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Politicians on economic team raise eyebrows
The appointments of several new people to hold positions in President Joko “Jokowi” Widodo’s economic team have raised concerns among economists and have left financial market players in the dark over their future policy directions despite a warm welcome from business players
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span>The appointments of several new people to hold positions in President Joko “Jokowi” Widodo’s economic team have raised concerns among economists and have left financial market players in the dark over their future policy directions despite a warm welcome from business players.
Jokowi announced on Wednesday the composition of the Indonesia Onward Cabinet for his second term from 2019 to 2024 with several politicians and professionals having been assigned to hold positions on the economic team.
The new economic team is to be led by respected coordinating ministers: Golkar Party chairman Airlangga Hartarto for economic affairs and retired Army general Luhut Pandjaitan for maritime affairs and investment.
Newcomers include National Awakening Party (PKB) politician Agus Suparmanto as trade minister, former Indonesian ambassador to Japan and longtime private sector executive Arifin Tasrif as energy and mineral resources minister and media mogul Erick Thohir as state-owned enterprises minister.
Leading efforts to promote “invest in Indonesia” to the world and to get domestic business players to expand is to be Investment Coordinating Board (BKPM) chairman Bahlil Lahadalia, who was formerly Association of Young Indonesian Businesspeople chairman from 2015 to 2019.
“I think the market players see that many unfamiliar names with more political backgrounds [are in the Cabinet],” said Trimegah Sekuritas Indonesia research head Sebastian Tobing on Wednesday. “They are not sure of what to do because they can’t see yet where these ministers’ policy directions will head.”
The Jakarta Composite Index (JCI), the main gauge of the Indonesia Stock Exchange (IDX), ended Wednesday’s trading with a moderate increase of 0.52 percent, slightly higher than the rises booked on Monday and Tuesday when the President started to invite his ministerial hopefuls.
The rupiah exchange rate slightly strengthened by 0.06 percent to 14,031 against the US dollar on Wednesday evening.
Sebastian said the market had placed some hopes in incumbents, such as Finance Minister Sri Mulyani Indrawati, Public Works and Housing Minister Basuki Hadimuljono, Transportation Minister Budi Karya Sumadi and Agrarian and Spatial Planning Minister Sofyan Djalil. Agus Gumiwang Kartasasmita, who replaced fellow Golkar member Idrus Marham as social affairs minister in August 2018, returns to the Cabinet as industry minister.
“The market’s expectation now is that we’re going to see more growth-oriented policies from the ministers,” he said. “I hope good and professional figures will fill in deputy minister positions as politicians have been placed as ministers.”
Center of Reform on Economics (CORE) Indonesia research director Piter Abdullah expressed similar concerns.
"From the beginning, we’ve been worried about the Trade Ministry and Industry Ministry positions being filled by political party representatives and thus we cannot place too much hope on the economic team," Piter told The Jakarta Post.
An impending Herculean task awaits this lineup. Jokowi envisions Indonesia being among the top-five economies by 2045, with a nominal gross domestic product (GDP) of US$7 trillion, sevenfold the current position of just over $1 trillion, against the backdrop of a threat of a global economic recession and a United States-China trade war.
Piter said Agus Suparmanto was not a well-known figure and had a questionable background for filling the trade minister’s position. He said that Sri Mulyani and Airlangga would be the key people to determine economic policies, adding that he was also pessimistic that the two could achieve a policy breakthrough.
"Without an economic breakthrough, we will not reach 7 to 8 percent economic growth, but we will only be at 5 percent or lower,” Piter added.
Centre for Strategic and International Studies (CSIS) economist Yose Rizal Damuri shared the same outlook as Piter, keeping in mind that the economic team mostly comprised politicians.
Yose expressed concerns that economic ministers from political parties would not be able to issue prudent and consistent policies owing to political burdens. "Jokowi promised that 55 percent of the Cabinet would be professionals but unfortunately key economic positions were given to political representatives,” he said.
"We should be optimistic but Jokowi's vision expressed during the inauguration will be hard to achieve, particularly with regard to regulatory and bureaucratic reform," added Yose.
Despite the doubts, businesspeople seemed to remain optimistic over the new team.
The Indonesian Chamber of Commerce and Industry (Kadin) said the composition of Jokowi’s new Cabinet was the “best option” to face mounting economic challenges from the international world and at home. (prm)
