The ‘People’s President’ talks to Nikkei Asia about growth, the new capital and whether two terms is enough
By: SHOTARO TANI, Nikkei staff writer
JAKARTA — Stepping off a helicopter and into the sweltering heat of Patimban, a deep water port a four-hour drive east of Jakarta, Indonesian President Joko Widodo seemed unfazed, barely breaking a sweat. Dressed in his trademark white shirt and dark slacks, he was doing what he likes to do best — an impromptu visit, known in Javanese as “blusukan,” to a region or town to learn from the locals first hand.
He was traveling light, aside from the helicopter, bodyguards and 20-plus person entourage. “Before I make policy, I must listen to the people about what they need and want,” he said.
“I go to the slum area, I go to the river bank, I go to the villages. Meet the people, listen to the people, so I know what they need, I know what they want,” the president explained.
Blusukan is something Jokowi, as he is widely known, has done throughout his political career, since he was the mayor of Solo, a city right at the center of Java Island, and then governor of Jakarta. Listening directly to the people is something he said has characterized his seven and a half years as president, the key to his governing philosophy in a country where entrenched interests and elites are difficult to navigate, even for a president.
Widodo himself is a product of the slow march of democracy in Indonesia’s postwar era. Following the 1945 Constitution and independence from Dutch rule after Japanese occupation, the country was dominated by a succession of military dictators and elites. It took until Widodo’s election for Indonesia to choose a leader who does not hail from the nation’s establishment or the military, a predominant force in politics until former President Suharto’s regime fell in 1998 and the full democratization of the country.
Widodo lived much of his childhood in a riverside shack in Solo before working his way up to become a successful furniture exporter. He does not have a political dynasty to fall back on nor does he have the military to back him up. That helps him relate to ordinary people, who believe they are usually left behind in politics run by elites.
As Widodo arrived at a cafe near the Patimban port for an interview with Nikkei Asia, he was greeted by dozens of people from surrounding villages who had heard he was close by. “Bapak, bapak (Mr., Mr.)!” they shouted, and the president handed out black T-shirts with a big “Jokowi” logo on the front as he passed by. His approval rating has dipped below 50% only once during his time as president and stands at over 70% in the latest survey by independent pollster Indikator Politik Indonesia.
Widodo’s ability to charm is increasingly being tested, however, as he tries a difficult balancing act in an effort to ensure economic growth. On the one hand, he must please the public, the source of his legitimacy and political power. On the other hand, he also needs to woo investors and businesses who are key to the development and growth of Indonesia’s economy. Widodo thinks both are achievable.
Indonesia needs investment — its economy must expand each year just to absorb an annual influx of over 2 million new workers while stagnating growth raises the risk of social instability. A 2019 report from the Ministry of National Development Planning (Bappenas) also pointed out that Indonesia needs to grow by at least 6% to avoid the middle-income trap, whereby an economy cannot make the step up to a high-income country because of declining productivity and rising costs. Throughout Widodo’s tenure, gross domestic product has only been growing around 5%. The president had initially promised 7%.
Generating growth requires cutting red tape and deregulation, something which often draws the public’s ire. The most prominent example was the passage of the so-called omnibus bill in 2020, which made sweeping changes to over 70 laws in key areas such as labor and tax. Believing that the new law would hamper their rights, workers took to the streets in massive, sometimes violent demonstrations across the archipelago, hurling stones and vandalizing bus stations in Jakarta. Riot police were called out, in some cases firing tear gas into crowds.
Widodo seems to realize that his primary job as the leader of the nation is to address lackluster growth. “I want to prepare the foundation of the country,” Widodo told Nikkei, as he outlined his ambitions for the rest of his tenure until new elections in 2024, when his two-term limit is up. He laid out three key policies that he has been implementing: building infrastructure; expanding manufacturing and value-added industries; and investing in human capital. With these three in place, he said, “I’m sure that the GDP of Indonesia in 2030 will be triple what it is now.”
