Erwida Maulia, Jakarta – Indonesia's next presidential election is still two and a half years away, but campaigning to succeed Joko "Jokowi" Widodo is already getting into swing.
The political battles among his allies could further stall Widodo's ambitious reform and infrastructure plans, which have had to take a back seat to his government's attempts to stem the spread of COVID-19 infections that have ripped through Southeast Asia's biggest economy.
"We've started seeing a number of parties and even a number of ministers making preparations ahead of 2024," Djayadi Hanan, executive director of pollster Indonesia Survey Institute (LSI), told Nikkei Asia. "President Jokowi's team is likely no longer solid. They can no longer focus on supporting his programs, and are busy instead with their own political agendas."
Most of the politicians starting their campaigns early are tied to the ruling coalition. They include Airlangga Hartarto, chief economic minister and chairman of the Golkar Party, House speaker Puan Maharani of Widodo's Indonesian Democratic Party of Struggle (PDI-P), and National Awakening Party chairman Muhaimin Iskandar.
The pandemic and mobility restrictions have delayed Widodo's flagship programs, which include an education system overhaul and a $32 billion project to move the nation's capital from Jakarta to East Kalimantan. Widodo announced those plans shortly after his re-election in 2019.
First, Widodo will address the nation in a closely watched State of the Union speech on Monday, which will give him an opportunity to address the pandemic, his achievements and his future plans. This will be followed by a 2022 budget proposal speech.
With the delta variant now spreading across the sprawling archipelago, analysts say it is becoming less likely that Widodo can realize his plan to begin the capital move before the end of his tenure in October 2024. The country's constitution bars the incumbent from running for a third time in the vote, which an election official recently said is set for Feb. 21 that year,
The prolonged pandemic has cut Indonesia's growth forecasts this year and next, and is straining the government's finances – the stimulus package budget for 2021 was recently raised to 744.7 trillion rupiah ($51.8 billion), including a more than 20% increase in health spending to 214.9 trillion rupiah.
Finance Minister Sri Mulyani Indrawati called it "a very massive and significant shifting" of budget allocations, indicating funds that could have gone to previously-prioritized programs and projects.
Before the pandemic, Widodo had pinpointed national strategic projects and major investments in human capital in his strategy to escape the middle-income trap and join the ranks of high-income nations in the nation's 2045 centenary.
Indonesia had been on the right trajectory, as the World Bank last year upgraded Indonesia to upper-middle income status after more than two decades at the lower-middle income level. But the pandemic quickly relegated Indonesia back to the previous grouping, the bank said last month.
The huge stimulus package could also threaten the government's ability to return the budget deficit to under the legal ceiling of 3% of the gross domestic product by 2023. A three-year removal of the cap was approved by parliament last year.
Keeping to that limit could reduce fiscal space to resume the delayed projects, which could further jeopardize an economy that may need fresh stimulus to quicken its recovery once the pandemic is under control.
Should the government decide to extend the temporary cap removal, "Indonesia's financial credibility will be under threat, and it will be hard for us if we lose the market's confidence," said Yose Rizal Damuri, head of economics at Indonesia's Center for Strategic and International Studies.
The pandemic has highlighted once again one of Indonesia's major problems: red-tape. The country's inefficient bureaucracy has deterred investment, and caused data discrepancies between different government offices that has hindered the distribution of aid to struggling households.
Corruption remains a major issue. Bribery charges have been filed against the former social services minister, which have fuelled public concerns about potentially graft-ridden vaccine procurements, according to an LSI survey in June.
"Incidents of corruption here are embarrassingly high. In an era of high-speed transformation, corruption is an extraordinary obstacle," CSIS chair Djisman Simandjuntak told a webinar last week. "Unless we cope with these, unless we have the means of fighting corruption, the 2045 dream will remain an empty dream."
Damuri said Widodo should focus on bureaucratic reforms in his final three years in office, working on regulatory frameworks and setting legal grounds to ensure his successor will carry on with key programs such as the capital relocation and its zero carbon pledge by 2070.
Defense Minister Prabowo Subianto, Widodo's opponent in the 2014 and 2019 elections, leads popularity surveys, and there is a high likelihood he will run with Maharani, daughter of former president and PDI-P chairwoman Megawati Soekarnoputri, according to LSI's Hanan.
Even so, Hanan said whoever wins will likely just continue with Widodo's legacies, noting that none of the candidates "appear to be directly opposed to" his key economic policies."
After an ambitious infrastructure push during his first term, the sweeping omnibus law on job creation passed in October last year has become Widodo's flagship second-term policy. Revising nearly 80 older laws in one go, the law – despite contentious clauses on labor rights and environmental issues – seeks to cut red tape to draw investment into diverse sectors by significantly reducing local governments' role in processing business permits.
The law also gave birth in February to the Indonesia Investment Authority (INA), which will manage the country's first ever sovereign wealth fund to channel foreign investment into key domestic projects in sectors including infrastructure, energy and the digital economy. The plan has drawn interest from several global funds and development agencies. Widodo told Bloomberg in April he was targeting $200 billion for the fund within the next three years.
So far, however, INA has only inked agreements with Canadian pension fund CDPQ, Amsterdam-based APG Asset Management and the Abu Dhabi Investment Authority for its first investment vehicle. This will include up to $3.75 billion in a subfund focused on Indonesian toll road assets.
Widodo has said he wants Indonesia's ease of doing business ranking to continue to improve from 73rd place last year out of around 190 countries surveyed by the World Bank.
"The pandemic should not stop our efforts to continue structural reforms," Widodo said last week. "Improving investors' confidence to open as many jobs as possible is a solution for the unemployment problems that have gone up due to the pandemic."
– Additional reporting by Ismi Damayanti