Tuesday this week (27 January 2015) marked the 100th day since Joko Widodo was sworn in as Indonesia’s President. With many battles still to fight, his reform credentials and lauded ‘common touch’ will continue to be tested.
Joko Widodo, known as Jokowi, is the first leader with no ties to the political elite or the military to be at the helm of the country. He was inaugurated as the seventh president of Indonesia on 20 October 2014 under strong pressure to tackle myriad challenges. Despite strong headwinds, his early moves are encouraging.
Three months into his presidency, Jokowi has set in motion a series of reforms to bring Southeast Asia’s largest economy back on track. He aims to boost the country’s economic growth to seven percent within three years, up from around five percent at present.
He has won international praise for delivering on his promises to reform the decades-old fuel subsidy system, which placed a major burden on the state budget. The government scrapped the subsidy for gasoline from the start of this year and introduced a fixed subsidy scheme for diesel, widely used among fishermen and public transport buses. The domestic fuel price will be revised every month based on international market prices, a step closer towards a market-based price mechanism.
The move followed earlier efforts to revise the subsidy scheme. In mid-November within just a month of taking office Jokowi raised fuel prices by more than 30 percent. These reforms will save the country about 230 trillion rupiah (more than £12 billion), which is expected to be channelled towards funding much-needed infrastructure projects and providing affordable healthcare and education. While the fall in oil prices probably made it politically easier, taking a traditionally unpopular policy decision early in his tenure has sent positive signals that Jokowi is strongly committed to transforming the economy.
Improving creaky infrastructure
Infrastructure development is high on the agenda. According to the National Medium Term Development Plan (RPJMN) 2015-2019, the Indonesian Government plans to build 2,650 km of new roads, 1,000 km of toll roads, 15 airports and 24 sea ports. The railway network is to be expanded by 3,258 km.
In the energy sector, the government aims to build a new oil refinery with a capacity of 300,000 barrels per day and increase electricity capacity from 50.700 megawatts to 86,600 megawatts to catch up with rising demand.
Realising such ambitious projects will require high levels of investment. National Development Planning Minister Andrinof Chaniago said last November the country needs 5,519.4 trillion rupiah (£295 billion) to support infrastructure development (link).
Despite fuel subsidy savings, the Government has already said it is relying on state-owned enterprises (SOEs) and private investors to fund 70 percent of its infrastructure program for the next five years.
But regulatory uncertainty, bureaucratic red tape and corruption threaten to scare off foreign investors.
Jokowi has already hit the ground running on this front. Seeking to unlock investment, the government has introduced a one-stop service at the Indonesia Investment Coordinating Board (BKPM) to streamline business licensing procedures. Investors can apply online and no longer need to seek permits from individual ministries. The aim is to shorten the time needed to process investment permits from years to a few weeks.
The government has also scrapped the tax on land and buildings for oil and gas firms that are still in the exploration stage. Improving the management of struggling state-owned enterprises, an important move towards making the country more competitive and addressing transparency, is on Jokowi’s to do list. The government currently owns or controls 119 enterprises ranging from transport and banking, to pharmaceuticals. Indonesian state-owned oil and natural gas corporation Pertamina has already undergone a major management shake-up.
Furthermore Jokowi’s administration is planning to transform the state-owned financing firm PT Sarana Multi Infrastruktur (SMI) into an infrastructure bank by 2017. If the revised budget for 2015, due to be signed off by Parliament in February, is approved, the government’s capital injection would mean a six-fold increase in Sarana’s capital to USD $2.05 billion (£1.37 billion).
Land issues have remained a major bottleneck for infrastructure development in Indonesia. In the coming weeks, the government is also expected to finalise revising two presidential regulations on land acquisition and public-private partnerships (PPPs).
Investing in human capital
Beyond economic issues, social reform and inclusive growth are also central to Jokowi’s nine priorities agenda called Nawa Cita. Shortly after his inauguration, the government introduced the Welfare Family Savings Programme (PSKS), comprising of three initiatives: Indonesia Smart Card (KIP), Indonesia Heath Card (KIS) and Family Welfare Card (KSS).
As part of the three-card package comes a pre-activated mobile phone SIM card linked to a savings account. The cards provide free health insurance for the poor, guarantee 12 years of free education as well as free higher education for those who pass the university entrance exams.
The trend of economic and social reform shows Jokowi is walking the talk. The steps taken so far could bring positive results, spark investment optimism and help close the existing income gap. But the proof of the pudding will be in the implementation.
Navigating the opposition
The biggest challenge remains consolidating power. Jokowi won 53 per cent of the votes in the 2014 presidential elections. But as the party coalition that supported his candidacy holds a minority of seats in the parliament, making compromises might be necessary to pass laws and deliver on reform pledges. Jokowi also has to manage divergent interests within his own front. The jury is still out on whether Jokowi can rise above political games.
His ‘man of the people’ image and clean government promises have come under domestic criticism. The selection of his cabinet and recent political appointments have raised questions about the level of influence that Megawati Sukarnoputri, former president of Indonesia (2001-2004), still exerts. She heads the Indonesian Democratic Party of Struggle (PDI-P), which Jokowi belongs to, and endorsed Jokowi to run for president in the 2014 elections.
The nomination of Budi Gunawan as Head of the National Police, who was charged days later with bribery by the Corruption Eradication Commission (KPK), generated a storm of protests. Disappointed supporters spread hashtags such as #ShameOnYouJokowi, #SaveKPK and #WhereAreYouJokowi on Twitter.
Having been elected on promises of hope and change, a steep erosion in popular support could have wider implications. Jokowi needs to effectively balance assertiveness and conciliation as well as show strong but smart leadership.
Jokowi’s inexperience in international affairs and clear focus on domestic matters have raised concerns about the future of Indonesia’s foreign policy. He stepped onto the world stage in November when he attended a series of global meetings including the APEC annual meeting in Beiing, G20 talks in Australia and the East Asia Summit and other related meetings in Myanmar. Several successful bilateral meetings with world leaders were also held.
But so far no clear direction appears to have emerged. Analysts have predicted that Jokowi will delegate decisions on these issues to his key advisers. Rizal Sukma, Executive Director of the Centre for Strategic and International Studies (CSIS) and one of Jokowi’s foreign policy advisers, said the country’s foreign policy would be directed more by business and economic concerns. In his inauguration speech, Jokowi highlighted his view of Indonesia as a global maritime axis (link). Foreign Minister Retno Marsudi has also suggested that foreign policy will focused on people, “pro-people diplomacy”. Priorities however are likely to be defined in the coming months.
Indonesia is punching below its weight in international affairs. As a ‘new’ kid in the block, Jokowi has a window of opportunity to raise Indonesia’s global profile. Whatever direction it takes, balancing effectively domestic and global issues will be essential. As Indonesia seeks to set its domestic house in order, a pragmatic approach to external relations might just be what the country needs. Initial inexperience could be turned into a virtue.
In conclusion, while it is too short a time to judge Jokowi, his first 100 days show his reform agenda is on the right track. Drawing from his experience as governor, he is delivering on his campaign promises and laying the groundwork to tackle Indonesia’s challenges and set the country on a path towards sustainable development. But the road ahead will surely be bumpy.
To read our exclusive coverage of the 2014 Indonesian elections with articles by a variety of experts click here.
Find out more about Asia House and come to one of our Business and Policy events. To see what is coming up click here.
Read our exclusive interview with the regional Managing Director of Twitter here where he outlines how western businesses can use Twitter to connect with Asian consumers, among other topics.