Economy
From The Report: Indonesia 2015
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Early moves made by the government of the new president, Joko Widodo, appear to be helping the economy considerably, especially on the FDI side. With the application of the right policies, the country could return to growth above 6%, and perhaps eventually reach the 7% target set by the new president. Indonesia is working off a sound economic base. The decline in GDP growth has been stopped, and the country is starting to make the transition from a consumption- and export-dependent economy to one that is more driven by investment, manufacturing and perhaps even the export of finished products. Risks remain, particularly in terms of overly aggressive policies on the one hand and implementation issues and protectionism on the other. If the right balance can be struck and the government’s plans can be translated into tangible projects, many see the possibility for growth to return to levels that are higher than regional and global averages.

This chapter contains interviews with Bambang Brodjonegoro, Minister of Finance; and Basuki “Ahok” Purnama, Governor of Jakarta.

Articles from this Chapter

Overview

Restoring investor confidence in Indonesia
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Indonesia’s GDP growth rate has been slowing for a number of years, falling from 6.5% in 2011 to 5% in 2014 and 4.7% in first-quarter 2015 – the lowest rate since 2009. From third-quarter 2014 to fourth-quarter 2014 the economy contracted 2%, and then in January 2015 the country experienced deflation of 0.2%, according to Bank Indonesia (BI). Foreign direct investment (FDI) on a committed basis grew by 13.5% in 2014, down from 22.4% the year before. Nevertheless, the economy is seen to be doing…

Interview

Bambang Brodjonegoro, Minister of Finance: Interview
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Interview:Bambang Brodjonegoro How will the government prioritise the reallocation of savings from the fuel subsidies cut to address the country’s economic weaknesses? BAMBANG BRODJONEGORO: Savings from the new subsidy scheme will be allocated to infrastructure development, particularly basic infrastructure promoting food security, energy security and connectivity. Indonesia is the largest archipelago in the world and we must utilise our maritime transport potential. We need to improve…

Analysis

Indonesia building an industrial base
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Indonesia is currently in the process of transforming from a resources- and consumption-based economy to a more manufacturing- and investment-oriented one, working to build an industrial base that will allow it to reduce its dependence on imports and keep more value within the economy. It is a vital transition, one that recognises the new realities of the global economy and at the same time sets the country up for long-term, sustainable growth. If Indonesia successfully adjusts and realigns the economy,…

Interview

Basuki “Ahok” Purnama, Governor of Jakarta: Interview
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Interview:Basuki “Ahok” Purnama How will you address concerns about bureaucratic inefficiencies hampering Jakarta’s development, especially with regards to infrastructure projects? BASUKI AHOK: If Indonesia is to become more effective and efficient in budget spending, then we will have to improve bureaucratic procedures on all levels. Jakarta needs to be a role model for the rest of the country. So far, we have eliminated Rp2.3trn ($190m) from fees and red tape related to infrastructure…

Analysis

Subsidy cuts create fiscal space to boost infrastructure spending in Indonesia
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In 2014 Indonesia elected a new president, Joko Widodo – a development of significant interest to both national and regional stakeholders, as well as global investors and economists. A self-made businessman whose background and policies have resonated with Indonesians, Widodo ran on a platform that included cracking down on corruption, improving the quality of life outside the country’s major urban centres, boosting foreign direct investment (FDI) and increasing government expenditure on critical…

Analysis

Indonesia’s prudent policies get a helping hand from global markets
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In a momentous development for the country, the newly elected president, Joko Widodo, followed through on campaign promises to do away with fuel subsidies in Indonesia. In addition to a 30% petrol price hike unveiled in November 2014, the new administration announced it would eliminate the majority of support beginning in 2015, ending a 48-year-old programme that cost the government billions of dollars each year. Removing subsidies to make room for infrastructure development has been a priority…

Analysis

Education seen as the key to more skilled workers and wealthier consumers in Indonesia
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The burgeoning middle class has been a crucial growth driver for Indonesia over the past decade, helping mitigate investment risks and solidifying the foundation of economic growth. Expansion of this demographic is expected to continue, driving urbanisation and expanding a consumer class that will bolster growth across a range of sectors. However, incomes are still comparatively low in Indonesia, and the middle class remains highly vulnerable to price shocks, a sluggish global economy and natural…

Analysis

Efficient tax collection high on the agenda in Indonesia
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More efficient tax collection is a top priority for Indonesia, with improved information sharing with foreign countries among the initiatives it has rolled out in service of this goal. The country has historically struggled to achieve its annual tax collection targets, despite the valuable revenue stream they represent, although recent moves by newly elected President Joko Widodo indicate the situation may soon change. The new administration has set its sights high for tax collection in 2015, implementing…

Analysis

Indonesia’s remittance services improving
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Though not as significant as in the Philippines, remittances to Indonesia from overseas foreign workers (OFWs) are crucial for thousands of families in the country. Remittances have shown strong growth in recent years, providing valuable opportunities for Indonesia’s sizeable excess labour force. Strong recent growth and new banking regulations have been a boon to the industry, leading to the proliferation of a host of new remittance service options. With workers overseas faced with the cost burden…

Analysis

Infrastructure investment works to keep pace with Indonesia’s rapid urbanisation
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The country’s urban areas have grown rapidly in recent decades, with Jakarta’s population more than doubling since the 1970s, driven by an influx of rural migrants seeking better opportunities. This growth has not been without consequences, as municipal governments struggle to absorb new residents, and infrastructure and employment gaps pose significant challenges to smooth urban growth. This trend is likely to continue, as some 30 Indonesian cities are expected to see significant population…