Economy first: Jokowi sticks to his agenda seven years into presidency


President Joko “Jokowi” Widodo presents the draft of the 2021 state budget to House of Representatives Speaker Puan Maharani during a plenary session on Aug. 14. - Antara

JAKARTA (The Jakarta Post/Asia News Network): President Joko 'Jokowi' Widodo has consistently prioritised economic development in his seven years of leadership, but Indonesia’s economic growth has remained below target.

Covid-19 policies are the latest example of how the Jokowi administration places the economy above other policy goals – in this case, over public health.

During the early days of the pandemic, the government refused to heed scientific advice to impose a lockdown aimed at curbing the spread of the coronavirus. The government pointed to the severe economic repercussions of a lockdown and the huge stimulus spending that would be needed to keep people and businesses afloat.

Instead of a lockdown, the government enforced a variety of activity curbs, including the latest emergency social restrictions (PPKMD) in a tiered system adapted to the regional threat level.

Comparatively loose curbs allowed Indonesia to record a smaller economic contraction than other countries at 2.07 percent in 2020, Statistics Indonesia (BPS) data show.

The government also booked a fiscal deficit smaller than other governments at 6.1 per cent of GDP last year, Finance Ministry data show.

The Jokowi administration’s refusal to lock down the country however, came at a cost. When the Delta variant drove the second wave of the pandemic, the number of daily confirmed deaths peaked at 2,069 on July 27.

Mohammad Faisal, executive director of the Center for Reform on Economics (CORE) Indonesia, said that policy decision, which made it hard to bring the pandemic under control, had dragged out the economic recovery.

“The pandemic response was very slow in the beginning; with minimal healthcare intervention. It improved in 2021 but was still plagued by many problems,” Faisal told The Jakarta Post in a phone interview on Monday (Oct 18).

In 2020, the government spent only an extra Rp 63 trillion (US$4.51 million) on health care, just 10.95 per cent of the actualised national economic recovery (PEN) budget, Finance Ministry data show.

Amid the pandemic, the government also pursued structural reforms through the job creation bill, which the House of Representatives passed into law in early October last year. The law revised nearly 80 laws to simplify business procedures.

The Job Creation Law prompted protest from labour unions, environmental groups, human rights activists and students, since the reforms came at the expense of labour rights and environmental protection.

For example, the law introduced a risk-based approach that requires businesses to get an environmental permit only if their operations are deemed to pose a high risk to health and safety.

“The approach was overly simplistic and rushed, so the law came at the cost of dissatisfaction among various elements [of society], even though the intention is good,” Faisal said. Faisal added that many issues hindering investment and job creation were unrelated to regulations, and the law did not necessarily address these.

Corruption, for example, remained a key challenge to doing business in Indonesia, British Chamber of Commerce in Indonesia (BritCham) chairman Olly Riches said last month, citing a business confidence index produced by European business chambers.

During Jokowi’s first term in office from 2014 to 2019, economic policies focused on the development of infrastructure like highways and airports, especially outside Java, to improve connectivity and reduce logistics cost.

In addition, the administration focused on foreign direct investment (FDI) and universal health care. In Jokowi’s first term, the administration planned to develop 223 projects and three programmes as part of national strategic projects totaling Rp 4.18 quadrillion.

However, between 2016 and August 2019, the government developed only 81 projects with investment of Rp 390 trillion.

In 2017, the Jokowi administration launched the Mandalika special economic zone (SEZ), which measures 1,035 hectares, in Central Lombok, West Nusa Tenggara.

After years of construction, the SEZ now hosts a 4.31-kilometer MotoGP circuit. But the project is mired in alleged human rights violations, according to the United Nations.

Despite his push for economic reforms and major infrastructure projects, Indonesia’s economic growth never met the targets outlined by the government.

In 2019, for example, the government aimed for 8 per cent GDP growth, but actual growth was only 5.02 percent, BPS data show.

Faisal Rachman, an economist at state-owned Bank Mandiri, said the failure to meet the growth target was related to a slowdown in global growth and the end of the commodity boom.

Infrastructure development is expected to lead to faster and more sustained economic growth in the medium and long term, according to Faisal. The pandemic has added pressure on the government’s efforts to meet its growth target.

Last year, Indonesia suffered its first recession since the Asian financial crisis. “If the government can really implement structural and bureaucratic reforms, there is still a potential to meet [the growth target], although it will be quite difficult because of uncertainty related to the pandemic,” Faisal told the Post in a text message on Monday.

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