Jokowi projects ambitious 5.5% growth next year

Indonesian President Joko Widodo indicated he was open to more private sector involvement, including foreign investment, to accelerate the development of large-scale projects such as bridges, ports and airports.
Indonesian President Joko Widodo indicated he was open to more private sector involvement, including foreign investment, to accelerate the development of large-scale projects such as bridges, ports and airports.PHOTO: REUTERS

Indonesian President also pledges more money for spending on infrastructure

In his first state of the nation address yesterday, Indonesia's President Joko Widodo projected an ambitious 5.5 per cent growth rate for the economy next year, buoyed by optimism of an improving global outlook.

He also pledged more money for infrastructure spending.

Mr Joko also indicated that he was open to more private sector involvement, including foreign investment, to accelerate the development of large-scale projects such as bridges, ports, toll roads, railways and airports, even in outlying areas of the sprawling archipelago.

"The global economic condition is projected to improve, leading to better performance of our trade, as well as increased demand for Indonesian products," said Mr Joko.

Next year will see 313.5 trillion rupiah (S$31 billion) set aside for infrastructure spending, or 15 per cent of the entire 2,121.3 trillion rupiah budget. Spending on infrastructure will be 8 per cent higher than this year's 290.5 trillion rupiah.

  • Speech highlights

  • 1 Indonesia’s gross domestic product is forecast to increase 5.5 per cent, with the rupiah getting stronger.
  • 2 Ministries and government agencies instructed to execute project tenders early so that projects can start next January.
  • 3 The roles of the private sector, state-owned enterprises and local administrations to be enhanced to accelerate infrastructure development.
  • 4 Illegal fishing ships to be sunk and ship-building industry to be beefed up as part of a plan to establish Indonesia as a maritime power.
  • 5 To work hard to wage war against corruption, acknowledging the existence of many problems that could hamper Indonesia’s development.
  • 6 Government agencies and political parties urged to work shoulder to shoulder and not be divided by political or short-term interests.
  • 7 Indonesians and media urged to refrain from sensationalising issues, launching harsh verbal attacks and spreading pessimism on political and economic issues that can erode investors’ confidence.

Mr Joko's address came just two days after he reshuffled his Cabinet to arrest plunging confidence in the government's ability to manage a sluggish economy. Half-year growth has been the slowest in six years.

The President, popularly known as Jokowi, is 10 months into his five-year term, and was elected amid high hopes that he would be able to push through with reform but has little to show so far for his efforts. His popularity is declining, with rising scepticism about his ability to cut through red-tape in the face of demands from his party, the Indonesian Democratic Party - Struggle (PDI-P).

Yesterday, he said he was aware of some these limitations and cited painful measures he has undertaken. These included the removal of fuel subsidies to channel funds towards infrastructure spending, and dropping underperforming Cabinet members.

In his speech, Mr Joko appeared to hint at what went wrong with the previous Cabinet by making a strong appeal for government agencies and political parties to work closely.

He said: "To overcome the issues this country is currently facing, we have to work shoulder to shoulder. We should not be divided by political or short-term interests.

"The erosion of a culture of mutual respect and tolerance in official institutions, such as law enforcement agencies, communities, media and political parties, is causing this country to be caught in a web of egos."

Addressing criticism about the slow progress of government spending, especially on development projects, Mr Joko instructed ministries and government agencies to execute their project tenders early so work can start by January next year.

CIMB Niaga's lead economist in Jakarta, Mr Winang Budoyo, said this was key to spurring growth in South-east Asia's largest economy.

"Indonesia must rely on infrastructure next year. It is good that the tender process is pushed forward. They should start doing tenders in November so that by January next year, projects can start," he added.

Mr Winang also said Mr Joko sent a positive signal for foreign investors. However, the Budget did not impress markets, with the rupiah trading 0.3 per cent down and the benchmark Jakarta stock index closing little changed.

The President also touched on building up Indonesia's self-reliance on food, and the national defence system in his speech yesterday.

A version of this article appeared in the print edition of The Straits Times on August 15, 2015, with the headline 'Jokowi projects ambitious 5.5% growth next year'. Print Edition | Subscribe