Indonesia’s presidential hopefuls lay out plans to revive $1.2tn economy

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As Indonesia’s three presidential candidates gear up for the start of the official campaigning period beginning on Tuesday, they face the challenge of turning around slowing growth in Southeast Asia’s largest economy.

Defence Minister Prabowo Subianto, former Jakarta governor Anies Baswedan, and ex-Central Java governor Ganjar Pranowo will face off on February 14 to succeed President Joko Widodo, who is constitutionally barred from running after two terms in power.

 

Indonesia’s gross domestic product growth slowed to 4.94 percent in the third quarter, compared with 5.72 percent during the same period in 2022, according to government data.

Indonesia’s economy grew 5.3 percent for the whole of 2022, the biggest expansion in nine years, as the resource-rich country rode a global commodities boom.

Economic experts say that maintaining GDP growth at above 5 percent will be essential to creating enough jobs for the one million-plus Indonesians newly entering the workforce each year.

Indonesia’s economy added an average of 2.4 million new jobs each year between 2009–2019, according to the World Bank.

Indonesia’s unemployment rate in August stood at 5.32 percent, down 0.54 percentage points from the previous year, according to official figures.

Ganjar and his running mate Mahfud Mahmodin, known as Mahfud MD, have pledged to create 17 million new jobs, with a particular focus on the nation’s youth.

 

His “Quick to Get Work” initiative includes plans to scale up vocational training and expand free education from the current 9 years to 12 years.

“Indonesian youth need to quickly find jobs or be given the ease to create their own businesses to become entrepreneurs,” Arsjad Rasjid, campaign chief for the Ganjar-Mahfud ticket, told Al Jazeera, warning that the country’s demographic bonus could become a catastrophe if not handled properly.

 

Arsjad said greater industrialisation and education would be the only way to meet the population’s job needs.

“For every low-income household, we want to have at least one university graduate in the family to lift them out of the poverty trap,” Arsjad said.

 

Anies, the former Jakarta governor, has stressed the need to more equally distribute the benefits of the country’s abundant natural resources.

Widodo, popularly known as Jokowi, made “downstreaming” a cornerstone of his economic policy by spearheading legislation to ban the export of minerals and mandate that commodities mined in the country be processed domestically.

Indonesia’s nickel-related exports jumped from about $6bn to $30bn from 2013-2022 on the back of higher value-added products such as stainless steel and battery materials.

 

Anies’ spokesman and economic policy adviser Tom Lembong said that the mining sector had widened the divides between the rich and poor as well as developed and less-developed regions.

“Indonesia’s economic growth has become dominated by a narrow segment of industries, mostly linked to commodities such as coal mining, nickel mining and smelting, and palm oil,” Lembong told Al Jazeera.

“Because commodity sectors are capital-intensive, it’s mostly the rich, the owners of capital, who have benefitted from our commodity-driven boom.”

Lembong said Anies would embrace previously neglected growth opportunities such as labour-intensive industries and the service sector, and put economic growth on a “more diversified and sustainable footing”.

“One example of Anies-Muhaimin’s urbanisation-led growth strategy is to focus on at least 14 cities around Indonesia, to each becoming a more dynamic growth engine for the regions around them,” Lembong said.

 

Prabowo’s campaign team did not respond to a request for comment.

In their election manifesto, Prabowo and his vice presidential nominee Gibran Rakabuming, who is Jokowi’s eldest son, have pledged to continue with Jokowi’s downstreaming policy and investment in infrastructure.

“In principle, we need to maintain free trade. But there is another principle that is very important for us, namely the principle of a level playing field. [Processing] raw materials [in Indonesia] is our right for our people to want to be as advanced as you … ,” Prabowo said last week at a Center for Strategic and International Studies (CSIS) forum.

Prabowo’s manifesto also pledges to continue developing rural areas, providing direct cash aid and building low-cost homes.

 

Both Prabowo and Ganjar have pledged to finish Widodo’s plans for a new capital city on Borneo, while Anies has not mentioned the project in his manifesto.

Alexander Arifianto, senior fellow at Singapore-based S Rajaratnam School of International Studies (RSIS), said Prabowo and Ganjar had laid out relatively similar economic policies.

“For instance, their macroeconomic and industrial policy, with both pledging to retain Jokowi’s ‘downstreaming’ industrial policy, particularly in the mining and oil and gas sectors,” Arifianto told Al Jazeera.

 

But Ganjar is likely to favour more state ownership due to his Indonesia Democratic Party of Struggle party’s history of favouring economic nationalism and state-owned enterprises, Arifianto said.

Fajar Hirawan, senior economics researcher at the Jakarta-based Centre for Strategic and International Studies (CSIS), said the new president should diversity foreign investment to “maintain geopolitical neutrality, hedge against risks in case one investor country experiences issues and cannot invest, produce or work with Indonesia any longer”.

Fajar said the next president would also have to address environmental sustainability, workforce development and welfare policy.

“Meeting sustainable agriculture and industrial standards will determine whether Indonesian exports will be competitive and welcomed in world markets,” Fajar said.

Fajar said the candidates should also be aware of the potential for the Israel-Hamas conflict to spread to other regions in the Middle East.

 

“As a net importer of oil commodities, for sure all candidates should be aware of this situation. They should anticipate the possibility that the conflict might be prolonged and will impact global and domestic economies, putting pressure on inflation, mainly coming from energy and food commodities,” he said.

University of Indonesia economist Fithra Faisal Hastiadi said that inflation is a major concern for lower income earners and a “realistic” economic growth target would be 5-6 percent.

“For people in the bottom 40 percent of income earners … this (inflation) rate is not affordable … (therefore) jobs and prices are viewed as their top priorities,” Fithra told Al Jazeera.

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