Suchergebnisse

This essay examines the extent to which Indonesia's 2018 budget will be able to address some of the key economic challenges the country faces.

At the start of his presidency, the then-newly elected President Joko 'Jokowi' Widodo promised to achieve seven percent annual growth within the next three years.1 Almost two years later, this target seems hard if not impossible to achieve amidst global economic uncertainties and a lacklustre domestic performance. The economy is now struggling to not fall below the five percent growth rate, a critical threshold for keeping Indonesia's 130 million workers gainfully employed. In fact, a five percent growth rate is actually barely sufficient in supporting Indonesia's ambition to eradicate extreme poverty. Around 11 percent of the total population are still living in poverty and mostly in rural areas.2 Moreover, Indonesia is suffering a huge income inequality. According to its Statistics Agency (BPS), the country's Gini coefficient, an indicator of income distribution, has worsened in recent years.3 In order to boost short-term growth, Indonesia relies on public sector spending, which is mainly directed towards infrastructure and social assistance programmes. However, given weaker-than-expected revenues in recent years, there is a risk that the government's fiscal capacity will be increasingly limited going forward.

`The Indonesian Parliament has approved the 2016 budget, which was prepared entirely by President Joko "Jokowi" Widodo's administration.2 Concern about declining growth since the end of the commodity boom in 2011 has prompted the government to increase public spending in order to maintain growth in the coming year. The new budget sets its economic growth target at 5.3 percent in 2016, up from 4.7 percent in 2015, which was the lowest level in a decade. Given that exports and investments are expected to remain subdued due to the weak global economy, public sector spending is expected to be the main driver of growth in the short term. Jokowi has commenced the construction of several key infrastructure projects, such as the building of roads, ports, dams, and power plants, across the archipelago. Moreover, to attract investments into the country, the government has introduced a series of economic packages aimed at cutting down the costs of doing business and at improving the business climate. Amidst continued global uncertainties and the weakened domestic economy, 2016 will be a challenging year for Indonesia. Last year, public spending failed to act as a growth catalyst. This year, however, the expectation that the public sector will deliver the needed boost to the economy is higher. This essay critically examines Indonesia's 2016 budget, and specifically discusses key components and new trends that are notable in it, as well as the key challenges faced by the Jokowi's administration in achieving its development targets.

Indonesia's parliament has approved a revised 2015 state budget with a significant shift in the spending allocation for infrastructure and subsidies.1 In doubling the capital expenditure, the revised budget clearly reflects the commitment of the new government to fix the economy's underlying infrastructure problems. Overall, the revised budget looks better targeted thanks to the elimination of the premium fuel subsidy and the significant increase in infrastructure spending. Getting the money is only the first step. The upcoming infrastructure projects are expected to pose serious challenges to the government. Within the next few months, the government has to design and execute a well-targeted investment priority, expedite the state budget realization for priority infrastructure projects, and attract private investors. Arguably the most challenging task of all is to supervise project implementation to minimise corruption and ensure the expected results.

Batam is the economic powerhouse of the Riau Islands (Kepulauan Riau or Kepri in short) Province, accounting for 65-70 per cent of Kepri's total GDP. Its population has increased from around 455,000 in 2000 to around 1.4 million in 2019, many of them young people moving into the industrial and service trade sectors from other parts of Indonesia. These internal migrants play an important role in the economy and in the process increase their political stakes in Batam. Nevertheless, Batam's politics is heavily influenced by the local ethnic Malay community (Carruthers 2018).

This brief will discuss some critical issues concerning the fiscal situation in Indonesia, focusing on government revenue and spending patterns before and during the pandemic. It will look at the ability of the government to fund the spending and the challenges it faces to maintain a budget deficit and a debt level that does not hurt its "investment grade" rating.

Unlike other populous democratic countries like India and the Philippines, Indonesia did not implement a full lockdown to control the COVID-19 pandemic. Arguably, the government was concerned about difficulties in imposing stringent lockdowns, which would have to be extended several times and which would be very costly for the country. From the beginning of the pandemic, there had been a contentious debate about whether a lockdown, which would cost government a lot of money, resources and even political risks, would make much difference in reducing infection numbers. Moreover, the government's awareness that it lacks the capacity where the healthcare system and the bureaucracy were concerned, forced it to implement a relaxed policy. Despite the government's claim that it has managed to 'flatten the curve' by early May, Indonesia has the highest number of COVID-19 fatalities in Asia, with a 6-7 percent death rate among total confirmed cases (Figure 1). Notwithstanding, the figures are perceived to be significantly underreported as the official data did not include deaths of patients suspected to have coronavirus and who were still awaiting tests. Certainly, many factors have been at play, but this reality indicates the country's lack of hard and soft public health infrastructure to deal with the crisis. This essay examines how the COVID-19 crisis has been exacerbated by the weakness in Indonesia's state capacity and the bureaucracy, especially in relation to public health governance and disaster response in general. It highlights the urgent need for Indonesia to revisit its state capacity in dealing with the current crisis and in preparing for the 'New Normal post-COVID-19' (New Normal, hereafter).

