New Challenges and Indonesia’s Responses
    Category: Column By : Jusuf Wanandi Read : 1568 Date : Thursday, August 11, 2016 - 08:06:39

    The global economy has not improved in 2016 as expected, and most probably will not well into 2017. Brexit has created havoc in the UK and EU, and will add to the economic stagnation. For the EU, it may cause the slowdown to 0.5% growth this year. In Japan, Abenomics has only brought lackluster economic performance with 0.1% growth in 2016. Following the slowdown in the past two months, the U.S. has resumed uplift of its employment number and to a steady growth in the 2% range.

    China’s slowdown to 7% (or lower) growth has hampered the banking sector with NPLs, reducing reform and restructuring. Many big emerging markets such as Brazil, South Africa and Russia are all slowing down. With these global and regional challenges, Indonesia’s goal to achieve 6% growth is now problematic: less money and capital; less exports of natural resources, oil and gas, and the non-oil sector; an overall trade slowdown, and less vibrant construction and real estate. These factors eroded consumer buying power, which is the main driver of Indonesia’s economic growth.  

    The deficiency of funds is the main reason for the tax amnesty, as a fix to fill the budget deficit. This effort can be successful for two reasons: one, the government’s relative credibility, as it has a majority in the Parliament to support this effort, and a strong president, due to his popularity and honest reputation. Secondly, the new global policy coming in 2017 requiring banks to share information for transparency purposes to prevent tax evasion and terrorism funding.  

    What President Joko “Jokowi” Widodo must do now is strengthen his grip by removing weak members of his cabinet through a reshuffle, a move long expected. It is timely as he has the support of Golongan Karya (Golkar) and Partai Amanat Nasional (PAN), and it is assumed these parties will have their representatives in the cabinet. Meanwhile, Jokowi got another win in appointing Tito Karnavian, a three-star police general, as the new National Police Chief. This is not a normal succession—Tito is relatively young, and has six years to be in the position if necessary. While he passed over senior officers, he is considered the best and the most favored by the people and politicians.

    In addition, Tito has good experience in anti-terrorism, intelligence and security, anti-narcotics, and as a regional chief of police in Papua and greater Jakarta area. Above all, he is among the few officers considered clean and incorruptible. Tito has also promised to build unity in the factionized National Police. Jokowi’s hand is strengthened because Tito’s appointment shows that he is in charge. With these new developments, despite global and regional problems (such as the South China Sea), the president’s leadership has strengthened, and looks more assured than two years ago. Thus the realistic, though measured, hope in a successful government is a real possibility for Indonesia.