All three pairs of presidential candidates have limited room to alter the present economic policy framework going forward. This is on account of the momentum in place, the challenges ahead and the existing institutional setup.
But let us fi rst clear up where they come from. Susilo Bambang Yudhoyono will likely continue what he has done in the last fi ve years. Jusuf Kalla, as part of the current government, now uses the slogan "fasterbetter". This essentially means his goals will be similar to the present government, even if the "how" might be different.
Meanwhile Megawati Soekarnoputri's platform, although not completely clear, must be seen in the context of her presidency between 2001 and 2004. The policy framework then was jointly developed and run by SBY's running mate, Boediono, who was her fi nance minister. The main ingredients were prudence and pragmatism. The success of these policies then makes it costly for a Megawati presidency to radically alter what it will attempt now.
From where they come from we can reasonably expect the candidates to formulate a similar economic policy framework going ahead. If fi rst quarter growth is any indication, growth this year is expected to slow to at least 4 percent. This is still much better than other neighboring economies. Hence Indonesia has been spared the worst impact of the global crisis. One reason is the prudent fi scal and monetary policies undertaken. Another is the equally prudent corporate and banking sectors that learned the painful lessons of the crisis in the late 90s. But mostly this is on account of the large domestic economy and less reliance on exports and the largely traditional fi nancial sector with practically no market for derivative products.
Certainly in some sectors that depend on exports, it already feels like a recession. And the fi rms linked to them are suffering as well. Those that are not fl exible enough to switch activities or strong enough to weather the storm there is not much that can be done. The government and the central bank have done what they can to take away impediments like trade fi nancing. But when demand for your product is not yet evident the only way to go is to wait it out. Or switch. In the short run it is important to ensure not so much as having a stimulus package but how to spend quickly but prudently. In the medium term boosting domestic demand should be done by lifting rigidities that constraint sectoral fl exibility. Special emphasis here must be given to the labor market.
More broadly and in the longer term our main challenge is unemployment, and related to this, poverty. Most of our workers are in slow growing sectors like agriculture and manufacturing. Hence the next government can either keep the bulk of the population in these sectors but boost their growth rates. The alternative is to allow for easier sectoral transformation into more productive activities. More probably a combination of the two must be taken.
In the present shrinking global demand the one thing next government must not do is to surrender to demands of protectionism. This will only provoke retaliation. But we must also ensure that other countries are playing fair and not closing their own markets while dumping their products on to us. Staying vigilant and engaging in more intensive bilateral and multilateral dialogues will be needed. This is especially important for Indonesia with its large domestic market and porous borders.
Certainly, important lessons can be drawn from new measures to strengthen fi nancial consumer protection, improve fi nancial disclosure, raise and enhance minimum capital standards, and detecting and containing systemic risks stemming from too-big to fail institutions. But a balance must be struck between keeping the fi nancial market from turning into a speculative spiral but still allowing it breathing room to innovate.
The present government has made great strides toward cleaning up the bureaucracy. Internally, several key ministries have improved their work ethics and increase of-fi cial salaries. Externally, the creation of the anti-corruption watchdog (KPK) has instilled fear against corruption or even breach of procedures across the entire offi cialdom. For sure we cannot turn the clock back on the clean government momentum. There is too much expectations and hope riding on this.
In recent year the government budget has increasingly come to rely more on market fi nancing. A sudden change in fi scal stance will have immediate impact on this fi nancing source and jeopardize government budget sustainability. Also note that the government bond market form the cornerstone of the domestic fi -nancial system.
The expenditure side of the budget can be roughly split into three parts: routine expenditure, regional transfers and debt servicing. Hence any sudden change in the fi scal stance will also have signifi cant impact on regional government fi -nances.
At the same time this structure leaves little room for direct fi scal stimulus. And it is diffi cult to imagine that a huge amount of funds suddenly makes itself available to fi -nance a fi scal led growth. Until now a sustainable government budget has been a signifi cant platform for overall economic stability. This is something the next government must safeguard.
It obviously impossible to combine the best traits of all the presidential hopefuls to form the ideal candidate. The best we can hope, then, is for the winner and losers to work together constructively once the election is over. It is our nation after all and taking it forward is our responsibility. For everyone.
The writer is a lecturer in the Economics and Business Department of the University of Indonesia. This is a personal opinion.
