Three Years of Jokowi-Kalla Politics
Jokowi-JK has maintained economic stability and strengthened the state’s role in the national economy in the absence of political parties.
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Perhaps the most "accurate" perspective from which assess the three-year politico-economics of the government of President Joko "Jokowi" Widodo and Vice President Jusuf Kalla is by looking at the extent to which the state is capable of benefiting maximally from the game of the "new" international economic order and the broadening of the country\'s presence in the national economic arena.
In the first field, the state faces many uncontrollable variables; in the second, the state has control. Efforts to explain the two will provide an objective understanding of Indonesia’s politico-economic existence under Jokowi-Kalla.
‘Fractured globalism regime’
Of course, the phrase “fractured globalism regime” is not quite correct here. However, I am inspired to use it after reading the phrase ”Europe’s New Order” in the heading of The Economist (30/9/2017), which described the potential changes in the economic map of the European leadership if the reforms of French President Emmanuel Macron were to be implemented.
His reforms, which places more emphasis on directing the French economy toward this "market" region does not only replace the dominance of the German economy under Angela Merkel in Europe, but is also marked by the appearance of "Trumponomics”, the economic policy of US President Donald Trump that took a "detour" from the flow of globalization. This last reflects Trump, who wants to return to what Steven Rosefielde refers to as “America’s social justice of the 1960s” in Trump’s Populist America (2017).
In this context are not only memories that "family was more important than cosmopolitanism", but a precedent for the state\'s protectionist stance on labor welfare. Globalization, in Trump\'s view, has confiscated the "harmony of family" and "welfare" from the US labor class. This is the background to the “America First” slogan. As its concrete realization, Trump and the Republican Party proposed a new taxation system, which Tri Winarno called “a territorial tax system” in ”Beware of the US’s tax amnesty’” (The Jakarta Post, 30/10).
The new system is indirectly nationalistic because, besides lowering corporate taxes to 35 percent from 39 percent, it encourages state multinational corporations to establish their headquarters at home. Through this system, Trump has tried to restore the US corporate funds – which had been scattered across foreign countries under the fast flow of globalization and the old taxation system – to their country of origin.
With the exception of China\'s economic role, I use the phrase “fractured globalism regime” to refer to the combined phenomenon of Europe’s New Order and Trumponomics, namely an international economic order that is marked by a structural pull on each other in the supra-state game between economic globalism and nationalism. Since the structure of the game consists of giant state actors, then beyond the pure regime of globalism, the variables that are reproduced by the fractured globalism regime are uncontrollable.
Is not the nationalistic character of Trumponomics’s going along with the trend of the US central bank, or the Fed, to raise interest rates, because the US economy is improving and its inflation rate has exceeded 2 percent? Isn\'t European Central Bank (ECB) governor Mario Draghi reducing quantitative easing (QE) funds from 60 billion euro to 30 billion euro per month next year as reported by then Financial Times (27/10/2017), even though he turned down certainty on the stoppage of his stimulative program? As a consequence, doesn’t the combination of Trumponomics, the Fed’s trend to raise the interest rate, and the ECB’s QE reduction have the potential to lead to capital outflow and at the same time, hinder capital expansion to the territories of emerging economies, of which Indonesia is one?
Nevertheless, in a situation where the variables cannot be controlled by "new" and increasingly complex international economic products, the Indonesian economy is being relatively maintained. "In general," said Luis E Breur, the head of an International Monetary Fund team that chairs the Indonesia\'s economy this year, ”it runs very well. When comparing Indonesia with other countries, we deem that Indonesia\'s 5 percent economic growth is very high" (Kompas, 15/11/2017).
The statement is in line with the evaluation of the World Bank, which has raised Indonesia\'s rank in the Ease of Doing Business (EDB) 2018 to 72nd out of 190 countries. This, as Kompas reported (2/11/2017), was a "high" leap, since Indonesia was still 109th in the EDB 2016. The ability to manage and maintain the macroeconomy (inflation is controlled at under 4 percent, deficit of goods and services export-import balance is below 2-2.5 percent in 2015-2017, the fiscal deficit is below 2.8 percent of gross domestic product (GDP), a 35 percent debt-to-GDP ratio and US$128 billion in foreign exchange reserves) has convinced the world of the "accuracy" of Indonesia\'s economic policy under Jokowi-Kalla. Therefore, it is not surprising that the World Economic Forum raised Indonesia\'s Competitiveness Index from 41 to 36 out of 137 countries (Kompas, 30/9/2017).
Expanding state\'s role?
The most dramatic and characteristic aspect of the Jokowi-Kalla economic policy is the private sector’s assumption that the state’s role in the national economy is growing. Whether the map of the state-private sector economic roles has changed along with the policy, of course, needs further study. For the time being, it can be said that the state’s effort to be present at the lowest level of the economy can be seen from the People\'s Business Credit (KUR) policy that has been expanded and deepened. If the KUR allocation was Rp 178.85 trillion in the 2007-2014 period, it reached Rp 94.4 trillion in 2016 alone. The KUR funds are expected to reach Rp 110 trillion this year.
The state’s penetration of the people\'s economy is experiencing "diversification" because of the various KUR categories. Aside from the micro KUR and retail KUR, credit is also allocated for Indonesian workers (Kompas, 2/10/2017). Along with the allocation of Rp 283.7 trillion for poverty alleviation and support for low-income people in the 2018 State Budget, including Rp 60 trillion in village funds, theoretically, the state’s role in the people\'s economy is growing.
However, the state is also reaching out to the "highest level" of the national economy. This has occurred as a consequence of the state’s massive infrastructure development program. In a situation where the government has limited fiscal support to achieve its goals, state-owned enterprises (SOEs) have acted as "quasi-fiscal" resources to realize Jokowi-Kalla’s development programs.
“The growing domination of state-owned enterprises,” wrote The Jakarta Post (4/10), “has become the recurrent issue that is raised over and over again during the tenure of President Jokowi, who came to power in 2014.” Without being noticed, the state’s role in the national economy, through the SOEs under SOE Minister Rini Soemarno, is deepening and expanding compared to previous administrations.
Meaning of politics
Establishing PT Inalum as a holding company in the mining sector means that the state’s presence as an economic actor will be increasingly felt, as 9.1 percent of the government’s shares in PT Freeport Indonesia will be entrusted to PT Inalum. This step not only strengthens the state\'s reach in the mining world, but also enables the Indonesian mining industry to become a "global giant" following the divestment of 51 percent of Freeport shares.
Except for "purely political" matters, the nation’s economic development under Jokowi-Kalla has strengthened state legitimacy and revenues in a democratic system. In several areas, public legitimacy and revenues saw a precedent in the era of Susilo Bambang Yudhoyono (2004-2014).
The difference is that the Yudhoyono government existed under the umbrella of a solid globalism regime that, through the global financial crisis, facilitated capital expansion of economic actors from developed countries into emerging markets. Directly or indirectly, this has helped the economic growth of developing countries, including Indonesia. As Wolfgang Streeck wrote in How Will Capitalism End (2017), the type of world regime is marked by the softness of global political authorities that could not control capital flow in the interest of the capital owners themselves.
Under Jokowi-Kalla, management of the national economy has taken place under the umbrella of a fractured globalism regime, where global political authorities are trying to correct the weaknesses of globalism through economic policies, as can be seen in the nationalistic Trumponomics. At the same time, another global actor, the European Union, is trying to reduce its financial stimulus programs. Joining the Fed’s trend to raise its interest rate reference, global political authorities have indirectly started deploying their power to control the movements of giant capital owners. Trumponomics’s imposition of a territorial tax system clearly shows an effort to control the global political authorities in the traffic of capital.
It is here that we see the "success" of national economic management under three years of Jokowi-Kalla in its effort to adjust to the changing global regime "without precedent". Because at a certain level, the national economy still survives even though it is faced with uncontrollable variables produced by changes in the global regime. And through the SOEs that are acting as "quasi-fiscal" sources in the massive infrastructure development program, we have witnessed the "revival" of the state’s economic role within three years. In contrast to recent accusations of neoliberalism raised against the Jokowi-Kalla economic policy, the private sector\'s protest over the increasing role of SOEs in the national economy proves otherwise.
Above all however, different from Yudhoyono who controls the Democrat Party, Jokowi-Kalla has maintained economic stability and strengthened the state’s role in the national economy in the absence of political parties. Because, isn’t it that neither Jokowi nor Kalla control political parties?
FACHRY ALI
A founder of the Indonesia Business Ethics Study and Development Institute (LSPEU)
