You are here

No more flip flops, warns Jokowi

[JAKARTA] The flip flops have to stop.That's the order handed down by Indonesian President Joko Widodo to ministers and top officials following several policy U-turns that are denting investor confidence in Southeast Asia's largest economy, said Sri Adiningsih, the head of the president's advisory board.

Better known as Jokowi, the Indonesian leader has struggled to govern effectively since he took office in October pledging to spur an economy growing at its slowest pace in more than five years. His government has announced and then scrapped policies including a language test for expats, a toll road tax, and a ban on government officials meeting in hotels.

"The president has said this shouldn't be happening any more," Ms Adiningsih said in an interview in her office next to the state palace on Tuesday, a day after meeting Jokowi. "They have to be comprehensive, so that when policies are launched they don't have to be taken apart and put back together, all of which raises questions of uncertainty."

Jokowi, a former furniture salesman, is under pressure to improve the government's performance by reshuffling his Cabinet, a mix of politicians from parties that supported his presidential bid and professional experts. Ministerial changes could come after the Eid al-Fitr holiday in mid-July, Luhut Panjaitan, the president's chief of staff, said in May.

"A change is needed with or without a reshuffle, in executing various existing programs and projects so that they can run more smoothly," Ms Adiningsih said. The possibility of choosing new people for the cabinet who are worse, incapable or not trusted by the market is an issue, she said.

Ms Adiningsih, a university economics lecturer and candidate for finance minister after Jokowi took office, highlighted tax as an area that had seen erratic policy making. The government is trying to lift tax revenues to fund projects to improve dilapidated infrastructure.

Jokowi approved a long-delayed plan to charge a 10 per cent tax on toll fees in order to generate at least 500 billion rupiah ($37 million) of state revenue, Coordinating Minister for Economic Affairs Sofyan Djalil said on March 5. A week later, Jokowi asked the finance ministry to shelve it because it clashed with a plan to increase toll road tariffs.

The country's Manpower Minister Hanif Dhakiri said in February he expected to implement a law this year requiring foreigners to pass an Indonesian language test to get a job, yet this was dropped after complaints from foreign companies.

Jokowi's most significant economic policy move, the curtailing of fuel subsidies to free up budget funds, is also being rowed back on as rebounding crude prices and a weakening rupiah are leading the government to avoid letting costs at the pump fully rise in line with the market.

Inflation is expected to exceed the central bank's target and reach 6.8 per cent this year, while 2015 growth is forecast to undershoot the government's goal and slow to 4.7 per cent, the World Bank said in a report on Wednesday. State revenue may end up 296 trillion rupiah short of the budget target, and the rupiah will depreciate further, it said.

"The flip flops are definitely not helping, at a time when sentiment on the economy is weak, and confidence on the government is waning," said Gundy Cahyadi, Singapore-based economist at DBS Group Holdings Ltd. "They are probably just another indication that there is room for improvement in policy coordination - one reason that may explain the disappointing pace of government spending this year."