A protester holds a placard during a demonstration in front of the presidential palace in Jakarts. (Reuters Photo/Beawiharta)

Indonesia Looks Back on a Bitter Year for Growth, Employment


OCTOBER 20, 2015

Jakarta. Hundreds of people representing labor unions, non-government organizations and universities rallied in front of the legislative complex in Jakarta on Tuesday, loudly voicing their disapproval of President Joko Widodo and Vice President Jusuf Kalla's first year in office.

Protesters, including union members of the Confederation of Indonesian Workers Union (KSPI) and the National Workers Union, paid no attention to the stinging heat on Tuesday afternoon as they shouted their displeasure over the current administration's failure to improve the welfare of Indonesians.

Some carried large signs reading, "Topple the Jokowi-JK," while a group of university students burned tires to make their point.

Police were prepared for the protest, deploying 1,200 officers to secure both the legislative complex and the State Palace in Central Jakarta, said Sr. Comr. Martuani Sormin, Jakarta Police bureau chief.

Despite the handful of rallies taking place across the country, with some locations, like Bogor, ending in clashes with police, the one-year anniversary of Joko and Kalla's inauguration went by like any other day for most Indonesians. Most have grown accustomed to the economic conditions of weaker earnings and higher cost of living that have forced them to put on hold any plans of buying durable goods.

“Indonesia's laborers give [Joko and Kalla] a score of five out of 10, which means they didn't pass [their test]. Joko and JK have failed to lift the people out of poverty," KSPI chairman Said Iqbal told the Jakarta Globe.

He continued to slam the current administration, accusing its policies of failing to prevent massive layoffs after companies were hit by slower growth, a weaker rupiah and higher costs of production.

"[The country's] poverty level rose by about 860,000 [people] in six months, many workers have been laid off and the economy has slowed significantly," he added.

Iqbal was quoting data from Indonesia's Statistics Agency (BPS), which showed that 28.59 million people – 11.22 percent of the population – live below the poverty line as of March, an alarming jump of 860,000 people from 27.73 million, or 10.96 percent of the population, in September 2014.

According to BPS, Indonesia also saw a noticeable increase in its unemployment rate, with 7.45 million people out of a potential workforce of 128.3 million identified as unemployed as of February. That puts the nation's unemployment rate at 5.81 percent.

In comparison, last year's data showed that 7.15 million Indonesians out of a workforce of 125.32 million people were without jobs, placing the unemployment rate at 5.7 percent.

JG infographic

Indonesia’s economy expanded 4.7 percent in the second quarter of 2015, the slowest pace in six years due to weak commodity prices and sluggish consumer spending that has hit company revenues.

The KSPI and other labor unions traditionally disapprove of the government, always demanding for more regardless of who the president may be, but this time they have armed themselves with data from the Manpower Ministry, which has recorded tens of thousands of job cuts in various industries – from textile businesses to the mining sector.

A survey released two weeks ago by researcher Indo Barometer suggested that Joko and Kalla's approval ratings have slipped by 11.5 percent in six months, in large part due to Indonesia’s rising food prices and sluggish economic growth. The company interviewed 1,200 respondents in 34 provinces in March and again on Sept. 14-22.

September data showed that 46 percent of respondents are happy with the president and vice president's performance, compared to 57.5 percent in March, said Indo Barometer executive director Muhammad Qodari.

Joko and Kalla's leadership has been marred with incessant political drama, from the hostile feud between the National Police and the Corruption Eradication Commission (KPK) to a glaringly obvious power struggle raging behind Palace doors between Joko and senior members of his political vehicle, the Indonesian Democratic Party of Struggle (PDI-P).

“It has been a frustrating first year and that is reflected in [Joko's] popularity ratings, but he has had to fast-track his knowledge of politics and hopefully he can draw on his experiences of the first year,” said British Chamber of Commerce executive director Chris Wren.

In response to these challenges, Joko launched four economic stimulus packages over the course of a month, aimed at streamlining policies, curbing bureaucracy and helping ailing companies get back on track.

Wren said these packages "make sense [but] because of the first-year performance, there is rather more [of a] 'well, let’s see' [approach] from business than bullishness."

He also highlighted the issue of "too much vested interest governmental politicking" within Joko's administration, "which has resulted in, for example, populist actions.

"We refer here to greater protectionism and regulatory inconsistency," he said.

Moody’s Investors Service, which has rated Indonesia’s sovereign credit at an investment-grade since 2011, criticized Joko’s planned move to lower energy prices in one of its stimulus packages, arguing the administration could potentially back-track on its much-applauded fuel subsidy reform that has been in place since last year.

Still, while BritCham is receiving unprecedented interest in all manner of investment and partnerships, Wren said: "The most [interesting part] is waiting on the impact of the policy changes."

With a consistent decline in growth since 2011 there may be no quick fix to Indonesia's economic woes.

The Asian Development Bank predicts unemployment to soar next year, with companies unlikely to absorb the influx of new workers entering the job market. The Manila-based bank also lowered its forecast for Indonesia's 2015 economic growth to 4.9 percent from 5 percent, in line with weaker growth prospects in China and India, the archipelago's main commodity buyers.

Next year's growth forecast was lowered to 5.4 percent from 5.5 percent, it said in an update to its report, "Asian Development Outlook 2015."

Chart showing economic growth in Indonesia from 2010 - 2015.