Jakarta. Prabowo Subianto and Joko Widodo are set for a second presidential debate this Sunday when they will highlight their views on the economy and welfare policies.
Many expect the second encounter, which will be broadcast live nationally, to continue from where they left off in their first debate, with both candidates further exchanging hard blows.
Similarities
A considerable number of similarities exist between Prabowo and Joko’s proposed economic policies.
Both extol the virtues of nationalism and are critical of what they perceive as Indonesia’s “excessive dependence” on foreign capital, although they welcome and are not against foreign investments.
Both have vowed to retain the current government’s ban on raw mineral exports, while gradually reducing the incumbent government’s fuel subsidies that has cost the state budget a hefty $20 billion a year.
Prabowo and Joko have also expressed a mutual keenness to improve Indonesia’s food and agricultural security.
Together, the presidential hopefuls have seasoned economic experts on their sides. While Prabowo can tap into the expertise of Hatta Rajasa, who was the former coordinating minister for the economy, Joko is able to gain valuable insight from running mate Jusuf Kalla, a former vice president and minister of trade.
Yet, despite these superficial similarities, Prabowo and Joko also have several strikingly different emphases in their future plans for the country’s economy.
For one, Prabowo’s plans are more ambitious than Joko’s in terms financing, as if the former is attempting to top the latter by going one step further. Regarding the country’s infrastructure, for example, Joko promised to build 2,000 kilometers of new roads, while Prabowo vowed to complete 3,000 kilometers.
Prabowo: ambitious or risky?
In his plans, Prabowo focused more on infrastructure spending with inclinations toward embarking on “massive projects” that will take up some $60 billion a year.
Prabowo’s brother and economic adviser Hashim Djojohadikusumo, has said he’s fully aware of allegations calling the ticket’s plans “rather unrealistic,” and many have questioned him on how Prabowo and his backers plan to finance such excessive spending.
Still, he refuted the claims labeling his brother’s vision unfeasible, saying the proposed economic plans will get the funding they require through improved tax revenue and loans from the capital market.
As for improved tax revenue, Prabowo is targeting an extra $300 billion over the next five years.
Hashim argued that Indonesia has “one of the lowest tax collection rates in the world,” amounting only to 11.7 percent of the gross domestic product. By contrast, neighboring Thailand’s tax collection rate stands at 17 percent of its GDP, he said.
Indonesia, therefore, has great potential to boost its tax revenue if government officials operate its tax system efficiently and ensure that everyone pays taxes accordingly, he added.
With that in mind, Prabowo pledges to clear the country’s tax system of corruption should he be elected president. His first step would be to ensure that each citizen receives a tax-registration number.
“Not even an ojek [motorcycle taxi] driver will be exempt,” Hashim said, adding that the added income from this improved tax revenue will then be used to finance infrastructure projects.
When questioned about obtaining external loans, Hashim said Indonesia was able to afford to borrow more, citing the country’s current “low” public debt, which amounts to roughly 28 percent to 35 percent of GDP and, therefore, considered “under-leveraged” when compared to that of Malaysia’s figure of 63 percent of GDP.
Nevertheless, some analysts remain incredulous about Prabowo’s plans.
“Hoping to finance massive projects from extra tax revenue does not seem realistic to me,” said Benjamin Haratua Siahaan, an investment manager and head of fixed income at Panin Asset Managemen.
Benjamin added that he is also doubtful of Prabowo’s plan to clean up Indonesia’s tax system.
“If you look at the political parties that are a part of Prabowo’s coalition, all of them have been involved in corruption cases,” he pointed out.
Other analysts believe Prabowo would be making a risky move by piling more debts on Indonesia’s shoulders.
A Bloomberg News report released on Friday showed that despite a lower debt-to-GDP ratio than neighboring countries, Indonesia is “10 times more likely to default compared to Malaysia or the Philippines.”
Indonesia has a 0.5 percent chance of defaulting within a year, according to the report, which suggests the move of taking on more debt is a markedly risky move.
