INDONESIA’S newly re-elected president must quickly tackle a host of challenges if Southeast Asia’s biggest economy is to join an emerging market big league headed by China and India.
President Susilo Bambang Yudhoyono’s current administration serves until October and still has key legislation to get through Parliament, but he must also finalize his coalition and pick a Cabinet of reform-minded technocrats who can drive a sweeping overhaul of the judiciary, civil service, and police.
That could turn Indonesia into a more attractive investment destination, making it easier to raise billions of dollars for infrastructure projects critical for transforming the economy.
“The only way to push GDP growth to be like China or India is to boost investment,” said Anton Gunawan, chief economist at Bank Danamon.
“To do that, you need infrastructure: electricity, roads, sea ports, airports ... and in all of the regions, not just Java.
“He needs to show some serious action. If he doesn’t do this, there will be increasing disappointment, foreign and domestic investment will not pick up, and the target for growth will not be achieved.” Whether Yudhoyono, who often goes by his initials SBY, can make quick fixes will depend on his coalition and his Cabinet.
He ran for re-election backed by an alliance of small parties including the Islamist Prosperous Justice Party, but with the defeat of his rivals, Megawati Sukarnoputri of the PDI-P and Jusuf Kalla of Golkar, he is now likely to reach out to them.
While that could deliver broader support in Parliament, it could potentially jeopardize reform, as neither party has a record of tackling graft or strong economic management.
During Yudhoyono’s first term, Golkar resisted reform of the civil service — a Golkar stronghold famous for its inefficiency and ability to impede, rather than facilitate, government work including infrastructure projects.
Once his coalition is finalized, Yudhoyono needs to appoint tough technocrats and dispense with the career politicians and tycoons who populated his first-term Cabinets.
At the same time he must continue to fight graft, building on the successes of the powerful Corruption Eradication Agency and the Corruption Court, which together have proved the most effective weapons in punishing scores of corrupt government officials, members of parliament and central bankers.
His current administration is already showing signs of faltering in its commitment to fighting graft: It has failed to push through legislation extending the lifespan of the Corruption Court and appears to be trying to reduce the court’s powers by changing the panels of judges.
Any backpedalling in the fight against corruption would be disastrous for Yudhoyono, disappointing the millions of ordinary Indonesians who voted for him because of his commitment to reform and his success so far in taking on the corrupt.
The fight against corruption is an important part of the overall reform process and goes hand in hand with the shake-up of the bureaucracy.
With a more efficient bureaucracy in place, Indonesia should at able to address infrastructure projects including toll roads, power plants and ports — which, as Trade Minister Mari Pangestu told Reuters in an interview last week, “are one of the major constraints” on trade and economic growth.
First-time visitors to Southeast Asia are often impressed by the gleaming new airports and unblemished roads in Singapore, Malaysia and Thailand.
