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Indonesia's Jokowi sworn in as wobbling growth tests reforms

Bloomberg - October 20, 2019

Arys Aditya, Viriya Singgih and Karlis Salna, Bloomberg News – Joko Widodo was inaugurated as Indonesia's president for a second five-year term and faces an early test to shore up support for reforms aimed at boosting investment and rejuvenating an economy growing at its slowest pace in two years.

Widodo, 58, read the oath of office at the parliament hall in Jakarta on Sunday where he was given a rousing reception by attendees including several heads of state and representatives from more than 150 countries. The event was held amid tight security as the capital was rocked by civil unrest in recent weeks over a controversial policy agenda and a senior minister was stabbed in a suspected terror attack.

Jokowi, as the president is known, begins his final stint at the helm of Southeast Asia's largest economy vowing to overhaul labor market rules and open up the country to more foreign investment. Facing a public backlash over key reform plans, he has already reached across the aisle to opposition parties and the nation's political elite in a bid strengthen his ruling coalition.

The president will announce the much-awaited cabinet line-up on Monday, Jokowi told reporters before leaving for his inauguration. The new cabinet may include a revamped finance team and key opposition figures as he seeks to secure support for his policy agenda.

Jokowi said Indonesia had set itself a target of becoming a $7 trillion economy and one of the world's top-five economies by 2045, with poverty eliminated. "However, none of that will come automatically, and will not come easily," he said during his speech.

Indonesia must continue to innovate amid a world "full of risk, that is very dynamic." He said he would call on lawmakers to introduce two "major laws" including one that will target labor market, adding that too often current legislation was hampering job creation.

Past presidents Susilo Bambang Yudhoyono and Megawati Soekarnoputri attended the swearing in. The previous Jakarta governor Basuki Tjahaja Purnama, jailed for blasphemy for part of the president's first term, was also at the ceremony. Purnama, known as Ahok, was deputy governor under Jokowi.

The former furniture maker from Central Java was the first president to come from outside Indonesia's elite or military. He was returned to office following a landslide election win in April in which he defeated Prabowo Subianto, repeating his 2014 victory over the Suharto-era general.

Prabowo, who was the son-in-law of the dictator Suharto, and Jokowi have since made amends after what was a divisive presidential campaign. Speculation has mounted in recent weeks about the possibility of Prabowo's Gerindra party and former president Susilo Bambang Yudhoyono's Democratic party joining the government.

Jokowi will be counting on a grand coalition in parliament to get through tough economic reforms as he faces a push by the dynastic families, including some that backed his rise, to amend the constitution and gain greater influence over the government."

Jokowi's biggest challenge in his second term will be managing a legislature that is dominated by establishment elites," said Hugo Brennan, principal political analyst with Verisk Maplecroft. "Having Prabowo inside the tent would dilute the influence of political elites within Jokowi's coalition that will seek to stymie his reform agenda."

But having the main opposition party in the cabinet may deprive the young democracy of any mechanism for checks and balances on the government, Brennan said. Gerindra joining the ruling coalition would also "fuel a culture of political horse-trading that undermines the policy-making process," he said.

Sweeping reforms

Jokowi has vowed sweeping reforms in his second term, insisting in an interview early this month he would seek to overhaul the nation's labor law by the end of the year. The plan, which he said is his "first priority", is aimed at appeasing labor unions as well as foreign investors and the business sector who are reluctant to put money into Indonesia or expand under the current labor market regime.

The president said he would also move to open up the economy further with changes to Indonesia's negative investment list, which governs foreign ownership levels across a myriad of sectors.

Jokowi has repeatedly said the reforms are needed to support the economy which grew 5.05% in the second quarter, the slowest in two years. The International Monetary Fund, in its latest World Economic Outlook, revised down its forecast for Indonesian growth this year to 5% from 5.2% in July.The president has also promised to gradually lower the corporate tax rate from 25% to 20% by 2023 to make Indonesia more competitive. Still, he is already facing public anger over some of his plans, with protesters rallying against the labor market reforms, a crime bill and legislation that weakened the nation's anti-graft agency.

– With assistance from Rieka Rahadiana.

Source: https://www.bnnbloomberg.ca/indonesia-s-jokowi-sworn-in-as-wobbling-growth-tests-reforms-1.133439