Sunday, October 30, 2016

What does Jokowi want for the Indonesian economy?

The question now is not whether Jokowi can consolidate political power, but what he wants to do with it.

Over the past 12 months, a Jokowi-styled developmentalism begun to emerge. The president has settled on a narrow set of economic priorities, in the service of which he has promoted a state-led, pragmatic policy execution. He wants to oversee an infrastructure boom and leave a tangible economic legacy. Other political and economic problems — corruption, good governance, human rights — are subordinate to this singular goal and clearly expendable in the eyes of the president.

Most of the administration’s major policy innovations are geared towards realising ambitious infrastructure goals. Jokowi is cultivating the image of a can-do president, one willing to don a hardhat, roll up his sleeves, and get things done quickly. In a bid to attract desperately needed infrastructure investment, Jokowi is telling the world that Indonesia is open for business.

But does this amount to an identifiable philosophy of economic leadership?

There is nothing transformative about Jokowi’s economic agenda. He simply wants a fast and no-frills implementation of an old statist development strategy that has loomed large throughout Indonesia’s history.

Indeed, there are uncanny echoes of the past in this new developmentalism. In recent months we’ve seen in the media a stream of comparisons between Jokowi and Suharto, the New Order autocrat who governed Indonesia for 32 years. Known as the ‘Father of Development’, Suharto oversaw a long period of economic transformation during which the idea of modernisation — symbolised by infrastructure development — was a fundamental part of the regime’s ideology and the autocrat’s political legitimacy.

Of course, the similarities should not be overstated. New Order developmentalism was repressive, whereas Jokowi has no anti-democratic designs. Today Indonesia is the most stable democratic country in Southeast Asia.

Still, the reaction from Indonesia’s commentariat is telling. It appears that Jokowi has tapped into a ‘widespread — though diffuse — mood of nostalgia for the certainties of the New Order’ and those golden years of economic achievement. The public have embraced Jokowi’s narrow developmental agenda. An October 2016 poll shows 69 per cent of Indonesians are satisfied with the president’s performance — Jokowi’s highest ratings since coming to office. For many Indonesians, Jokowi may be the kind of president to resurrect the developmental success of Indonesia’s recent past.

But is he?

Jokowi’s developmentalism is marked by contradiction. His promise of liberal reform is accompanied by a renewed commitment to the statist-nationalist economic model. To the private sector and foreign investors, the president casts his economic reform packages as a ‘big bang’ deregulation program. But these reforms are highly circumscribed. And to the Indonesian public, the administration is careful to emphasise that deregulation is not a turn toward liberalisation.

Jokowi sees the state sector as a locomotive for fast development, and he has injected millions of dollars into state-owned companies and handed them strategic infrastructure contracts. There are plans afoot to establish giant state-owned holding companies – an innovation designed to give SOEs greater leverage to borrow more money. Meanwhile, interventionist policies persist, often in the name of downstream industrialisation and food self-sufficiency.

Foreign analysts constantly lament the administration’s ‘mixed messages’. But what are the sources of this contradiction?

The president is not an ideologue; most refer to him as a pragmatist. It seems, though, that Jokowi is embracing the tailwinds of an economic nationalism he inherited. He took the reins of power at a time of rising protectionism and anti-foreign mobilisation. Nationalist policies are popular among Indonesia’s political class and the broader public too, and scholars of Indonesia’s economic history argue that all governments have oscillated between liberalism and nationalism. In many ways, Jokowi is simply acting out the ideological tensions that have long characterised Indonesia’s economic landscape.

Jokowi’s personality is also to blame. The president’s leadership style and decision-making process are unpredictable. Jokowi surrounds himself with very different kinds of economic thinkers. At times he embraces the ideas of pro-market advisors, but then pursues statist-nationalist policies endorsed by his personal partisans.

Jokowi is defined by ad hockery. He deals with each problem in isolation, and sometimes without wide consultation. Jokowi can be fickle, even erratic, in his management of people and policies. In two years, his administration has had three trade ministers, three coordinating ministers for natural resources, two finance ministers and four energy ministers – all with different approaches to problems of investment, trade and growth. It is, therefore, difficult to predict how he’ll manage an increasingly complex set of budget challenges, attract investors, and realise ambitious infrastructure targets.

Jokowi’s developmentalist agenda also risks crumbling under a host of political and economic hazards. The president’s approval ratings are highly contingent upon inflation and oil prices. The budget is under pressure, and some of Jokowi’s flagship policies — the deregulation packages, the 35,000mw project — face a range of logistical, political and financial challenges. At this stage, if such hazards materialise, Jokowi’s narrow developmentalism will fall flat, and he will have little else to take to the 2019 elections.

Eve Warburton is a PhD Candidate at the Department of Political and Social Change in the Coral Bell School of Asia Pacific Affairs, The Australian National University.

This piece is based on longer article that will appear in the November edition of the Bulletin of Indonesian Economic Studies, and which she presented at the ANU’s Indonesia Update in September 2016.


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