Asia Pacific / Politics

Indonesian President Joko Widodo sets sights on $7 trillion economy with new cabinet

Bloomberg

Indonesian President Joko Widodo’s new Cabinet is taking shape, with some well-known business figures set to join his team as he pledges to put the world’s fourth most-populous country on path to become a $7 trillion economy by 2045.

The president, who was sworn in for a second and final five-year term in office on Sunday, is widely expected to include professionals, key opposition figures and industrialists to his Cabinet.

Jokowi, as the president is known, met with several high profile visitors on Monday, some of whom said they’d been asked to join the Cabinet: Nadiem Makarim, co-founder of Indonesia’s first startup unicorn Gojek, resigned from his company and said he will take up a Cabinet post; Mohammad Mahfud Mahmodin, a former Constitutional Court judge, said he was offered a ministerial post; Erick Thohir, a successful businessman who spearheaded the president’s election campaign team, confirmed he was offered a Cabinet post related to the economy without providing further detail; and Wishnutama Kusubandio, co-founder of PT Net Mediatama Televisi, was also offered a Cabinet position.

Indonesian National Police Chief Tito Karnavian also visited the state palace but is yet to confirm whether he has been asked to join the Cabinet.

Jokowi, 58, took the oath of office at the parliament hall in Jakarta in a ceremony attended by several heads of state and representatives from more than 150 countries. Known colloquially as Jokowi, he immediately urged lawmakers to overhaul a myriad of laws hindering investment and job creation to rid the country of poverty. By the time Southeast Asia’s largest economy marks a century of its independence in 2045, he aims to have lifted the per-capita income to 320 million rupiah ($22,656).

“None of that will come automatically, and (it) will not come easily,” Jokowi said in a speech after his inauguration. Indonesia must continue to innovate amid a world “full of risk, that is very dynamic.”

Facing a public backlash over key reform plans in recent months, Jokowi has already reached across the aisle to opposition parties and the nation’s political elite in a bid to strengthen his ruling coalition. The president has made amends with Prabowo Subianto, a former general and his rival in the elections, as he bids to build a grand coalition to see through tougher economic reforms.

A former furniture maker from Central Java, Jokowi was the first president to come from outside Indonesia’s elite or military and was returned to office following a landslide election win in April. Speculation has mounted in recent weeks about the possibility of Prabowo’s Gerindra party and former president Susilo Bambang Yudhoyono’s Democratic party joining the government.

He will be counting on new allies in parliament to also counter a push by the dynastic families, including some who backed his rise, to amend the constitution and gain greater influence over the government.

“Jokowi’s biggest challenge in his second term will be managing a legislature that is dominated by establishment elites,” said Hugo Brennan, principal political analyst with Verisk Maplecroft. “Having Prabowo inside the tent would dilute the influence of political elites within Jokowi’s coalition that will seek to stymie his reform agenda.”

But including the main opposition party in the Cabinet may deprive the young democracy of any mechanism for checks and balances on the government, Brennan said. It would also “fuel a culture of political horse-trading that undermines the policymaking process,” he said.

Jokowi has vowed sweeping reforms in his second term, insisting in an interview early this month he would seek to overhaul the nation’s labor law by the end of the year. The president said he would also move to open up the economy further with changes to Indonesia’s negative investment list, which governs foreign ownership levels across a myriad of sectors.

He’s repeatedly said the reforms were needed to support the economy, which grew 5.05 percent in the second quarter — the slowest in two years. In its latest World Economic Outlook in July, the International Monetary Fund revised down its forecast for Indonesian growth this year to 5 percent from 5.2 percent.

While Jokowi’s first tenure was dominated by an infrastructure drive, the second term must see a boost in “soft infrastructure” including legal reform, anti-corruption measures and education, according to Satria Sambijantoro, an economist at PT Bahana Sekuritas in Jakarta.

“If we are looking at long-term economic policy, especially amid the escalating global uncertainty, reform of the labor law is probably the low-hanging fruit for the president to start to achieve some of the long-term economic vision,” Satria said.

The president has also promised to gradually lower the corporate tax rate from 25 percent to 20 percent by 2023 to make Indonesia more competitive. Still, he is already facing public anger over some of his plans, with protesters rallying against the labor market reforms, a crime bill and legislation that weakened the nation’s anti-graft agency.

If Indonesia is to follow the likes of China and become one of the world’s biggest economies it must continue with reforms in areas like human resources, said Satria. “In the next five years, the president needs to focus not only on short-term economic policies but also on long-term policies.”

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