Indonesia May Replace Economics Team, Vice President Says

JAKARTA, Indonesia—A cabinet shake-up is coming and could bolster the
Indonesian government’s economics team as it struggles to reverse a
downturn in Southeast Asia’s largest economy, Vice President Jusuf Kalla
said Friday.

“We’ll change [to create] a better team” after evaluating all ministers,
Mr. Kalla said in an interview.

Pressure has been building on President Joko Widodo to shake up his
cabinet as his programs to revive the economy falter. Mr. Kalla said the
government was wrestling with problems such as administrative snags that
have hampered the distribution of budgeted funds and lack of progress on
major construction projects, as it tries to convince foreign investors
to fund the projects that Indonesia can’t launch on its own.

Mr. Kalla, a wealthy businessman and longtime fixture on the political
stage, declined to say when a cabinet shuffle would happen. However,
advisers to Mr. Widodo, who took office last October, and members of his
coalition have said it could happen in July after the Islamic holy month
of Ramadan.

Indonesia’s near $900 billion economy had been among the world’s
fastest-growing in recent years and analysts have said that it could
join the ranks of the world’s largest economies in coming decades.

But growth has slipped to its lowest level in more than five years, and
Mr. Widodo’s team, in place for almost eight months, has failed to
arrest the fall. Indonesia’s stock index recently hit its lowest level
in more than a year, wiping out all gains made since Mr. Widodo’s
election. Lackluster corporate earnings were partly the cause, along
with waning confidence in the president’s ability to shepherd his team
to quickly implement his program.

Mr. Kalla acknowledged the economy was a problem, and said one of his
and the president’s priorities is to speed up spending on stalled
infrastructure projects that are expected to inject billions of dollars
into the economy. He pointed to a new law that makes it easier for the
state to acquire land -- a long-standing sticking point for projects
ranging from power plants to factories. The new rules are set to pave
the way for a Japanese-funded $4 billion power plant to proceed after
years of delay, Mr. Kalla said.

As falling global oil prices cut into Indonesia’s oil-gas revenue, and
tax collection so far coming up far short of targets, the government is
working to attract more foreign direct investors. Mr. Kalla said that
many companies “don’t need more incentives” to invest in Indonesia,
pointing to the large population and low labor costs that attract
consumer companies and manufacturers. He said the government is trying
to address old problems of acquiring permits for foreign workers,
improving the roads and access to electricity, and helping to clear land.

Mr. Kalla said a recent push to require foreign workers to learn the
Indonesian language was an example of poor coordination among ministries
and while restrictions on some foreign job seekers might be acceptable,
they shouldn’t apply to those investors or professionals.

In the case of the oil-gas industry, where exploration is at a
standstill and major projects by the likes of Chevron Corp. are only
inching forward, Mr. Kalla said the government’s primary goals were
studying new rules for cost recovery and ensuring legal certainty across
industries.

Major oil companies have long argued that Indonesia lacks incentives to
develop projects in the deep water and remote environments that are home
to Indonesia’s largest remaining oil and gas fields. Mr. Kalla said
talks for Chevron’s $12 billion, ultra-deepwater gas project—the first
in Indonesia—are now moving forward after the project was sidelined last
year.

Indonesia has been ambivalent in efforts to attract foreign investment
in recent years, depending heavily on it but also wary of investments
that could stifle the rise of its own industries. Mr. Kalla said he
supported moves to boost local industry by creating barriers to foreign
companies, such as a recent call by the president to ban the import of
ships to benefit local shipyards.

“This is one thing that any country should do,” he said.

Mr. Kalla dismissed talk of a fractured relationship with Mr. Widodo, a
major concern of markets in recent weeks. He said he and the president
agree “90%, 99%” of the time, meeting multiple times some days.

Mr. Kalla and Mr. Widodo have disagreed on issues ranging from the
running Indonesia’s football association to whether a law concerning an
antigraft body needs revising. Mr. Widodo also faces a troubled
relationship with his own party, led by former President Megawati
Sukarnoputri, compounding concerns that political infighting is part of
what is holding the economy back.

Mr. Kalla has fewer powers than he did during an earlier stint as deputy
to former President Susilo Bambang Yudhoyono from 2004 to 2009. Then, he
played a greater role in running economic ministries and had more power
to appoint senior officials. Pundits say Mr. Kalla’s growing power was
one reason Mr. Yudhoyono dropped him from a re-election bid in 2009.

Mr. Kalla said he had no complaints about his current role. Mr. Widodo
“is very active, it’s good. I don’t need [to be] more active” publicly,
he said.

An adviser to Mr. Widodo said a cabinet shuffle was expected to bring
virtually all political parties into government, including Golkar, the
nation’s third-largest party, which was once led by Mr. Kalla. Political
analysts say that could strengthen Mr. Kalla’s position.

Write to Ben Otto at ben.otto@wsj.com