April 21, 2015 / 10:05 PM / 2 years ago

Honeymoon over for Indonesian leader as U-turns erode authority

Indonesia's President Joko Widodo applauds as China's Premier Li Keqiang speaks during the Indonesia-China Economic Cooperation Forum at the Great Hall of the People on March 27, 2015 in Beijing, China.Feng Li/Pool

DENPASAR, Indonesia (Reuters) - When Indonesian President Joko Widodo wanted to push this year's budget through the opposition-dominated parliament, he left it to his advisers to hash out a deal with lawmakers.

Among the sweeteners his aides offered parliament members was to roughly double their allowance for down payments on new cars to $15,000.

The plan backfired.

Amid public fury over the concession in a country where graft is pervasive, the aides scrambled to reverse it, one of several policy flip-flops that have eroded support for Widodo since he took office six months ago.

His meteoric rise from furniture businessman to president of the world's third-largest democracy, and the first to come from outside the political or military establishment, was widely seen as a watershed moment for Indonesia.

Here was a leader, his supporters said, who would root out corruption, promote people based on merit rather than connections and create an environment where the stalling economy could reignite and investment flourish.

But in interviews with Reuters, government officials and palace insiders portrayed the president as sometimes out of his depth and struggling to get around entrenched vested interests.

Mis-steps like the car allowance decree have hurt Widodo's reputation and cost him time. His strained relationship with the powerful head of his political party, former president Megawati Sukarnoputri, further complicates his job.

"The 'realpolitik' situation is taking energy away from the real work; the economic program, the roads and ports that need to be built," Eko Sulistyo, a member of the presidential office, told Reuters.

"(His) concentration and focus can be fragmented and broken because of the politics (around him)," he added. "That affects the ministers' and government's performance."

But Sulistyo, like others interviewed, believes Widodo can run the government successfully and still enjoys the support of Indonesians.

"ON THE RIGHT PATH"

One of the president's main problems is structural. He does not have a parliamentary majority allowing him to push through all the reforms he would like to.

Despite that, he has delivered on some of his promises that investors say are key to setting Indonesia on the path to sustainable economic growth, including slashing fuel subsidies and revamping the budget to boost infrastructure spending.

"It's only been six months, and to significantly improve the state of the country, it will take time," said a minister and presidential adviser who asked to remain anonymous.

"I believe we're on the right path. There is a lot of interference from different angles ... Because of that, people don't see the good things that are happening."

There have been setbacks, however.

Widodo conceded that he had not read the decree on car allowances before signing it, drawing widespread scorn on social media and in newspapers, which drew up lists of other U-turns.

They included reversing a visa waiver for citizens of 30 countries, dropping a ban on government bodies using hotels for meetings and backtracking on a requirement for foreigners working in the country to pass Indonesian language tests.

POLICE TROUBLE

Widodo has also been weakened in the eyes of his people by the domineering Megawati, leader of Widodo's Indonesian Democratic Party of Struggle (PDI-P) and his political patron.

At a recent party congress on the island of Bali, the president sat hunched in a front-row seat while Megawati harangued members to follow party directions, saying that this included the president himself.

Widodo left the three-day convention after only a few hours and without having delivered a prepared speech of his own.

Relations between the two were strained earlier this year over who should be made national police chief, party insiders said.

Widodo waited for weeks before bowing to pressure and ditching candidate Budi Gunawan, who is close to Megawati, after he had been implicated in a bribery scandal.

Gunawan maintained his innocence, and the case against him was eventually dropped by the anti-graft agency, but not before a public outcry over Widodo's wavering.

"These days they (Widodo and Megawati) talk less frequently. There is definitely a problem with communication between PDI-P and Jokowi," said PDI-P official Andreas Pareira, using Widodo's popular local nickname.

Megawati declined to comment for this article.

For some foreign investors, Widodo's floundering threatens to dampen sentiment at a time when the economy is growing at its slowest pace in five years and needs a kickstart from investment in infrastructure and manufacturing.

"Six months in we're still facing a big question mark about whether Jokowi is really in the driver's seat," said Jakob Sorensen, head of the European Business Chamber of Commerce in Jakarta.

In a rare speech in English, Widodo told a business forum this week: "Please come and invest in Indonesia. Because where we see challenges, I see opportunity. And if you have any problem, call me."

Additional reporting by the Jakarta bureau and Trisha Sertori in DENPASAR; Editing by John Chalmers and Mike Collett-White

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