President
Joko Widodo's administration has made reform a top priority, but seemingly
rushed measures introduced by his ministers are creating havoc, raising
concerns and angering many business owners and executives.
Roughly six months since coming to
power, one ministry after another in Widodo's government has started announcing
various regulations. Some of the new measures do not seem to be well thought
out. The mess stemming from rushed efforts to deliver on a key election promise
could curb much-needed investment as well as an export recovery.
And with economic growth languishing
at its lowest level in five years, the timing could not be worse.
Playing to the
public
"Some stores are already suffering 10% to 30% sales
declines," an executive of a chain of convenience stores said.
The executive was bemoaning a new
regulation that prohibits sales of alcoholic beverages at convenience and other
small stores, even if the beverage's alcohol content is 5% or less. Many of
these stores' customers used to stop by to pick up some beer along with some
edibles. Now they don't come in, so the new regulation's negative impact has
reached beyond alcohol sales.
The Ministry of Trade introduced the
rule, which took effect April 16. The intent is to "correct deteriorated
public morals," Trade Minister Rachmat Gobel has said.
Nearly 90% of Indonesians are
Muslims, whose religion bans booze. Some view the new regulation as the
minister pandering to religious conservatives.
Not to be thwarted, the minister has
indicated the possibility of banning online sales of alcoholic beverages.
Naturally, these developments are
deeply concerning for the booze industry. A rumor is even circulating that
Bintang, the country's No. 1 beer brand, will postpone plans to expand a
brewery.
The new rule's fairness is also being
questioned. When the ban was announced, the ministry insisted it would cover
the popular tourist spot of Bali. But the trade minister exempted the island at
the 11th hour, enabling beach vendors to continue selling beers to tourists.
Wrong
priorities?
Indonesia has been plagued by a chronic current account
deficit. The situation has opened the trade ministry to protectionist
temptations. This can explain why some recent "reforms" seem to run
contrary to what most people expect.
A new measure requiring natural
resource exporters to use letters of credit to settle their transactions was to
take effect April 1. It was canceled at the last minute, however, creating
confusion among many related businesses.
When President Widodo took office
Oct. 20, he skipped over career politicians to fill his administration with
experts who possess knowledge and experience in relevant fields. Trade Minister
Gobel, for instance, was a successful businessman who managed a joint venture
with Japan's Panasonic.
The president calls his team a
working cabinet. The subtext is that any minister not producing results will
quickly lose his or her job. This has put ministers under pressure to introduce
attention-grabbing policies, gain popular support and please Widodo.
Susi Pudjiastuti, a former fish
broker who now serves as the country's minister of maritime affairs and
fisheries, is Widodo's most popular minister. With her husky voice and a tattoo
on one of her legs, she stands out. Her bold actions, such as capturing illegal
foreign fishing boats and sinking them with explosives, have stunned many, both
at home and abroad. At the same time, they have jacked up her approval ratings.
However, fishermen and
fishing-related businesses are quite unhappy about new regulations introduced
under her watch.
When fishermen picketed in front of a
presidential palace in February, one sign read, "Susi may be a public idol
[idola in Indonesian], but she is as deadly as Ebola."
Since Susi took her position, the
fisheries ministry has banned trawling, catching pregnant lobsters and
transferring catches from one ship to another while out at sea. In addition,
fishing licenses for foreign-registered fishing boats are not being extended.
These measures, introduced in the
name of preventing overfishing and illegal exports, have resulted in
"halving the volume that fishermen hand over to seafood companies," a
high-ranking representative of a fisheries industry organization said.
More
uncertainties
Growing uncertainties over the Widodo administration's
reform drive are also putting other industries under a shadow. If
Indonesia's economy is to thrive, it will need foreign investment and higher
exports. But the Ministry of Industry is considering new regulations that could
hinder the growth of the country's auto industry.
The ministry has turned its attention
to the fact Japanese brands control 90% of Indonesia's auto market. To nurture
the domestic industry, the ministry is contemplating caps on imports of
autoparts and exports of finished vehicles.
"Ad hoc, stopgap measures like
these can lead to lowering the Indonesian car industry's global
competitiveness," said an executive at an Indonesian unit of a Japanese
bank.
As chaos and frustration mount, there
are growing calls from Indonesia's business community for the president to
replace economy-related ministers. But giving in to these pleas might not
produce anything positive. The best course of action could be to give the new
government a little more time. SADACHIKA WATANABE, Nikkei staff writer
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