Building infrastructure, from roads to ports, airports and bridges, has been the hallmark of Widodo’s presidency. In his first six years in office, 6240 km of roads were constructed, along with 15 new airports and 124 new seaports. Indonesia suffers from a chronic infrastructure problem, so much so that logistics costs total more than 20% of GDP. Better infrastructure can cut those costs and boost economic growth.
But all other infrastructure projects pale in comparison to Nusantara, the $30 billion new capital on the island of Borneo, which the president said was needed to spread economic growth outside the most-populous Java Island. Java currently accounts for nearly 60% of the country’s GDP. “We have 17,000 islands. We need to split up [economic growth] to other islands,” Widodo said.
Another priority is industrial “downstreaming” — moving into processing and manufacturing rather than simply churning out raw materials. This is being pursued through a law — initially introduced before Widodo’s era but which had been continuously delayed — that amounts to a de facto ban on the export of unprocessed minerals, including nickel, tin, bauxite, gold and copper, to push foreign companies to build processing and manufacturing inside Indonesia.
Exports of nickel ore, for example, a key component of batteries for electric vehicles, have already been banned since 2020. This is key leverage that the government is using to entice commitments from Chinese and South Korean firms to develop a domestic EV battery industry.
The ban has been “very effective, and is very important” to Indonesia, said Mamit Setiawan, executive director of nongovernmental organization Energy Watch. “We have only exported raw materials for decades. [But with the export ban], in addition to employment, positive impacts have also occurred in export growth, economic growth in mineral processing locations, as well as state revenues,” he said.
Indonesia is uniquely dependent for growth on foreign investment: half of all private investments in the country came from direct investment from overseas in 2021. The state is in no position to stimulate the economy, with a tax-to-GDP ratio of 11.6% in 2019 (the latest year where figures are available) well below the Organization for Economic Cooperation and Development average of 34.3%, meaning state coffers are not nearly enough to pay for the nation’s development. The state budget deficit by law is capped at 3% of GDP, and while that limit has been temporarily removed because of the need to spend during the COVID-19 pandemic, it is set to return next year.
With foreign investment a priority, the president took the World Bank’s Ease of Doing Business ranking very seriously – Indonesia was 120th when Widodo took over in 2014 and had improved to 73rd in 2019. Widodo has often mentioned in public speeches the need to improve Indonesia’s standing. In a private meeting in 2019, representatives from the World Bank pointed out to Widodo that despite businesses moving out of China due to a trade spat with Washington, they “are not coming to Indonesia because Indonesia’s neighbors are more welcoming,” noting that Vietnam was their prime destination.
According to people close to him at the time, the president immediately gathered his ministers, ordering them to think of ways to lure more investment into Indonesia.
A string of setbacks
It has not been all plain sailing in Widodo’s quest for economic growth. A recent setback has been SoftBank Group’s decision to pull out of investing in Nusantara, the new capital, despite Chairman and CEO Masayoshi Son being named a member of the steering committee for the project, along with Abu Dhabi Crown Prince Mohamed bin Zayed Al Nahyan and former British Prime Minister Tony Blair. SoftBank’s pullout is a blow to the project, which, under previous plans, will only be 19% funded by the state budget, with a further 26% coming from private investment and the rest from a collaboration between state-owned enterprises and private parties.
SoftBank’s withdrawal is a serious blow to the project, “an indicator that financially, the new capital is not feasible,” said Tauhid Ahmad, executive director at Jakarta-based think tank INDEF. He added that for private investors, the withdrawal “sets a precedent that investment in the new capital is not that promising” and that it is bound to create a request for “market guarantees” from the government.
Widodo’s signature omnibus law has suffered a setback too, with the Constitutional Court last year ordering the government to provide stronger legal ground for the move. It said the current framework will be declared “permanently unconstitutional” if necessary changes are not made within the next two years as the legal process behind the passage of the law failed to meet standard lawmaking methods under the constitution. The ruling bars the issuance of implementing regulations, meaning many details of the law remain unclear.
The mineral export ban has not gone down well with the international community either. The European Union asked for a consultation with the World Trade Organization over the ban in 2019, and in January 2021 requested a panel to be set up to, as it said in a statement, “seek the elimination of unlawful export restrictions imposed by Indonesia.” The EU claims that the ban violates the 1994 rules of the General Agreement on Tariffs and Trade.
