Less than one year into his term as Indonesian president, Joko Widodo faces a difficult set of challenges, both political and
\neconomic.<\/p>\n
The first, overseeing a cabinet reshuffle, requires some deft handling. Some of his ministers have failed to perform, so he must
\nbalance the demands coming from members of his ruling coalition against the need to appoint nonpartisan professionals to a new
\ncabinet. This is easier said than done.<\/p>\n
Undoubtedly Mr. Widodo will feel obliged to cater, at least in part, to vested interests such as the business and political
\ninterests of his ruling alliance. But the president\u2019s real test will come when it comes to appointing individuals to lead
\neconomics-related ministries. As these occupy the commanding heights of the Indonesian economy, they are also the most highly
\nprized positions for political patrons.<\/p>\n
Getting this delicate balancing act wrong poses a huge risk: If the president overreaches in trying to appease leaders of his
\ncoalition and gives away the crown jewels of the cabinet, Mr. Widodo could end up with another mediocre cabinet\u2014or worse. The
\nelectorate would not blame political party leaders for their economic woes, as they\u2019ve done so far. Instead, they will blame Mr.
\nWidodo.<\/p>\n
On the other hand, if Mr. Widodo manages to find and select some of Indonesia\u2019s best and brightest to run the economy, he might
\ngain more enemies from the ruling coalition. But he would win kudos from the electorate and, even more important, from the
\nbusiness community.<\/p>\n
Mr. Widodo\u2019s second task is to figure out how to jump-start a faltering economy. Despite what the president or his advisors may
\nwish to believe, an economic storm is brewing.<\/p>\n
Continued and persistent global economic uncertainty, a lower-than-expected growth trajectory for China\u2019s economy, a bottoming
\nof commodity prices and a loss of investor confidence in Indonesia all show that action is urgently needed.<\/p>\n
The economy is set to grow less than 5% in 2015. Growth over the past two quarters has been negative, and it\u2019s possible we have
\nnot yet reached bottom. And although exogenous factors can partly explain our slowing economy, a large part of the blame rests
\nwith Indonesian government policies, many of them left over from previous administrations.<\/p>\n
One lesson that Mr. Widodo should learn from his earlier days in office is that trying to do too much often amounts to less. His
\nso-called \u201cworking cabinet\u201d was long on policy intentions but seemingly without any sense of purpose or priorities. Such a
\nlaundry-list approach to policy making makes for good public relations but not much else. Now is the time to prioritize.<\/p>\n
Instead of trying to do everything at once, a wiser approach would be to ask: What are the most critical, binding constraints on
\neconomic growth today, and how can we remove those constraints in the most expedient way?<\/p>\n
The most obvious constraint on the Indonesian growth story, and one that Mr. Widodo needs to address immediately, is low
\ninfrastructure spending. More than half a year into the budget, only 8% of allocated state funds have been spent on new
\ninfrastructure. Clearly there are serious bottlenecks. If left unaddressed, these pose a serious threat to the economy, both in
\nthe short- and medium-term.<\/p>\n
Luckily, there is a quick fix. Mr. Widodo could have his economic advisors arrange for a revaluation of assets currently held by
\nthe larger state-owned enterprises. Many of these are undervalued, so once they are properly valued, SOEs could raise their own
\nfinancing for infrastructure projects by issuing local and global bonds.<\/p>\n
With a weak currency and excess industrial capacity at 30%, there is real potential for increased exports. But exporters are
\nconstrained by a lack of credit facilities. If the Widodo administration uses state banks as a vehicle to aggressively expand
\ncredit for exporters, it could see quick results with relatively little effort.<\/p>\n
Finally, the government needs to address a decline in consumer spending. This is partly due to a lack of confidence in the
\neconomy, but it is also a result of food-commodity inflation. The typical Indonesian household has less disposable income after
\nspending on basic food commodities, mostly due to supply-side problems.<\/p>\n
Those supply constraints aren\u2019t due primarily to lower domestic production, but to import quotas. Most of these quotas are held
\nby a \u201cfood mafia\u201d that controls the import of basic food commodities and then sells them at a premium. Removing those quotas
\nwould quickly result in lower food prices and boost consumer purchasing power.<\/p>\n
The vested interests that have been profiting from the quotas will no doubt protest such a move. They will use the banner of
\nnationalism as an excuse when arguing against the lifting of quotas. Mr. Widodo should understand that standing up to vested
\ninterests and exerting his presidential authority for the common good is the key to his success as president.<\/p>\n
Mr. Ramli is chairman of Bank BNI and a former coordinating minister for the economy and minister of finance.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/a-way-forward-for-jakarta", "image": "jokowi-nationalism.jpg" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }