Foreign investors should not hold their breath for extensive pro-investment reforms in Indonesia, as president Joko Widodo’s planned reforms may be stymied by coalition members, said specialist risk consultancy Control Risks’ lead analyst for Indonesia Achmad Sukarsono in an Oct 18 note.
“Intense pressure from the domestic business lobby on issues is likely to lead to the government making policy decisions benefiting local businesses, such as limiting the extent of market liberalisation,” he added.
The president is set to announce the cabinet lineup for his second term soon after his Oct 20 inauguration. His meetings with election rival Prabowo Subianto and former president Susilo Bambang Yudhoyono “suggests that parties that opposed Jokowi’s re-election could join his cabinet”, while the five parties that did back his campaign “are already pressing the president to reward them with ministerial posts”, said Mr Sukarsono.
“Despite promising more reformist ministers, President Jokowi will continue to have many cabinet members who are beholden to their political parties, including politicians who like to mix politics with business,” he added.
Granted, crucial economic posts are likely to go to investment-friendly figures, said Mr Sukarsono. These include Finance Minister Sri Mulyani Indrawati and Coordinating Minister for Maritime Affairs Luhut Pandjaitan, who “could either remain in their positions or receive more powers to safeguard Jokowi’s economic priorities” such as infrastructure.
However, “some sectoral ministers might represent local players that are wary of foreign presence and exploit nationalist sentiments”. Sectors with strong local industry players include trade, industry, agriculture, manpower and energy.
“In this environment, foreign businesses can thrive when they align themselves with strong local players or support a national programme,” concluded Mr Sukarsono.