Five Steps Jokowi Can Take to Keep Indonesia Open for Business

(JG Graphics)

By : Ari Sharp | on 9:30 PM October 20, 2014
Category : Opinion, Commentary

As Joko Widodo assumes the presidency, there are many issues competing for his attention. One of the most urgent is reviving the country’s sluggish rate of economic growth, which has sunk below 6 percent a year, low by historic standards and that of other developing countries.

Generating the growth needed to lift millions more people into the ranks of the middle class requires the president to help restore Indonesia’s status as an attractive investment destination; developments in recent years have prompted foreign investors to think twice about the country.

Thankfully, the sorts of measures that Joko should be considering to improve the investment environment are also measures that will benefit ordinary people yearning for clean government, and local entrepreneurs seeking greater stability.

With that in mind, the following ideas are humbly presented in the interests of creating a better investment climate so that local people can continue to enjoy the fruits of international engagement.

1) Make fewer promises.

But be sure to deliver on promises made. Too many Indonesian politicians in the past have told audiences what they want to hear — one thing to ordinary local people, another to the local business community and a third to foreign investors — in order to avoid conflict and maximize popularity.

With so much “noise” in political debate, media not keen to blow the whistle on a senior figure’s inconsistencies, politicians have for too long gotten away with it.

A disconnect between a politician’s words and deeds is a source of great anxiety for investors keen for certainty. That frustration is magnified when there is a disconnect between the laws those politicians choose to enact and the laws they seek to enforce.

It is the high expectation of slippage in the enactment and enforcement of law that made the tough lines taken by the Yudhoyono administration on both food self-sufficiency and mining so surprising.

Had the government established credibility by following through on promises, such tough lines would not have been sources of shock.

Joko has a chance to improve the expectations Indonesians have for their politicians. By only promising things that are achievable, committing to a budget that funds those promises and ensuring that promises are consistent with one another, the president can give himself a fighting chance of implementing them. There may be a short-term political price to pay, but it might also serve to improve the sophistication of political debate.

2) Govern with a small, focused coalition.

Indonesian politics in the present Reformation period is severely fragmented. Nine parties have been represented in the legislature since 2014, six which counted themselves in President Susilo Bambang Yudhoyono’s coalition.

For Yudhoyono, coalition partnerships were largely a product of political horse-trading rather than any shared political agenda. Coalition members varied from Yudhoyono’s own staunchly nationalist Democratic Party to the Islamist Prosperous Justice Party (PKS).

This meant that when the going got tough on issues, such as the need to increase the price of subsidized fuel, Yudhoyono’s cabinet members sometimes went off the reservation. So weak was the president’s position that he was politically unable to force out of the coalition parties that defied his stated policies.

Joko should seek to take on as few coalition members as possible to ensure stability and greater certainty in prosecuting his agenda. Those joining the coalition should be encouraged to embrace the core tenets of the president’s governing philosophy. If, over the course of the presidency, those parties are no longer committed to the government’s policies, they should be relieved of their duties.

Once appointed to the cabinet, ministers need to put their country and the presidency first and leave behind the disparate agendas of their political parties.

Too often under Yudhoyono, ministers would offer vastly different explanations of the government’s position on a given matter — too often because they were substituting in their own party’s preference for that of the ruling coalition. That’s a recipe for government instability.

3) Cultivate an ethic of accountability.

There are tremendously bright and hard-working people in the senior ranks of the Indonesia’s bureaucracy. They design sensible policy, consult with stakeholders and scorn the temptations of power.

They rarely get the credit they deserve; nor are they treated more favorably than colleagues who lack the same the diligence, intellect or integrity.

The incoming president needs to celebrate the achievements of the stars in his or midst — and sack poor performers. He could start with the cabinet, making clear that underperforming ministers will be shown the exit sig n .

This may rankle some bureaucrats, but it will be extremely popular among good performers — and most importantly among a frustrated public that depends on decent public services.

Joko’s own example of accountability in action is a good one. Soon after being installed as governor of Jakarta in October 2012, Joko started a series of spot checks on provincial government offices.

Unannounced, the governor and a gaggle of journalists would descend on a bureaucratic office to test out the services, seeing how many people were at their desk, how many customers were waiting to be served and how cleanly the environment was being maintained.

It didn’t take long for the governor’s visits, or fear of future visits, to prompt a significant improvement in the functioning of offices under his purview.

4) Apply rigorous analysis to spending from the budget.

The list of worthy projects competing for government funds is enormous.

The 2011 Master Plan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) featured dozens of infrastructure, energy, mining and agricultural projects that would each have a positive impact on the economy.

Prioritizing among them is far trickier, due to the lack of evidence about any given project’s likely economic impact.

The absence of this data makes spending decisions vulnerable to whims of individual ministers, whose favorites among industries and provinces are usually reflected in spending preferences.

Understanding a project’s likely return on investment must be a key factor in the government decision-making.

Once green-lighted, those accountable need to improve efforts to ensure the project is delivered on time and on budget.

An open, competitive tender process should be the norm, with private competitors, both local and foreign owned, competing on a level playing field with Indonesian state-owned rivals. Officials with conflicts of interest should be compelled to bow out or face prosecution.

Projects should be thoroughly audited before final payments are made so that citizens can be assured they are getting what they paid for. Long-term plans must be put in place to maintain infrastructure continuously so bridges don’t collapse and roads don’t become potholed soon after their ribbons are cut.

5) Clean up the judiciary.

There is no judicial selection system in the world that is not political. But there are ways to mitigate this influence’s deleterious effect on the rule of law.

In Indonesia, judicial candidates are typically scrutinized by the legislature before a short list is compiled for the president’s consideration. A significant proportion of judges have a professional history in politics that dwarfs legal experience.

As early as 1860, Indonesia’s top legal minds have advocated for making the judiciary more professional.

Mandatory gaps between the time someone leaves a formal political role and joins the judiciary may aid this end.

Clerks and judges must be paid better if we expect them to avoid temptation.

The next, more professional generation of judges should be expected to write, rather than orally deliver, decisions and explain their reasoning. This step is fundamental to enhancing people’s confidence that their disputes will be resolved in a predictable, transparent way.

Cases should be resolved quickly and publicly. The Judicial Commission must be given an opportunity to investigate suspicion of corruption; and police should be compelled to honor the judiciary’s inherent powers and abide by its findings.

President Joko has a tremendous opportunity to clean up the institutions that have, in the past, kept Indonesia from reaching its full potential.

Present and potential foreign investors will be among those watching with keen interest to see if he can do it.

Ari Sharp is an Australian journalist and formerly chief copy editor at the Jakarta Globe. This column is adapted from his book “Risky Business: How Indonesia’s Economic Nationalism is Hurting Foreign Investment — and Local People,” published by Connor Court Publishing.

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