Government policies are unclear and seem to accommodate the interests of particular groups.
By
A PRASETYANTOKO
·5 minutes read
Kompas/Totok Wijayanto
A warehouse worker takes a nap on Saturday (23/12) during his break at the Cipinang Central Rice Market, Jakarta.
It might be true that 2018 will be a year of uncertainties. Government policies are unclear and seem to accommodate the interests of particular groups. These range from the government’s decision to import rice, its compromise on the use of cantrang (seine net), the controversy over the sinking of illegal fishing boats and to the minor cabinet reshuffle, not to mention the growing trend in the government\'s populist policies ahead of the 2019 elections. Should we worry about the situation?
First, uncertainties in the dynamics of politics are happening not only in the country. In fact, at the global level, the uncertainties are much more serious. The year-end special edition of The Economist titled "The World in 2018" confirmed that many thrilling events would arise this year in connection to political uncertainties.
The increasingly controversial American President Donald Trump, the difficult political compromise in Germany, the rise of ultra-right leaders in Europe, and the potential North Korean nuclear crisis could create uncertainty.
The US government is currently in shutdown due to disagreements between the government and the Senate related to the operational budget. In essence, uncertainties are inevitable, but must be mitigated. Compared to global uncertainties, this domestic uncertainty is relatively low.
Second, to a certain degree, economic populism creates a positive political momentum that may even be necessary. At least, that\'s the opinion of Dani Rodrik of Harvard University in his short article, "In Defense of Economic Populism". A populist economic policy is needed to ensure that political populism will not grow further. The recent rise of political populism is worrying, and it thus requires a certain compromise in economic policy.
The growing phenomenon of inward-looking politics is also discussed in the quarterly report of the International Monetary Fund (IMF), the October 2016 edition of the World Economic Outlook. This report points out that massive economic stagnation will give rise to protectionism. The thesis has been proven in the case of the US and many other elections in the world.
In the medium term, protectionism could hinder the dynamics of the global economy. As a result, even if economic performance improves, as long as protectionism continues to develop, its impact will not be significant.
In facing these global uncertainties, the economy is actually doing well. First, the IMF quarterly report of October 2017 raised the global growth projection from between 3.5 percent and 3.6 percent in 2017 to between 3.6 percent and 3.7 percent in 2018. Second, China\'s realized economic growth throughout 2017 was estimated at 6.9 percent, higher than the government forecast of 6.5 percent and the 6.7 percent consensus among observers. In general, the global economy has begun to grow.
The increased global growth projections brings fresh wind to the sails of our economy. Exports are expected to start rising, especially with rising commodity prices, rising investment and the inflow of foreign funds. Domestically, demand is also recovering in line with increased exports. Then, what is there to worry about?
It is therefore no exaggeration for the President to ask businessmen not to worry about the political situation, because everything is under control. The business community was asked not to hold out on investments. Nevertheless, it won’t be easy for the government to convince the business world, especially in relation to foreign investment. The economic policy package must be consolidated to provide tangible benefits, not just jargon.
The economic policy package should be able to change the business landscape so it will support business players. However, implementing it is not easy, because this involves many parties. Uncoordinated government policies should receive special attention. If they are not addressed soon, they will create a wider problem this year. Different interests in the framework of the 2018 regional elections (Pilkada) and the 2019 presidential election could potentially increase policy miscoordination.
The elections of regional heads do not merely polarize political power, but also has economic implications. The role of local government is very important in the implementation of the central government’s programs, since most of the budget is held by the local government.
The World Bank noted that in 2000, the central government still controlled about 84 percent of the budget. However, by 2015, this had declined to only 47 percent, and the role of local government became increasingly more important. The governance’s capacity and local government performance is divergent; the gap is very wide.
The malnutrition cases and measles outbreak in Asmat district, Papua, reflect the weakness of local government. In addition to geographical and logistical issues, weaknesses in governance should not be ignored.
In 2018, 171 regions will hold local elections. Undeniably, this will degrade the government\'s public services performance. In terms of economics, this may result in the increased circulation of money, which will support regional economic growth, but public service will be a major problem. The challenge to the central government is great.
Kompas/Heru Sri Kumoro
A. Prasetyantoko
Various efforts should be continued. First, the government should take the advantage of the cabinet reshuffle, which has created a sense of political consolidation. Whatever the reason, political consolidation is necessary for properly implementing economic policy.
Second, policy consolidation should be urged to suppress commotion. Third, populist economic policy should be carried out proportionately to further encourage the dynamics of the lower tiers of society. If it is allowed to be stagnant, this could result in the potential rise of sectarian populism. Fourth, it must be ensured that local governments can continue to function as public servants through the regional elections.
