August 14, 2015 / 6:53 AM / in 2 years

Indonesia's Widodo takes swipe at egos blocking economic progress

JAKARTA (Reuters) - Indonesian President Joko Widodo on Friday called on bureaucrats and politicians to set aside their egos and work together to revive an economy whose growth has slumped since he took office last October.

Indonesian President Joko Widodo addresses members of parliament in Jakarta, Indonesia August 14, 2015. REUTERS/Darren Whiteside

In a state-of-the-nation address, he took a swipe at bickering across government agencies and political parties that has hamstrung his administration and disappointed both investors and voters who had high hopes he would turn the economy around.

“To overcome the issues this country is currently facing we have to work shoulder to shoulder. We should not be divided by political or short-term interests,” he told parliament in a speech delivered ahead of the Southeast Asian nation’s 70th anniversary of independence from Dutch colonial rule.

“The erosion of a culture of mutual respect and tolerance in official institutions such as law enforcement agencies, communities, media and political parties, is causing this country to be caught in a web of egos.”

Widodo also unveiled in a separate speech his proposed budget for 2016, in which he promised 5.5 percent growth, which was seen by economists as overly optimistic.

“It’s hard to see Indonesia getting close to growth of 5.5 percent next year, given that commodity prices are likely to remain low and monetary policy relatively tight,” said Dan Martin at Capital Economics.

“The main hope is that the infrastructure drive takes off, but implementation and bureaucratic problems will inevitably stand in the way.”

Widodo, whose government has struggled to disburse funds for roads, ports and power stations, pledged an 8 percent increase to 313.5 trillion rupiah ($22.74 billion) in spending in infrastructure in the hope that it would have a knock-on effect on investment and consumption growth.

Economic growth slipped to 4.67 percent, its slowest pace in six years, in the second quarter amid drooping domestic demand and sliding prices for coal and commodities, key earners for the country. The rupiah has dropped nearly 10 percent against the dollar this year to trade at 17-year lows and is Southeast Asia’s worst performer after Malaysia’s ringgit.

The first Indonesian president to come from outside the military or political establishment, the former furniture businessman won last year’s election in large part because he was seen as someone who cared for issues facing ordinary people.

But after 10 months in office, many of Widodo’s economic programs have struggled to get off the ground.

The 54-year-old president this week hit the reset button on his government, replacing two key economic ministers and installing two experienced technocrats who are expected to improve policy coordination and dispel concerns that Indonesia is taking a protectionist turn to shield its economy.

However, some analysts doubt that Widodo is willing to embrace radical reforms that could prove unpopular.

“Prospects for some economic reforms do now exist to some extent with the new cabinet ... but he’s not inclined to institutional reform because he’s still not emphasizing issues such as land acquisition and civil service reform,” said political analyst Kevin O‘Rourke.

“With worsening economic conditions and continued neglect of reforms, I think the outlook remains grim.”

Additional reporting by Nicholas Owen; Editing by John Chalmers

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