Known as a troubleshooter and a witty political lobbyist, Coordinating Economic Minister Hatta Rajasa has a bigger role to play than just working out statistics. Hatta’s job is not only to ensure smooth coordination among his 17 ministers, but also to unlock hurdles faced by businessmen and politicians. The Jakarta Post’s Rendi A. Witular and Hans David Tampubolon interviewed this businessman-turned-politician. The following are excerpts from the interview:
Question: What have your accomplishments been in de-bottlenecking the infrastructure sector?
Answer: We have synchronized all overlapping regulations, and finding out which ones oppose others. From this, we have found that infrastructure investors face grave uncertainty in acquiring land. So far we have revised a government regulation on public-private partnership, under which the government will now play a greater role in land acquisitions, and investors can sell shares to other parties while projects are underway.
Under the regulation the government is also required to directly support investors in providing licenses, limited support in construction, and tax incentives, as part of a risk-sharing scheme. In toll road projects (the Public Works Ministry) will work closely with the local administration in land acquisitions, by deploying high-ranking officials so that land settlements can be resolved quickly.
We still need to have stronger legal certainty for land clearance procedures through a law on land acquisition for public interests. Under the draft law, land allocated for public infrastructure projects cannot be sold to parties other than the government, and that prices for such land will be pegged. Landowners who refuse to cooperate can file complaints with the court, while their land ownership is transferred to the government.
We have also issued two regulations to settle overlapping regulations on mining companies operating in forest areas. The regulations include those on forest conversion and on forest rent and use.
What about infrastructure related to electricity?
We have issued a regulation on a price cap for state power company PT PLN, for its purchases of electricity from independent power producers running plants fueled by geothermal energy. There is also a regulation on domestic market obligations for coal so that the domestic market will have assurances of primary energy supply. For coal sold to the domestic market, including to PLN, we have yet to issue any regulations on their benchmark or ceiling prices because until now there have been no indications of a supply shortage for domestic use. If there is, we will be strict in regulating that for the national interest.
Will there be any changes to electricity and fuel subsidy policies?
We have no plan to raise electricity rates this year, because we are focusing on restructuring PLN’s financial management and services, to make sure there will not be any more blackouts this year. To strengthen PLN’s financial condition, we will increase their margin for providing public service obligation to 8 percent this year from 5 percent. The increase will be made during the state budget revision this year. The higher margin will enable PLN to increase its borrowing capacity by Rp 21 trillion (US$2.23 billion). The point is that PLN will no longer be a burden to the state budget.
In the long run, the subsidy mechanism should be restructured by no longer subsidizing the price but the consumer. Poor consumers should have access to subsidized electricity.
The fuel subsidy mechanism will also undergo restructuring. We are in the process of looking at various options, including introducing a smart-card to limit purchases of fuel by wealthy motorists.
There will definitely not be a fuel price increase this year despite the fact that oil prices are hovering at between $70 and $80 per barrel. We once had to cope with oil price at $140 per barrel, and can still manage this. Increasing fuel prices is not an easy policy, since it is not just an economic issue but is also political.
Poor coordination among ministers undermined the economic team’s performance in the previous Cabinet. How are you going to improve that?
The key issue here is good communication. I hold coordinating meetings with the ministers every Tuesday at 7 a.m. I’ve always reminded them they must not leave any problems unresolved. They should also report any disharmony between ministers so I can immediately settle it. I’m tasked by the President to coordinate, and make sure that not all problems are left for him to settle — but just those related to presidential decrees, government regulations and draft laws that need his approval.
I (also) aim to design a mechanism to resolve potential problems. The economic team must be able to anticipate potential problems, as in the case of the free-trade policies.
How can you resolve the rift between Trade Minister Mari Pangestu and Industry Minister M.S. Hidayat in the handling of free trade agreements?
I think it is just style differences between them. I’ve decided to form a team to anticipate a jump in imports under free trade policies. There are 228 products that could jeopardize our industry, and we are negotiating on them with our foreign counterparts. Mari insisted on focussing on output and avoiding diplomatic fuss. Meanwhile, Hidayat insisted on making the process public and transparent. So that’s why this is just a matter of style. The point is we all agreed on a renegotiation.
You were appointed by the President as a political lobbyist to ensure the harmony of the coalition. Is that true?
Every political member in the Cabinet is tasked to ensure harmony... as stated in their code of conduct, which they signed when joining the Coalition.
...I have regular political discussions with various parties. Communication can resolve numerous hitches that could potentially create problems as well as settling misunderstandings and fostering mutual respect. I think any complicated problems can be settled amicably. There’s always a way.
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