Widodo insists the export ban is necessary to generate more and better jobs, that without it, Indonesia will merely continue to be an exporter of raw commodities. Staying true to his moniker as a “man of the people” Widodo has on numerous occasions said the export ban is for the benefit of the public. “We have 270 million [people], they ask for jobs” he said in a firm tone, adding that he is working to develop value-added industries. “Industrial ‘downstreaming’ is very important for Indonesia to create jobs for my people” he said.
In December, he was scathing about opponents of the export ban in a speech at an event to commemorate the anniversary of a political party that supports him. Widodo went so far as to say that “it is OK to lose” the WTO nickel dispute with the EU.
Hardware vs. software
But while Widodo has followed through on his commitments of building infrastructure and industrial downstreaming, observers say he has not been as ambitious in the last of his three pillars — developing human capital.
“One thing we have to understand about President Jokowi is that he is overwhelmingly hardware-oriented, and minimally software-oriented,” former Trade Minister and Chairman of the Investment Coordinating Board Tom Lembong told Nikkei. “When he talks about building the foundations for the country, he’s primarily talking about hardware, meaning physical infrastructure. … But he’s much more indifferent about the software for the country.”
The need to develop better human resources is a problem that the government itself had pointed out; Bappenas said in its 2019 report that while access to education had improved, “the quality of education is still wanting compared with peer countries” and that “there is a high probability of [education] constraining economic growth in the future.” It is a problem that Widodo had also realized, at least initially, with the development of human capital one of the key promises for his second term.
Some measures have been put into place. In the interview, Widodo touched upon the Kampus Merdeka program, whereby university students can earn credits by doing internships at companies. The country also introduced a program called Kartu Indonesia Pintar right after Widodo took office in 2014, which helps low-income families pay school fees. The country also abolished national exams, accelerated by the pandemic, replacing them with competency assessments. The Prakerja program was hatched as a skill-development-cum-pandemic relief program for job seekers and those laid off to study online to help in their hunt for work.
Despite all that, Widodo “lacks seriousness” in developing the country’s human resources, said Indra Charismiadji, executive director at Center for Education Regulations and Development Analysis, an education think tank. “In infrastructure, Jokowi has a blueprint of what kind of things he wants to build. Does the development of superior human resources have a blueprint? None, so definitely not a priority,” he said.
The reason why the president has not pushed nearly as much on human resource development as he has with things like infrastructure, according to a former Widodo administration official, is because he is still very much a businessman at heart, and is not comfortable with taking steps for which the return on investment is hard to measure.
The former official added: “He loves to carry everything to extremes. If some infrastructure is good, then more infrastructure must be better, unlimited infrastructure must be the best. … Water for your body is necessary. More water into your body is probably healthier. Too much water into your body is called drowning.”
Third time’s the charm
Widodo has often said that the goal for Indonesia is to reach developed country status and become one of the world’s five largest economies by 2045. “Many achievements under Jokowi’s leadership have been made” to achieve that, said Wasisto Raharjo Jati, researcher at the Jakarta-based Research Center for Politics-National Agency for Research and Innovation. “Massive infrastructure building… didn’t happen in the previous president’s tenure,” he said. “Previous presidents didn’t have the same policies as Jokowi.”
The biggest challenge for Widodo, Jati said, is “the classic problem” in Indonesian politics of a lack of policy continuity between different presidents.
“[Previous presidents] tend to come from different political parties and they have different ideologies to build the nation. [New presidents] often will change the current plans according to their ideology and [political] platform,” he said. “This may become a big risk to Jokowi’s legacy because many huge projects… may be reversed when his successor [takes over].”
The presidency is limited to two five-year terms by the constitution, and while other political elites may be able to wield their influence through their patronage and family ties, Widodo is not in such a position. After he leaves office, he returns to being merely a single member of the Indonesian Democratic Party of Struggle, a party chaired by Megawati Sukarnoputri, former president and the daughter of the country’s first president, Sukarno. Many believe her daughter Puan Maharani, current speaker of the House, may run for the presidency.
