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Doubts linger about economic team

Indonesian equities and the rupiah extended losses on Tuesday amid growing concern that President Joko “Jokowi” Widodo’s economic team lacks the leadership and experience to do their jobs

The Jakarta Post
Wed, October 29, 2014

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Doubts linger about economic team

Indonesian equities and the rupiah extended losses on Tuesday amid growing concern that President Joko '€œJokowi'€ Widodo'€™s economic team lacks the leadership and experience to do their jobs.

The Jakarta Composite Index (JCI) fell by 0.4 percent, its third consecutive day of decline, to close at 5,001.3 amid selling pressure from foreign investors. The rupiah fell 116 basis points to close at a one-week low of 12,158 per US dollar, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).

Jokowi'€™s economic team lacks several names that investors and the business community had hoped to see included, most notably former finance ministers Sri Mulyani Indrawati, Agus Martowardojo and Chatib Basri, analysts from Japan-based fund manager Nomura wrote in a report to their clients on Tuesday.

Nomura said that newly appointed Finance Minister Bambang Brodjonegoro, while relatively well-known to the market by virtue of his previous role as a deputy in the ministry, was unproven and '€œunlikely to be of the same caliber as his predecessors'€.

'€œOur overall impression is that the appointments could prove disappointing to markets,'€ said Nomura, a senior political analyst Alastair Newton, the lead author of the report.

He also criticized the decision to put two academics in charge of important roles such as the State Secretariat and the National Development Planning Board (Bappenas). Leading the two posts are University of Gadjah Mada (UGM) rector Pratikno and University of Indonesia (UI) public policy expert Andrinof Chaniago, respectively.

'€œThere does seem to be an absence of previous ministerial experience,'€ argued Newton. '€œWe think experience does count for something, especially when it comes to dealing with reform-resistant bureaucrats.'€

In picking his line up, Jokowi chose not to opt for continuity as he only reappointed Religious Affairs Minister Lukman Hakim Saefuddin from former president Susilo Bambang Yudhoyono'€™s Cabinet.

He also overhauled the Yudhoyono Cabinet structure, introducing new posts such as the Office of the Coordinating Maritime Affairs Minister, while also strengthening the role of Bappenas, which is now responsible directly to the President'€™s office. The strategic planning board previously reported to the Office of the Coordinating Economic Minister.

'€œAn important area of uncertainty is how some of these new and inexperienced ministers will handle the pressure from the parliament and various interest groups, particularly in sectors such as finance and energy and mineral resources,'€ said Andrew Tilton, an economist with US investment bank Goldman Sachs.

Some analysts also raised eyebrows at the appointment of Coordinating Economic Minister Sofyan Djalil, who will supervise 10 crucial, economy-related ministers.

'€œ[Sofyan] is reportedly close to Vice President Jusuf Kalla and might have to work doubly hard to prove that his appointment is not purely on that basis alone,'€ said Wellian Wiranto, an economist with OCBC Bank in Singapore.

'€œTo be sure, being stuffed with so many '€˜somebody'€™s somebodies'€™, it'€™s no dream team,'€ he added.

Commenting on the issue, Bambang said that there was apparently a '€œmisunderstanding'€ among market players regarding his previous experience in the government, particularly on fiscal management and the state budget.

'€œFor four years [in the Finance Ministry] I was involved in discussions with the House of Representatives'€™ Budget Committee, at the same time leading roadshows for global bonds to investors,'€ he told The Jakarta Post.

'€” JP/Satria Sambijantoro

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