Indonesia's Jokowi finds traction after tumultuous first year

FEB 15, 20167:35 AM

[JAKARTA] Shoppers clamber atop slippery fish stalls in a town in rural Indonesia to catch a glimpse of President Joko Widodo and jostle to kiss his hand, a sign the star power that swept him to office a year-and-half ago is intact.

Until recently, the same couldn't be said for his relations with the parliament, or even his own party.

While challenges remain, that now looks to be changing as the former furniture exporter gets a better grip on national politics and the once-majority opposition coalition crumbles. Set against neighbours Malaysia and Thailand, Indonesia looks relatively calm.

"Our relationship with all political parties is good, there is no problem," the president, better known as Jokowi, told Bloomberg Television after stopping off at the market and visiting a toll road project on Sumatra island last week. "Our relationship with the parliament is also very good." He put his initial woes down to "communication" issues.

The shift, which has been accompanied by an improvement in macroeconomic indicators and positive polling numbers, is crucial.

Mr Joko needs political stability and smoother relations with parliament for the rest of his five-year term to reach his goal of lifting economic growth to 7 per cent by 2019. He's planning a massive increase in public spending on infrastructure and seeking greater foreign investment.

DIVISIVE ELECTION

Mr Joko took office in October 2014 after the most divisive election in the country's history saw him beat former Suharto- era general Prabowo Subianto. Under Indonesia's electoral system, Mr Prabowo's coalition of parties occupied most of the seats in the parliament as well as its leadership roles, making it harder for Mr Joko to govern effectively.

He also lacked experience on a national level and didn't have well established networks within the major political parties in order to get things done. Before becoming president he was governor of Jakarta and the mayor of Solo.

Mr Joko found that out the hard way with early missteps and public spats within his coalition that caused unease among investors.

He drew criticism for some policies: The country's manpower ministry made it harder for foreign professionals to get work permits, while the trade ministry issued protectionist regulations.

Still, patronage and money, rather than policy or ideology, drive Indonesian politics so shifting allegiance is possible. Gradually, most opposition parties have expressed support for Mr Joko, most recently the Golkar party, giving government backers a majority in parliament.

'LEARNT FAST'

"Jokowi has good reason to be confident because he has been able to assemble broad political support," said Djayadi Hanan, a politics professor at Paramadina University in Jakarta. "He learnt fast. He has the backing of the parliament and the public. He should be optimistic of stability until at least mid 2018 when the elections begin approaching."

The president has an approval rating of 67 per cent, up from 41 per cent in June 2015, according to a survey carried out last month by Indikator Politik. Thirty seven per cent said they would vote for him in 2019, with Mr Prabowo in second place with 15 per cent. Indikator Politik conducted personal interviews with 1,550 people.

PARTY TENSIONS

Market sentiment has also improved. So far this year the rupiah is Asia's third-best performer, driven by inflows into the bond market.

Mr Joko seems to have smoothed out ties with his own Indonesian Democratic Party of Struggle, or PDI-P, led by former President Megawati Soekarnoputri.

Tensions between them were exposed last year by a destabilising dispute over Mr Joko's choice of police chief. In August, he appointed Pramono Anung, the PDI-P's deputy secretary general, as his cabinet secretary, a move that gave the party closer access to Mr Joko and helped heal relations with Megawati, said Mr Hanan.

Still, parliament last year passed just three bills into law, the lowest total in at least the last five years, according to the Jakarta Post. The 560-seat body has prioritized the passage of 40 new laws or amendments this year.

A coming test of Mr Joko's ability to work with parliament will be whether he can push through a tax amnesty law projected to bring in an extra 60 trillion rupiah of revenue this year. It's possible some parties may seek concessions from the president in return for supporting the measure.

GROWTH TARGET

While the economy has held up, there are headwinds as Mr Joko targets growth of 5.3 per cent this year, up from 4.79 per cent last year, including the external environment. With little prospect of a pick up in commodity prices and the extent of the slowdown in the Chinese economy still unclear, the pace with which Mr Joko can push through domestic reforms will be key to reaching the growth goal.

Also on the agenda is a revision of anti-terrorism legislation to better deal with the threat posed by the emergence of the Islamic State.

Parliamentarians, including those from Mr Joko's party, are seeking revisions to the anti-corruption agency that critics say would leave the body, ranked in surveys the country's most respected institution, severely weakened. Failure to stop them risks hurting Mr Joko's reputation as a reformer.

'SHOW LEADERSHIP'

"Jokowi's stance on corruption will be put to the test," said Frank Feulner, a governance analyst and former adviser to the Indonesian parliament. "The question is whether the president will show leadership by vetoing the parliament's attempts or instead succumb to horse trading."

After the enthusiastic reception at the market, where the president and his staff bought squid, cockles and fish from vendors and gave school books to young children, the trip to the toll road showed progress on at least a small section of his infrastructure ambitions.

Given the morning's agenda, Mr Joko was asked if he was considering running again in 2019. The president laughed before an aide cut in, also smiling, to shut off the line of questioning, saying: "It's still too early to talk about that."

BLOOMBERG