However, as his term approaches its end, there has been constant speculation that Widodo is trying to forge himself a position that can have continued influence on politics.
That speculation started emerging in 2020, when Gibran Rakabuming Raka, Widodo’s oldest son, and Bobby Nasution, the president’s son-in-law, ran in the mayoral elections in Solo and Medan, respectively, and won. The former was especially noticeable, as Solo mayor is the position that propelled Widodo into his political ascendancy.
The president has denied any speculation of building a “Widodo dynasty,” but having his son and son-in-law in major mayoral roles may allow him to remain influential. Just over a year into his role as Solo mayor, Gibran is already being touted to run in the 2024 Jakarta gubernatorial election, tracing his father’s footsteps even further.
In addition, there has been speculation for some time that Jokowi might seek to change the constitution and run for a third term beyond the end of his second and final five-year term in 2024. Peter Mumford, practice head of South and Southeast Asia at Eurasia Group, said the reasons are largely due to Widodo’s continuing popularity, broad political coalition, and desire to make further progress on his policy agenda, including the new capital city.
An alternative suggestion of delaying the 2024 election is relatively new, he said, and has been floated as another option for keeping Jokowi in power longer, “for similar reasons plus sense of ‘lost time’ during the pandemic” said Mumford. “Some politicians also fear that they will have less influence under the next administration, so stand to benefit if Jokowi stays in power longer” he added.
In January, the government, the parliament and the General Elections Commission agreed on the date of the next presidential election in 2024, seemingly quashing such a possibility. But since then, as many as four leaders of political parties in Widodo’s ruling coalition have floated ideas of postponing the election, including Airlangga Hartarto, coordinating minister for economic affairs and the chair of Golkar, the second-largest faction in parliament. “We capture the aspiration about the desire for a sustainable policy and there is also the aspiration that the same policy can continue… we will discuss this aspiration with other political party leaders,” he said in February.
Widodo seems to understand that staying in power for an extended period could spark a constitutional crisis. He has previously tried to distance himself from any talk of a third term, referring to extending his rule as “a slap in the face,” but has also said everyone in a democracy is entitled to an opinion.
“I am a president that is elected through a democratic system. [I] must uphold the 1945 Constitution,” he said, when Nikkei asked him on March 8 whether 10 years is enough to achieve everything he wants. “The constitution mandated a maximum two periods of presidential term. I will always uphold the constitution,” he said firmly.
It’s a line that he has often repeated. However, “it seems he is at least open to the idea [of an extended term], even if it was perhaps not his idea initially,” said Mumford of Eurasia Group. He cites close associates such as Coordinating Minister of Maritime Affairs and Investment Luhut Pandjaitan as well as Airlangga who have suggested extending his time in office.
“Jokowi is likely gauging public and broader political reaction. Ultimately though it is up to the party chairs to decide, and so the position of Indonesian Democratic Party of Struggle and Gerindra [Party, holding the third largest seat in parliament] will be key. If they oppose changing the constitution then it is unlikely to happen” said Mumford.
Pandjaitan recently appeared on a YouTube video hosted by popular Indonesian celebrity Deddy Corbuzier, suggesting that Widodo’s “obeying the constitution” message can have different meanings under different circumstances.
“It is clear that the current constitution has two term [limits], he obeys two terms. But if suddenly someone says that the [public] want to make [Widodo run for a third term] and the House of Representatives is proceeding [with a constitutional amendment], political parties are proceeding… under the circumstances that the [election] can be postponed for one day or one year, or two years, or three years. That’s perfectly fine,” he said in a video posted on March 11. “It’s the people’s voice… if the people’s voice is big, then the House of Representatives or the political parties must listen to it.”
Additional reporting from Bobby Nugroho and Ismi Damayanti in Jakarta
This article first appeared in Nikkei Asia on Wednesday MARCH 23, 2022
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https://ourindonesiatoday.com/unfinished-business-indonesias-jokowi-still-has-lots-to-do/ Unfinished business: Indonesia’s Jokowi still has lots to do