The COVID-19 containment and social restriction measures sent the Indonesian economy into a severe contraction of 5.32 per cent in Q2-2020, the first negative growth since 1999. Faced with a severe policy challenge to reconcile the conflicting imperatives of public health and economic sustenance, the government has loosened the restrictions on people movements. This in turn has elicited criticism that this could be premature, since infections have yet to peak. Micro, small, and medium enterprises (MSMEs) and the tourism sector have been badly hit. Around half of MSMEs have temporarily closed mostly due to a sharp reduction in demand and disruptions in the supply chain. Indonesia's Chamber of Commerce has estimated that the potential loss to the tourism sector will reach USD35 billion, if the dire situation continues until the end of this year.

Does Indonesia really need a high-speed train to connect Jakarta, its capital city, to Bandung, West Java's capital city? This question has been contentiously debated in the mass media since late September 2015, after the Indonesian government turned down a Japanese bid in favour of a Chinese one to build a 142-km long high-speed railway line connecting the two cities. Japan's proposal was officially rejected because of its condition that the project required a government guarantee. China's counter proposal did not seek Indonesian state funds, and its project would be a wholly private business deal, led by a consortium of state owned enterprises (SOEs) in both countries.

Sandiaga Uno, Indonesia's vice-presidential candidate paired with Prabowo Subianto, has framed the coming presidential election as a referendum on the Indonesian economy, and considers the main priorities to be: 1. job creation; 2. keeping prices stable; 3. maintaining strong and firm leadership in order to create a clean government; and 4. developing infrastructure through public-private partnerships.

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By any indicator, Indonesia, the fourth most populous nation on earth, is a development success story. Yet 20 years after a deep economic and political crisis, it is still in some respects an economy in transition. The country recovered from the 1997-98 crisis and navigated the path from authoritarian to democratic rule surprisingly quickly and smoothly. It survived the 2008-09 global financial crisis and the end of the China-driven commodity super boom in 2014 with little difficulty. It is now embarking on its fifth round of credible national elections in the democratic era. It is in the process of graduating to the upper middle-income ranks. But, as the 25 contributors to this comprehensive and compelling volume document, Indonesia also faces many daunting challenges -- how to achieve faster economic growth along with more attention to environment sustainability, how to achieve more equitable development outcomes, how to develop and nurture stronger institutional foundations, and much else.

For Indonesia, which is keen to accelerate its infrastructure development, Belt and Road Initiative (BRI) is seen as an opportunity to tap into China's huge financial resources and technological capability. There has however been no concrete BRI project agreed to between China and Indonesia so far. While China considers all projects, including infrastructure projects and economic interactions as part of BRI, Indonesia only considers those infrastructure projects initiated during the Xi Jinping period as BRI projects. Indonesia has offered several broad areas for cooperation under the BRI framework and carefully selected project locations to minimize political risk for the Joko Widodo government. But no agreements have been signed yet as China requires detailed project proposals from Indonesia, which it has apparently not received. What appears to hamper progress are four key issues: the perception of China's economic domination, the ethnic Chinese issue, the Natuna issue, and the mainland Chinese workers issue.

The relationship between the performance of Special Economic Zones (SEZs) and their governance is an under-researched topic. Despite their popularity as a development policy tool in developing countries, many SEZs fail to achieve their intended goals. A key factor determining the success of SEZs is their governance set-up. This article examines the designs and practices of governance in three SEZs in Indonesia—two tourism-oriented SEZs and one industry-oriented SEZ. Exploring the gap between the theoretical concept of "good governance" and the actual governance practices in SEZ development and operation, the article finds that current governance designs and practices neglect the importance of local contexts, which in turn results in suboptimal outcomes. We therefore suggest that the designs and practices for SEZ governance should be adjusted to reflect local socio-economic, cultural and political conditions. In other words, successful SEZ models should be based on a governance framework that needs to be both "good" and "proper". (Contemp Southeast Asia/GIGA)