Indonesian President Joko Widodo adjusts his translation headphones during the opening ceremony of the World Economic Forum on East Asia in Jakarta on April 20, 2015. (AFP Photo/Adek Berry)

Economy Suffers for Jokowi’s Distractions


APRIL 26, 2015

Jakarta. President Joko Widodo should free himself from the suffocating political “straitjacket” and focus on the economy for the rest of his term, as investors begin wondering if on-going sagas may start affecting his ability to govern the nation effectively, an analyst has said.

Wellian Wiranto, an economist with OCBC Bank in Singapore said that Joko has been at the helm of Indonesia for just over half a year, or about 10 percent of his five year term — with a long way to go until another election in 2019.

“However, the public gaze is never far away and some investors may be beginning to wonder whether the apparent drop in his popularity might start to affect his ability to govern effectively,” said Wellian in an “Inside Indonesia” report released last week.

“From the police chief appointment saga earlier this year to the more recent honest-to-a-fault admission that he has not perused everything that he signs off on — including an indefensible approval for hand-outs to state officials for car purchases — he appears to have been busy shooting himself in the foot,” the economist said in the report.

Wellian also cited the confusingly inconclusive leadership tussle within Golkar, a powerful opposition party, whereby one faction has clamored to join Joko and bestow his coalition with a parliamentary majority.

Where Golkar would swing is important for investors as with the party’s support, Joko could win supports against the opposition.

“On top of that, the pre-election talks about how he is at the beck and call of Megawati, the head of PDI-P [Indonesian Democratic Party], have been rekindled, courtesy of her rather pointedly delivered speech in a party conference,” Wellian said.

“As if things are not challenging enough on the political front, Indonesia’s economy faces a tricky period as well,” Wellian said.

“Dragged down by commodities weakness and a lackluster global economy, Indonesia’s growth has slowed to just a whisker above the 5 percent level in the last quarter of 2014 and may well have dipped below that in the first quarter of this year,” he said.

Indonesia’s economy expanded by 5.01 percent year-on-year in the fourth quarter of 2014, accelerating from 4.92 percent year-on-year in the previous period.

Meanwhile, for the year of 2014, the economy grew at 5.02 percent, the lowest in five years.

Josua Pardede chief economist at Bank Permata — a joint venture between UK lender Standard Chartered Bank and Indonesia’s top automotive distributor Astra International — also projected first quarter growth to be weaker than the previous quarter.

“Investment remains slow as investors are still in wait-and-see [mode] over promises of Joko and over the law and political stability,” he said.

Still, even though Bank Permata has a gloomy outlook on the first quarter growth forecast, its full year estimate, somehow, is a bit rosy.

It said Indonesia’s economy is expected to expand by 5 to 5.3 percent this year, as the government spending is larger than last year and taking into account over Joko’s promise to accelerate infrastructure development, reduce complex bureaucracy and focus on welfare programs.

However, in overall assessment, wellian of the OCBC concluded: “The first tenth of Joko’s presidential term has been filled with too much political drama and, on balance, not enough economic actions.

“While the political challenges do not look like they will abate any time soon, Indonesia’s future will be much better served if Joko re-focuses his efforts on reviving economic growth with foreign investors.

“Ultimately, how the economy performs will be the major determinant in just how secure his political career will be. A key plank in Bill Clinton’s successful campaign strategy in the 1992 US presidential elections comes very bluntly to mind: “It’s the economy, stupid.’ ” Wellian said.

“That will be a smart thing to remember as he tries to seize the agenda for the remaining 90 percent of his present term,” Wellian said.