Indonesian President Joko Widodo is pushing to speed up infrastructure investment after pledging to build roads, railways and ports to support growth.
He is hampered by one of the weakest tax takes in the Association of Southeast Asian Nations and a fiscal deficit that is dangerously close to Indonesia’s ceiling of 3 per cent of gross domestic product.
Disappointing tax collection, exacerbated by weak commodity prices, has been a significant factor in the deterioration of Indonesia’s public finances. Infrastructure investment, meanwhile, has trailed economic expansion since the Asian financial crisis in 1997-98, resulting in expensive business disruption and high logistical costs. Read more
By Hugo Brennan, Verisk Maplecroft
When the Association of Southeast Asian Nations (ASEAN) launches its economic integration project in December this year, it could provide the region with the impetus to become a key emerging market powerhouse. However, the 10 country grouping needs to overcome several significant hurdles if the proposed ASEAN Economic Community (AEC) is to succeed in freeing up trade and commerce between member states.
Chief among these is ASEAN’s institutional weakness, which is hampering efforts to bring together diverging national interests and counteract economic protectionist sentiment in key members, such as Indonesia. Many countries in the bloc also face difficult political realities on the domestic front which have the potential to divert attention away from the goal of integration. The success of the AEC will hinge on these factors, but whether it prospers or flounders, foreign businesses in the region will face a changing investment landscape that they need to be prepared for. Read more
By Maarten-Jan Bakkum, ING Investment Management
Few emerging economies have been under so much pressure lately as Indonesia. Since 2011, the terms of trade of the country have deteriorated sharply. This came as a result of the Chinese slowdown and the drop in coal, palm oil and rubber prices. After having enjoyed ten years of rising commodity prices, the Indonesian economy is now suffering from price declines of its main export products.
This has pushed local incomes down, with a negative impact on consumption and bank deposit growth. And it has led to a sharp correction in fixed investment growth, because of uncertain commodity demand and tighter financial conditions, partly linked to the widening current account deficit. Read more
Few, if any, Indonesians have heard of Gerald Ratner, the former British jewellery chain executive who became notorious for joking that his company’s products were “total crap” and then seeing sales nosedive.
But, in Ignasius Jonan, the head of the state-owned national rail company, Kereta Api Indonesia, they seem to have their own version of Ratner.
When asked why the trains are so crowded, he has a simple answer: you get what you pay for. Read more
Tough-talking former general Prabowo Subianto has put nationalist rhetoric at the heart of his powerful presidential campaign.
But one of his communication advisers is Rob Allyn, an American political consultant has who worked for George W. Bush and Mexico’s Vicente Fox among many others.
Supporters of Subianto’s rival Joko Widodo, the Jakarta governor, have claimed that Allyn is linked to a widely circulated smear campaign that has falsely accused him of being a Communist, ethnically Chinese and not a Muslim. Read more
If ever the phrase “it was the best of times, it was the worst of times” could be applied to Indonesia, it would be to President Yudhoyono’s ten years in power from 2004-2014. Arguably, his first term was the best five-year period of economic reform and revitalisation in the history of the country, while his second term was possibly the worst.
As Indonesia, Asia’s fifth-largest economy, speed-walks towards presidential elections on July 9, it’s probably time now to start looking beyond the elections. What kind of economic-reform program could the newly-elected president pursue to re-ignite our sharply slowing economy?
As it turns out, President Yudhoyono’s first term in 2004-2009 showcases what can be accomplished in Indonesia, given enough political will, and given enough desire to execute and implement. Here’s a sampling of bold, determined and successful reforms from 2004-2009. Read more
Tracking Joko Widodo, the narrow front-runner in Indonesia’s presidential election, is not an easy task, as the FT found out when it trailed him in East Java at the weekend.
The schedule constantly changes, he turns up for events hours late and keeping up with his entourage’s long convoy of cars requires bouts of death-defying acceleration through busy city streets.
The perils of following the Jakarta governor on the stump underline the weaknesses of his campaign, which has lost a 30 percentage point poll lead over the past three months. Read more
For a frontrunner whose campaign has been floundering, the first of Indonesia’s televised presidential debates did not start well on Monday night.
Small-town mayor turned political superstar Joko Widodo had left a large piece of notepaper poking prominently out of his suit as the candidates sang the national anthem.
