Wed, 08 Jul 2015


By Rieka RahadianaHerdaru Purnomo
The flip flops have to stop.

That’s the order handed down by Indonesian President Joko Widodo to ministers and top officials following several policy U-turns that are denting investor confidence in Southeast Asia’s largest economy, said Sri Adiningsih, the head of the president’s advisory board.

Widodo, better known as Jokowi, has struggled to govern effectively since he took office in October pledging to spur an economy growing at its slowest pace in more than five years. His government has announced and then scrapped policies including a language test for expats, a toll road tax, and a ban on government officials meeting in hotels.

“The president has said this shouldn’t be happening any more,” Adiningsih said in an interview in her office next to the state palace on Tuesday, a day after meeting Jokowi. “They have to be comprehensive, so that when policies are launched they don’t have to be taken apart and put back together, all of which raises questions of uncertainty.”

Jokowi, a former furniture salesman, is under pressure to improve the government’s performance by reshuffling his cabinet, a mix of politicians from parties that supported his presidential bid and professional experts. Ministerial changes could come after the Eid al-Fitr holiday in mid-July, Luhut Panjaitan, the president’s chief of staff, said in May.

Sri Adiningsih, a university economics lecturer and candidate for finance minister after Jokowi took office, highlighted tax as an area that had seen erratic policy making. The government is trying to lift tax revenues to fund projects to improve dilapidated infrastructure. Shelving Ideas

Jokowi approved a long-delayed plan to charge a 10 percent tax on toll fees in order to generate at least 500 billion rupiah ($38 million) of state revenue, Coordinating Minister for Economic Affairs Sofyan Djalil said on March 5. A week later, Jokowi asked the finance ministry to shelve it because it clashed with a plan to increase toll road tariffs.

The country’s Manpower Minister Hanif Dhakiri said in February he expected to implement a law this year requiring foreigners to pass an Indonesian language test to get a job, yet this was dropped after complaints from foreign companies.

Jokowi’s most significant economic policy move, the curtailing of fuel subsidies to free up budget funds, is also being rowed back on as rebounding crude prices and a weakening rupiah are leading the government to avoid letting costs at the pump fully rise in line with the market.

“The flip flops are definitely not helping, at a time when sentiment on the economy is weak, and confidence on the government is waning,” said Gundy Cahyadi, Singapore-based economist at DBS Group Holdings Ltd. “They are probably just another indication that there is room for improvement in policy coordination -- one reason that may explain the disappointing pace of government spending this year.”