Indonesia’s Jokowi wants growth, but it’s not enough

Workers load sacks of rice from a truck onto a ship at Sunda Kelapa Port in Jakarta, Indonesia, on Monday, March 15,2021. Indonesia is pursuing another attempt at increasing government influence in the decision-making and operations of its central bank, as well as expanding its ability to fund public debt, according to a draft legislation to be discussed in parliament. Photographer: Dimas Ardian/Bloomberg

IN upsetting everyone’s best-laid plans, the pandemic has made us aware of the fallibility of our single-minded pursuit of peak efficiency.

Among those seeking a more decompressed future, in which there’s a better balance between today’s rewards and tomorrow’s risks, is Joko Widodo.

The president of Indonesia has his own compass to navigate the post-Covid-19 world: a two-year stint at a remote pulp mill in his early youth.

His search for answers, Widodo told me in a Zoom interview, is taking him back to Aceh at the northern tip of Sumatra. That’s where as a forestry graduate, the future furniture businessman-turned-politician had landed his first job, living with his wife, Iriana, deep in the jungles, a seven-hour ride from the provincial capital, which itself is 2,200kms (1,367 miles) from home on the main island, Java.

“As we pursue our right to development, I know what it’s like to be dependent on forests for livelihood, ” he said. To prolong the riches of the country’s resources, he wants to reforest over 130,000ha (321,000 acres) – an area as large as Los Angeles – this year, make Indonesia a hub for electric vehicles, promote furniture made only with certified timber, and raise the contribution of renewable power to 31% by 2050, from just 11% now. “It’s about striking a balance, ” he says.

One-and-a-half years into his second and final five-year term, Widodo has come a long way from Aceh, where resource exploitation once coexisted with brutal military repression.

In today’s democratic Indonesia, and especially after Covid-19, the approach is a more participative transformation, with sustainable development an important consideration, the president said. A moratorium on new palm-oil plantations remains in place. Once the pandemic eases, the ambitious and controversial project of situating the new national capital amid tropical rain forests of Borneo will resume.

As the first president to emerge from outside a tightly knit elite, “Jokowi, ” as the 59-year-old popular leader is known, has to create jobs for a still-growing population of around 270 million, the fourth-largest in the world.

The economy might need another quarter-century to earn a high-income status. With China and the United States competing for global dominance, it won’t be easy for Indonesia to hitch an independent ride.

While Jokowi’s immediate priority is to reignite economic growth to ward off the risk of large-scale capital flight, starting with a 7% expansion in the current quarter, it’s the task of reimagining Indonesia’s place in the global economy that will require true leadership.

The central question is whether a sprawling archipelago of 17,000 islands and atolls, astride the Pacific and Indian oceans, needs to extract all the carbon trapped for thousands of years in its peaty wetlands. Everything else – from putting more palm oil in biodiesel and setting up fewer coal-fired plants to decongesting the sinking capital city, Jakarta – will emanate from that vision.

Widodo wants to demonstrate that he’s serious about making up for lost time with new regulations expected later this year.

The world’s top exporter of thermal coal finally sees the need to put the right price on carbon, tax it properly, and plow resources into a barely tapped reservoir of renewable power. But a low-carbon future is difficult in a resource-rich nation with entrenched business interests.

Policy U-turns have slowed wind and solar adoption, leaving cheap and abundant coal with a dominant 39% share in the country’s total energy mix.

More than coal, however, palm oil embodies the tensions between lives and livelihoods. The thick haze of pollution released every year as oil-palm planters set fires to clear land has been a constant source of irritation in recent years in Indonesia’s relations with neighbouring countries like Singapore.

Last year, Indonesia’s government warned that illegal burning could be a health hazard for coronavirus patients at home. Widodo insists things are getting better: Only 296,000ha came under forest fires last year, compared with 2.6 million ha in 2015.

But there’s no easy way out of palm oil dependency. Before the pandemic, Indonesia’s plan was to raise the refined palm oil content in biodiesel to 40% by 2022, from 30% at present. The shift to greater domestic demand is a way to protect 16 million direct and indirect jobs in a crucial export industry that the European Union (EU) has declared unsustainable.

The EU will phase out palm in biofuels by 2030. After the pandemic, some growers are packing up, with Sri Lanka recently asking planters to dig up their trees.

Despite concerns of environmental degradation and human-rights abuse, that’s not an immediate option for Indonesia, which accounts for a huge portion of global production.

Jokowi’s choices will shape the climate destiny of South-East Asia. Even if the world’s most popular cooking oil is indispensable in the interim, the president needs to double down on his signature village-fund programme so that rural hamlets, like the one I visited in Sumatra, can decide for themselves how to diversify their economies with government support.

The good news is the help from digitisation. In youthful Indonesia, one in five people is on the Internet for at least eight hours a day, according to consulting firm Deloitte. Of the US$8.2bil (RM33.92bil) raised by South-East Asian startups last year, 70% went to Indonesia.

The country is brimming with entrepreneurial energy around ventures that could be both profitable and sustainable, such as the TaniHub, which allows people to buy produce online directly from farmers.

Widodo’s biggest legacy will still be a shiny state-led project: a new capital on Borneo island, the scene of some of the worst excesses of extractive development under former president Suharto’s 32-year dictatorship.

Indonesia is one of Asia’s more stable democracies, resisting Islamist militancy even with the army back in the barracks.

Java’s hold on national affairs is still strong, though. That’s something that a faraway new capital can help weaken, leading to a fairer distribution of the pie. If there’s one lesson from Covid-19, it’s the need to break decisively from centralised efficiency. People need more autonomy and choices.

The new seat of administration can be a symbol of this path – a city running on hydro and wind power and acting as a nursery for 20 million seeds and saplings every year. “It’ll be green, very green, and smart, ” Widodo tells me.

To be able to apply the lesson the president learned as a young man in Aceh will be the biggest test of the remainder of his time in power. ─ Bloomberg

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. The views expressed here are his own.

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