Gundy Cahyadi, an economist at DBS in Singapore, said in a June 10 interview to Bloomberg News that Indonesia “shouldn’t take on more leverage just because it can.”
Joko: bureaucratic reforms?
Meanwhile, Joko’s plans put significantly more emphasis on internal restructuring, compared to those of his rival.
Joko insists on boosting Indonesia’s economy by embarking on bureaucratic reforms that would ease the process of doing business, which he mentioned in both his campaign trails and his published political manifesto.
In this respect, it becomes evident that Prabowo is placing more emphasis on external improvements — such as infrastructure — while Joko is more concerned about internal matters.
The Jakarta governor’s commitment to improve the “ease of doing business” has met the approval of investors and business players who have long lamented Indonesia’s inefficient bureaucracy.
At a meeting with the Jakarta Foreign Correspondents Club on Wednesday, Anies Baswedan, the Joko-Kalla ticket’s official spokesperson, said Joko’s “political will to bring about bureaucratic reform is certainly bigger [than Prabowo’s].”
Joko has years of experience as an administrator under his belt; first as the mayor of Solo, then as governor of Jakarta — an edge his rival does not have.
As Jakarta’s chief, Joko has been known for firing a string of senior officials he believed were blocking his efforts to reform the administration’s bureaucracy.
Joko’s inclinations to create business-friendly policies, such as the promise of a one-door policy for the issuance of business permits, have won him market sentiment.
When Joko announced his candidacy on March 14, the Jakarta Composite Index rose to by staggering 3.2 percent, a one-day rise that was unprecedented for six months.
On the other hand, when results of the legislative election of April 9 showed Joko’s party failed to secure enough votes to nominate a presidential candidate on its own, Indonesian stocks took a drastic dip, with a decline of more than 3 percent.
However, not everyone is optimistic that Joko can bring about bureaucratic reform on the national level.
During the meeting on Wednesday, Anies was asked how Joko plans to deliver far-reaching bureaucratic reforms, given that he is not the chairman of his own political party and is answerable to PDI-P chairwoman Megawati Soekarnoputri, who herself is a member of Indonesia’s political old guard.
In addition, with the presence of other former New Order acolytes, such as retired generals Wiranto and Hendropriyono in his coalition, Joko can hardly fire anyone as easily as he has in Jakarta should he be elected president.
Anies admitted there is some weight to that concern.
“With regard to party reform, that could be an issue,” he said, though countered that Joko’s position in the PDI-P would not significantly affect his plan to make necessary reformations.
In the same vein, Purbaya Yudhi Sadewa, head of economic research at Danareksa Research Institute, told the Jakarta Globe that while Joko can possibly restructure certain areas of Indonesia’s bureaucracy, it will be difficult for him to change “core” areas within the system, where his action might go directly against Megawati’s interests.
“Megawati will not act so long as his action does not interfere with her concerns,” he said. “Jokowi would have to be very bold indeed to embark on a bureaucratic reform of that scale.”
Purbaya highlighted that such a change is much needed in Indonesia for the sake of its own economy.
“Bureaucratic reform is very important, because bureaucratic inefficiencies have always been a hindrance to businesses in Indonesia,” he said.
While Joko’s promise to bring about bureaucratic reform will undoubtedly be positive for Indonesia’s economy by boosting productivity and efficiency, to what extent he would be able to deliver that, however, is subject to debate.
While acknowledging Prabowo’s more detailed agenda, Anies said Joko is content with campaigning for relatively broader platforms, which include welfare programs called “Indonesia Sehat” (“Healthy Indonesia”) and “Indonesia Pintar” (“Bright Indonesia”), which aim to provide improved access to health care and a free, 12-year education for children respectively.
“The people trust Joko enough,” Anies simply said.
With the Indonesian economy growing at its lowest rate since 2009, and April exports experiencing a 5.9 percent drop from the month before, the country’s next president — whoever he may be — stands to face a grueling road up ahead.
By Josua Gantan on 11:24 pm Jun 13, 2014
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