Jokowi vows sweeping reforms in second term

Indonesia President Joko Widodo during an interview in his Jakarta office yesterday. He has pledged to quickly lower corporate taxes, ease stringent labour laws and lift curbs on foreign ownership in more industries.
Indonesia President Joko Widodo during an interview in his Jakarta office yesterday. He has pledged to quickly lower corporate taxes, ease stringent labour laws and lift curbs on foreign ownership in more industries.PHOTO: BLOOMBERG

He aims to boost growth to protect against risks from weakening global demand

JAKARTA • Indonesian President Joko Widodo has vowed to implement a wave of reforms to attract foreign investment as he looks to unleash the potential of South-east Asia's biggest economy during his second term in office.

In an interview at his Jakarta office yesterday, the President - commonly known as Jokowi - pledged to quickly lower corporate taxes, ease stringent labour laws and lift curbs on foreign ownership in more industries.

Emboldened by a landslide election win in April, the President insisted he had a mandate to push key reforms through Parliament.

"I know better the problems," Mr Joko said, adding that "many young people" would fill his Cabinet in a reshuffle in October. "Because this is my last term, I have no burden. I have nothing to lose."

Following a bitter election campaign that saw violent street protests, Mr Joko is pushing to bolster economic growth to protect against risks emanating from weakening global demand.

Lower taxes may help Indonesia compete with regional rivals, like Vietnam and Thailand, in luring companies seeking to relocate businesses from China as it spars with the United States on trade.

Indonesia's economy grew about 5 per cent in recent years, well short of the 7 per cent Mr Joko targeted ahead of his first term.

Already, projections for growth for this year and next year have been downgraded, presenting the President with an early test before he is sworn into office in October.

Mr Joko said he would improve worker skills, overhaul the bureaucracy, increase revenue and build infrastructure "faster" in the next five years.

EMBOLDENED BY LANDSLIDE WIN

I know better the problems... Because this is my last term, I have no burden. I have nothing to lose.

INDONESIAN PRESIDENT JOKO WIDODO, insisting he has a mandate to push key reforms through Parliament.

He will also widen the number of industries open to foreign investment, saying those in need of outside capital include petrochemicals, manufacturing and labour-intensive sectors like textiles, garments and footwear.

Mr Joko said he may seek Parliament's approval next month to lower the corporate tax rate to 20 per cent, starting in 2021.

Indonesia's corporate tax rate is 25 per cent, compared with a standard rate of 20 per cent for Thailand and Vietnam, and 17 per cent in Singapore. The country's top individual tax level is 30 per cent, more than the highest 22 per cent Singapore levies on its residents.

The President also stressed the need to overhaul the nation's labour laws, long criticised as an impediment to both foreign and domestic investment.

While Mr Joko was returned to office with an increased majority, the election aftermath saw the deadliest political violence in Jakarta in two decades after runner-up Prabowo Subianto's supporters took to the streets to protest.

Mr Joko has since sought to unite the country and reassure foreign investors, who were already sitting on the sidelines awaiting the outcome of a long presidential race that officially began back in September last year.

Yesterday, Mr Joko also dismissed concerns that political Islam was on the rise in Indonesia.

"Indonesia is moderate Islam, modern Islam, tolerant Islam," he said. "I'm not worried about that."

He touted his administration's efforts to cut the poverty rate and rein in inflation while also building new airports, toll roads and seaports.

His second term would see more investments in village infrastructure, like small roads and bridges, that could help farmers access markets, he said.

While the government still wanted growth rates of more than 7 per cent, external conditions made it difficult, he added.

An interest rate cut would not automatically boost growth even though it would stimulate private sector activity, he said.

"Now there is a trade war, low commodity prices, then global economic growth," Mr Joko said. "We must be realistic."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 13, 2019, with the headline 'Jokowi vows sweeping reforms in second term'. Print Edition | Subscribe