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| World Marketplace |
Pacific Doldrums
Hadi Soesastro
08/01/06
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State of Stasis
Yudhoyono’s popularity has dwindled since his election; he has only about two years to institute the necessary reforms before the country becomes preoccupied with the 2009 elections. In their fourth and fifth years, Indonesian administrations become immersed in election preparations and campaigns. The process climaxes with a long, disruptive election season: parliamentary elections are followed by two-stage presidential elections that unfold over approximately six months.
If Yudhoyono cannot make good on his campaign promise to improve the economy well before the elections, he will lack the support necessary to stay in office. But the measures he needs to enact to create a hospitable investment climate for foreign investors, especially labor reforms, will most likely upset voters.
| Unfortunately, it seems unlikely that Indonesia will produce a strong president
in the foreseeable future. The economy will muddle along for years to come
unless the country's various regions strengthen their local governments to
counteract the persistently weak center. |
Indonesia currently overregulates the labor market; investors and employers find the country’s rules onerous. The government has prepared legislation that would cut severance pay, which ranks among the highest in the world, and allow employers to use contract workers and outsource labor services. Understandably, the labor unions are strongly opposed to these proposals.
Yudhoyono wants to appease labor to maintain his popularity, rather than taking the harder road and explaining to them why Indonesia’s laws must change. Vice President Yusuf Kalla, a more proactive and decisive leader, takes a much firmer position on the issue. He has championed other unpopular but important reforms. For example, Kalla pressured the president to reduce fuel subsidies. He cannot, however, continue to strong-arm Yudhoyono over every measure without damaging his relationship with the head of state.
The growth in the Asia-Pacific region overall will provide some boost to Indonesia’s economy. But with the right leadership, Indonesia could be leading the region, rather than riding the coattails of its neighbors. Unfortunately, it seems unlikely that Indonesia will produce a strong president in the foreseeable future. The economy will muddle along for years to come unless the country’s various regions strengthen their local governments to counteract the persistently weak center. Hadi Soesastro is the executive director of the Centre for Strategic
and International Studies, a private, nonprofit research organization based in Jakarta.
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