When Indonesians vote on April 17 in an epic democratic exercise across thousands of islands in a single day, polls suggest Widodo will win comfortably and also see his coalition gain a stronger majority in parliament. The knowledge that it will be his last term, given statutory limits, should also embolden him.
A small-town mayor from central Java, Widodo had a meteoric rise in a country led for decades by a tight military and political elite. He turned up in thronging Jakarta with a clean, can-do image, ready to tackle everything from ever-present traffic jams, costing the capital $5 billion in economic losses annually, to corruption. His soft-spoken style contrasted with established rivals, and he vowed the country was open for business.
Certainly, his administration has made a start, cutting red tape and rolling out infrastructure, like the long-delayed Jakarta subway, inaugurated last month. Village life is also better under a model that has devolved power. The anti-graft agency has been on a tear, going after politicians and business executives.
And in a country more used to heavyweight conglomerates, nimble next-generation stars like ride-hailing app Go-Jek, worth some $10 billion, and $7 billion e-commerce group Tokopedia have flourished, filling gaps in logistics. Meanwhile, the stock market and the rupiah are much-recovered from months of turbulence last year, a rough patch well-handled by both the Widodo cabinet and a competent central bank.
Punitive and oft-changing policies which favour state-owned firms have been damaging – as in oil and gas. Indonesia, once a significant producer, is now a net importer and left cartel OPEC again in 2016. Solutions like Jakarta’s biodiesel plans, using homegrown palm oil to reduce diesel imports, fail to tackle the deeper issues.
Widodo has reduced some foreign ownership restrictions and cut bureaucracy, but can do far more to attract outside capital, starting with stable legislation. A boost in oil and gas production, for example, could help tackle the current account deficit, and reduce the country’s vulnerability to external shocks. Continued outlays on roads, railways and airports – still nowhere near enough – will help too.
He can also raise government revenue to boost spending by closing fiscal loopholes, and do more to follow up a 2016 tax amnesty that turned up assets worth some $370 billion. Tighter income and corporate tax has irked businessmen, but Indonesia’s revenue pool from such levies is still only around 11 percent of GDP, below even peers like the Philippines, which has been funding its own infrastructure push.
With a stronger majority in power, Widodo can turn to an even thornier issue: the cripplingly rigid labour market. The difficulties of hiring and firing, including hefty severance pay, have kept many workers on short-term contracts and have stifled efforts to boost manufacturing. Foreign employees are needed to lift productivity but hiring restrictions mean less than one percent are not Indonesian, according to official figures.
The president’s quieter demeanour plays less well in a country weaned on fiery speeches. Prabowo is better at courting the conservative Islamist vote and strikes a nationalist note, promising for example to review Chinese investment. As much as 20 percent of the electorate, depending on the pollsters, remain undecided. A low turnout or a thin margin could encourage the opposition’s plan to contest irregularities.
That would be a poor outcome for Indonesia, which has plenty to gain from a more experienced Widodo at the helm for another five years. – Reuters Breakingviews