Jokowi’s Indonesia needs a lot more than a reboot


  • Economy
  • Monday, 24 Aug 2020

The country desperately needs foreign cash and know-how if it is to balance the budget, create jobs for a fast-growing workforce and move toward the president’s lofty ambitions to reach developed-nation status. To get there, Jokowi, (pic) as he is known, will have to rein in his protectionist tendencies.

INDONESIAN President Joko Widodo isn’t a great orator but the former factory owner has a knack for charming listeners with cute analogies. In his state of the union address this month, he likened the pandemic-hit economy to a computer that had crashed and needed a “reboot.” If only it were that simple.

The country is facing its first recession since the Asian financial crisis of 1997-98 and the highest Covid-19 death toll in South-East Asia. The country desperately needs foreign cash and know-how if it is to balance the budget, create jobs for a fast-growing workforce and move toward the president’s lofty ambitions to reach developed-nation status. To get there, Jokowi, as he is known, will have to rein in his protectionist tendencies.

The president’s speech highlighted the fundamental contradiction at the heart of South-East Asia’s biggest economy. On the one hand, Jokowi promised to get rid of “overlapping, complicated and misleading” regulations and build a “productive and innovative” economy – music to the ears of foreign investors. On the other, he marked the 75th anniversary of independence by insisting that “we must buy Indonesian products, ” calling for self-sufficiency in energy, and pushing questionable plans to develop massive state-backed food farms in far-flung Kalimantan and Sulawesi.

Jokowi is a political chameleon who is skilled at letting people see what that they want, as I argue in my forthcoming biography, Man of Contradictions. He has learned how to beguile foreign investors, ever since his early days as a small-time furniture exporter attending trade shows.

However, while he has won many foreigners’ hearts and minds, their wallets haven’t followed so easily. That’s because many of Jokowi’s purported investment reforms have been cosmetic, often undermined by obstructive civil servants and the president’s own nationalist leanings. Indonesian politicians and voters have deep-seated protectionist instincts, in part because of a legacy of colonial exploitation at the hands of the Dutch. While telling foreigners that Indonesia must become more “open and competitive, ” Jokowi has overseen the nationalisation of key natural resource projects and significantly expanded the role of Indonesia’s influential but inefficient state-owned enterprises.

In his first five years in office, Indonesia surged up the World Bank’s “ease of doing business” ranking to 73rd from 120th place. Still, it’s hard to find many foreign investors who believe business has become more straightforward.

With Indonesia facing a deteriorating economy and a spreading pandemic, more of the same policy confusion won’t be good enough. Rather than trying to be all things to all people, Jokowi should chart a clearer, more honest path forward.

Indonesia has every right to seek a bigger role for domestic companies, products and workers in its economy, even if it upsets Wall Street and the World Bank. But instead of endlessly flip-flopping between openness and protectionism, Jokowi needs to develop an East Asia-style industrial policy that sets out a stable balance between foreign and domestic capital and drives competitiveness at home rather than rent-seeking.

To get there, this former city mayor will have to restrain his bias to action and spend more time thinking. He needs to focus on strategy, not tactics. He will also need to pay more heed to the technical experts he has too often sidelined in the last few years. That approach has led to bad policy, such as the decision to build a US$33bil new capital city in the jungles of Kalimantan and the failure to take the health impacts of Covid seriously enough.

The president is surrounded by a slew of ministries and units that are meant to coordinate and drive policy-making. But their abundance is evidence of their ineffectiveness. Jokowi prefers to run the presidential palace as a kingly court, where no one individual or office is empowered to interpret and enforce his will.

His recent establishment of a committee to manage the pandemic and the economic recovery could be a step in the right direction, under the leadership of Erick Thohir, the straight-talking minister for state-owned enterprises and former owner of Italy’s Inter Milan soccer team. But Thohir must listen to the technocrats and epidemiologists. And Jokowi must give the committee the political backing to harmonise government policy and end inter-ministerial bickering.

The committee should start by ramping up Indonesia’s capacity to test and trace Covid cases, improving confused public health messaging, and ensuring that cash transfers reach the millions of poor families who desperately need them.

Jokowi should abandon his profligate plan to build a new capital city (it’s on hold because of the pandemic), rein in his urge to launch new projects for their own sake and develop a carefully screened list of strategic investments that can be rolled out quickly for maximum impact. Then he will be better placed to start resolving the contradiction at the heart of Indonesia’s economy.

Rebooting a computer just returns it to the status quo ante; it doesn’t improve performance. Instead of a reboot, Jokowi needs to rethink his economic policy if Indonesia is to have any hope of becoming a developed nation by 2045. — Bloomberg

Ben Bland is director of the South-East Asia Programme at the Lowy Institute. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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