors. We can read, as happened when becoming mayor of Solo and Jakarta Governorate, Widodo will more assertively execute his economic policies, even though they are considered not populist.
Written by Daniel Deha, Contributor for TIS Intelligence