Jakarta focussed on reforms to stimulate economy: Indonesian Finance Minister

Jakarta

EVEN while peering into a Zoom conference screen, Indonesian Finance Minister Sri Mulyani Indrawati exudes the same attitude she's had since first taking on the job over 15 years ago - having a sense of realism, and with plenty of confidence.

The 58-year-old economist - who returned to her old post in 2016 after a stint as managing director and chief operating officer of the World Bank in Washington - is under no illusions that the global economy and those of many Asian nations, including Indonesia, will be forever changed in a post-Covid world.

"It will not be business as usual," the Jakarta-based politician told The Business Times in an exclusive interview last Friday. "I firmly believe there will be changes in the way we work, the way business is conducted. There will be changes in the way people consume, and more awareness of climate change. This is going to be the new game for all countries."

Among other things, she noted upcoming changes to the global health industry, given the arrival of new Covid-19 vaccines in 2021.

"I believe this is going to shape the global economy and the region, as well as Indonesia," the minister said.

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But, according to her, change is not necessarily a bad thing, especially for South-east Asia's largest economy.

Dr Sri Mulyani said the government of President Joko Widodo is still optimistic that Indonesia's economy will grow between 4.5 and 5.3 per cent this year, with the possibility of landing at 5 per cent, as more of the population get their vaccines in the coming months.

This is the same level of economic growth that Indonesia has achieved in recent years, before the pandemic hit.

"The first quarter of this year was a little bit slow but we saw a pick-up in March. In April, we see the PMI (purchasing managers' index) growing at 53.2. Exports in March jumped 30.4 per cent. The momentum of growth is on the demand side," she pointed out.

While the Indonesian government, along with national and regional parliaments, have bought into state policies to mitigate Covid-19, "reform has become one of the most frequent menu in the Cabinet as well as (is) being discussed in Parliament", said Dr Sri Mulyani.

One of the Widodo administration's major successes was the passage of what is known as the Omnibus Law last October, which eases stringent business regulations for both domestic and foreign companies in hopes of increasing productivity, jobs and attracting new foreign direct investment.

Regulations continue to be drafted and approved. As of February, 44 had been completed but numerous others remain, ranging from the national sovereign fund, to taxation, local governments, the environment, small and medium-sized enterprises, labour and special economic zones.

Dr Sri Mulyani cautioned, however, that Asian businesses are still cautious about entering new ventures due to their own internal financial issues including non-performing loans that must be restructured.

This raises questions about how firms will continue to borrow in such a situation to bounce back from the pandemic.

"What we are doing is trying to lessen this risk by providing some guarantees, in this case providing subsidies for the interest rate in order for us to be able to create an environment for these investment activities," said Dr Sri Mulyani, who also heads the board that oversees the new Indonesia Investment Authority sovereign wealth fund.

"There is no investment without a source of financing," she added.

If new foreign investments are to come in and be successful, Indonesia must decide how to reopen its borders at some point, which have been closed since last year to foreign visitors due to Covid-19. It will need the help of other nations, though.

"It does not only depend on Indonesia, but it depends on which countries already have the vaccination. This will be a very dynamic development for 2021," the minister said.

She added that Indonesia continues to acquire more vaccines with a target to reach herd immunity by the fourth quarter of 2021.

As of Saturday, about 10.8 million have gone for their jabs, with 5.9 million of them already receiving their second dose.

Indonesia is the world's largest archipelago nation, with its 250 million people spread across thousands of islands. Experts say about 180 million people need to be vaccinated in order to achieve herd immunity.

While she said Indonesia would return to a level of normality this year, an imminent key test will be the last week of the current holy month of Ramadan and the following Eid al-Fitr celebrations, when tens of millions of Indonesians across the country will travel to their home villages or visit nearby friends and relatives.

Last Saturday, Indonesia added 5,041 confirmed cases, bringing the tally to date to 1,599,763. Another 132 people died from the virus, bringing the death toll to 43,328.

Dr Sri Mulyani also commented on relations between Indonesia and close neighbour Singapore.

"Singapore is also suffering (from the pandemic), because they are positioned as a hub. Regional and global activities have slowed down or even stopped. But I think they will recover in 2021," she said.

"Indonesia-Singapore relations continue to be very strong and important. Singapore continues to be an important hub, such as for digital companies based in Indonesia. (Our) investment (in Singapore) will be in areas where we see potential."

Turning back to Indonesia's economy, Dr Sri Mulyani noted that it remains business as usual for massive ongoing infrastructure projects including light rail systems, toll roads and ports, as well as basic ones such as water and sanitation, and electricity.

"We are learning from what happened during the Asian financial crisis in 1997, when we faced the kind of shock that we are seeing today," she explained.

"But what the government has decided is we will not stop these projects. We may slow down, but stopping them will create a much-bigger cost. Many projects will continue but at a slower pace, while the timelines of other projects will be stretched."