To supporters of his rival, former general Prabowo Subianto, the wardrobe malfunction underlined their view that Widodo, now the governor of Jakarta, is an uncertain and inexperienced leader, not ready for the highest office. Read more
Unilever boasts that the mission of its Wall’s ice cream brand is “to bring more smiles to more people”.
But the consumer goods giant had rather the opposite effect on Tri Risma Harini, the indomitable mayor of Surabaya, after its latest marketing push in Indonesia’s booming second city went awry on Sunday. Read more
While the “quick count” results from Wednesday’s five-yearly legislative election are only preliminary, it seems clear that the Indonesian Democratic Party-Struggle (PDI-P) has failed to fully capitalise on the popularity of its presidential candidate, Joko Widodo.
Having named Widodo, the highly regarded Jakarta governor, as its presidential candidate in March, PDI-P was targeting at least 27 per cent of the vote for the 560-member House of Representatives (DPR). But initial results showed that it secured 19 per cent, in spite of coming first.
While Joko Widodo, the wildly popular governor of Jakarta, just about managed to restrain his euphoria when he was finally named as his party’s presidential candidate on Friday, investors were not so coy.
The Jakarta stock exchange jumped by three percent on Friday, its biggest one-day gain for six months, to reach a nine-month high, while the once-troubled rupiah has strengthened by 1.3 per cent against the US dollar since then. Read more
Amid the feverish speculation over whether Joko Widodo will run for president of Indonesia, it is right to ask what he has achieved in just over a year as the governor of Jakarta.
Walking through the anarchic streets of Jakarta, while avoiding open sewers and choking on the traffic fumes, it does not seem that much has changed. But as Widodo – who is universally known as Jokowi – told the FT in an interview, there is much to do after years of neglect. Read more
Nothing lasts forever, not even the Federal Reserves’ QE programme. And when it ends, emerging markets will have a new normal to contend with. Time to get ready.
Indonesia is hoping robust investment and the completion of much-delayed infrastructure projects will enable it to contend with the new “basic economic parameters” that will be required once the Fed starts tapering its asset purchases, the country’s vice-president (pictured above) said in an interview on Thursday. Read more
Kevin Rudd has managed to get something out of his talks with Indonesian President Yudhoyono. It’s not a condemnation of Tony Abbott’s “send back the boats” pledge campaign but it’s something.
Yudhoyono has decided to hold a regional summit to explore ways of dealing with asylum seekers. Unsurprisingly Rudd has welcomed the move. Read more
Kevin Rudd, Australia’s new prime minister, likes hobnobbing with heads of state on the world stage so much that during his first stint as premier he was dubbed Kevin 747.
Ahead of his trip to Indonesia this week for an annual bilateral leaders’ meeting, however, Rudd has been keen to dampen expectations of any deals or agreements, particularly on the thorny issue of border security. Read more
With air pollution in Singapore sinking to the worst level ever recorded because of pervasive forest fires in the Indonesian island of Sumatra, the blame game is in full swing.
Vivian Balakrishnan, Singapore‘s environment minister, has called for “urgent and definitive action” by Indonesia, saying that “Singaporeans have lost patience, and are understandably angry, distressed and concerned”. But with accusations flying, who is really at fault? Read more
Around two-thirds of adult men smoke in Indonesia, one of the world’s largest and least regulated tobacco markets. The government in Jakarta has tried to introduce legislation to restrict advertising but the proposals have been watered down after industry lobbying. The FT’s Ben Bland talks to smokers, lobbyists and health campaigners about why smoking is still so popular.
You’re attacked as a lame duck president, nearing the end of your second and final term. Your political party is mired in corruption scandals and infighting. And your government is under fire over a growing list of policy missteps. So what do you do to salvage your reputation? Join Twitter of course.
Susilo Bambang Yudhoyono, the Indonesian president universally known as SBY, surprised many when he took the plunge into the back-biting world of social media on Saturday. Read more
It’s bad news for consumers and the government but good news for traders (and vampires). Indonesia is suffering from a garlic shortage and prices have skyrocketed as a result, up by an average of 31 per cent in February alone.
Indonesians like to eat garlic and the surge in prices, which contributed to higher than expected inflation last month, will make life particularly tough for the nearly half of Indonesian’s 240m people who live on less than two dollars a day. Read more