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Jakarta Post
The Jakarta Post
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Editorial: The Prabowo-Hatta platform

  • The Jakarta Post

    The Jakarta Post

| Fri, May 30, 2014 | 09:50 am

The economic platform of presidential candidate Prabowo Subianto and his running mate Hatta Rajasa is, by and large, similar to that of their competitors Joko '€œJokowi'€ Widodo and Jusuf Kalla as both emphasize a basic-needs approach in their priority programs for the next five years.

Like the Jokowi-Kalla economic program, the Prabowo-Hatta economic platform also puts agriculture, notably food, energy and basic infrastructure on top of their list of priorities. Prabowo-Hatta also agree with Jokowi-Kalla that agricultural research should be increased, irrigation networks should be expanded, new rice fields should be opened and a commercial bank for farmers and fishermen should be established.

Both pairs also fully realize that poor and inadequate basic infrastructure and deeply entrenched corruption have become the biggest barriers to economic development. They, therefore, promise to build thousands of kilometers of new roads, new airports and seaports and express strong commitments to further empowering the Corruption Eradication Commission (KPK).

Both Jokowi and Prabowo promise to increase the role of national companies in natural-resource development, notably in the mining sector, and to continue the programs of the present government, which require mining companies to refine mineral ores and which prohibit the export of unprocessed minerals. They also promise to revise the Oil and Gas Law to allow for a bigger role for national companies and to ensure that the hydrocarbon sector provides maximum benefit to the people.

However, Prabowo-Hatta are more explicit and specific in their programs on increasing the role of national companies in the petroleum sector by implicitly promising preferential treatment for national companies to acquire expired oil concessions. The latest data from the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) shows that about 10 oil and gas concessions will expire within the next five years.

But while their commitment is quite strong with regard to the empowerment of national companies in the oil and gas sector they stop short of recommending rational measures as to how they will go about implementing this promise. National companies will need billions of dollars in bank loans as working capital to operate oil or gas fields while most national banks, besides being short of lending resources, have shunned the petroleum industry due to it being high risk.

But with all the substantial working programs promised by both presidential candidates, the biggest question is where all the money needed to implement these projects will come from.

Both Jokowi and Prabowo have promised to increase the tax ratio (tax receipts as a percentage of gross domestic product) from around 12 percent now to 16 percent. But this target is quite ambitious, given the inadequate institutional capacity of the taxation directorate general and the huge investment needed to boost economic growth, currently below 6 percent, to its potential capacity of 7 to 8 percent.