International New York Times | 25 October 2015
JAKARTA, Indonesia — The Indonesian president, Joko Widodo, said he would decide whether Southeast Asia’s largest economy would join the United States-led Pacific trade agreement after his meeting with President Obama at the White House on Monday.
In an interview before a four-day visit to the United States this week, Mr. Joko also said that his government was rapidly stripping away cumbersome protectionist trade regulations that foreign businesses had long chafed at.
“I’m a businessman,” he said, referring to his job as a furniture exporter before he began his political career as the mayor of his hometown in Central Java. “I know what they want. I know what they need. I want to say that Indonesia is open for investment. Indonesia is open for investors.”
If Indonesia, a G20 member with about a $1 trillion economy, were to join the trade agreement, it would be a boon for Washington.
The agreement, the Trans-Pacific Partnership, is seen as a bulwark against Chinese influence in the region. Without Indonesia, it would already wrap in two-fifths of the world’s economy, including the United States and 11 other Pacific Rim nations.
The Indonesian trade minister, Thomas Lembong, has said that Indonesia could be ready to join within two years. He has expressed concern that the country could fall behind its neighbors who have joined the accord, including Australia, Brunei, Malaysia, Singapore and Vietnam. The pact must be approved by Congress.
But other members of Mr. Joko’s cabinet, as well as some lawmakers, have expressed pessimism, leaving the Indonesian president with a tough decision.
“After I discuss it with President Obama, I will decide,” Mr. Joko said in the interview on Thursday. “Really. Wait and see.”
The main focus of the visit is trade — Mr. Joko is seeking billions of dollars in foreign investment — and he and Mr. Obama are expected to announce several business deals.
But there are concerns in Washington about longstanding obstacles to doing business here, including the glacial pace of approval for business and work permits, rampant corruption and an unpredictable judicial system. American business leaders are still fuming that four local employees of Chevron, the United States-based energy company, were sentenced to prison on corruption charges despite repeated assurances by senior government officials that they had committed no crime.
Since Mr. Joko took office a year ago, his government has added to the mire of regulations, requiring that foreigners be proficient in the Indonesian language, Bahasa, to keep their work permits, that multinational companies employ 10 Indonesians for every foreigner on their staff, and that visiting foreign businesspeople obtain a special permit to hold meetings at their companies’ Indonesian offices. The last regulation has forced some executives to meet in restaurants in Jakarta, the Indonesian capital, or in neighboring Singapore.
In July, Mr. Joko’s government drastically increased tariffs on more than 1,000 import items ranging from automobiles to condoms to judo belts.
“There’s going to be a lot of questions from the business community about the business climate here,” Robert O. Blake Jr., the American ambassador to Indonesia, said at a briefing here Wednesday.
Mr. Joko, however, said his government had already changed course and had begun clearing away obstacles that have frustrated foreign businesses.
In August, with the economy growing at its slowest pace since 2009, the currency, the rupiah, at its lowest level since the late 1990s, and his own popularity sinking, he reshuffled his cabinet, replacing key economic ministers.
Since then his government has released five separate deregulation packages, including rules to simplify and reduce the permitting processes, a new formula to calculate minimum wages, and tax reform.
Mr. Joko said he had also revoked regulations requiring foreign workers to master Bahasa and visiting businesspeople to obtain a permit to hold meetings at their offices.
That was just the beginning, he said. “Maximum, every two weeks we will have a new economic package” to deregulate the economy, he said.
He said there had been resistance to the changes within the bureaucracy, with its corruption, red tape and a mistrust of foreigners. “But we must be consistent that we are serious to simplify business permits, to simplify our bureaucracy,” he said.
Foreign businesses here have welcomed the moves, saying that they will equally benefit Indonesia, while calling for more deregulation.
“You can’t blame the Indonesians for wanting foreigners to learn to speak Bahasa,” said Brian Arnold, an adviser with PricewaterhouseCoopers in Jakarta and current president of the American Chamber of Commerce in Indonesia. “But if Indonesia wants to be competitive with its neighbors, that just creates another obstacle.”
Murray Hiebert, a Southeast Asia expert with the Center for Strategic and International Studies in Washington, said Indonesia’s size made it a prize for foreign investment.
“But compared to Vietnam or Singapore, it’s a tough place to do business,” he said.
Mr. Joko nonetheless has high hopes for his visit, especially for American investment in Indonesia’s e-commerce sector, which analysts say could see tens of billions of dollars in new investment in the next five years. He is scheduled to fly to San Francisco on Wednesday to tour Silicon Valley, visit the headquarters of Google, and have dinner with Tim Cook, chief executive of Apple.
In Washington, Mr. Joko and Mr. Obama are expected to sign memorandums of understanding on maritime and defense cooperation, and energy. Mr. Blake said the two leaders would also discuss increasing cooperation in countering violent extremism and climate change, and the territorial disputes in the South China Sea.
China has recently acted aggressively to bolster its maritime claims in the region, including by creating islands in disputed territory, which conflict with claims by the Philippines, Vietnam, Malaysia and Brunei. In 2002, China and the Association of Southeast Asian Nations agreed to establish a code of conduct in the South China Sea, but to date no document has been finalized.
Mr. Joko said he wanted Indonesia, which is not a claimant to the disputes, to use its neutrality to push for a code to be signed as soon as possible.
“Dialogue is very important to solve this problem,” he said. “We must start detailing the contents” of the code “element by element, and implement them. It’s been too long — 13 years.”
In the interview, he also reflected on his first year in office, which analysts say has been rocky. Mr. Joko, a slum child who made history by being his country’s first president not to come from the political elite or the military, followed through on campaign promises to eliminate fuel subsidies, and provide free health care and financial support for education for the poor.
But his commitment to fighting corruption in one of the most graft-ridden nations in Asia was questioned when he nominated a police general implicated in corruption as the nation’s top law enforcement official.
The excitement he had generated, especially among the working class who mobbed him at campaign rallies like a rock star, has waned. A poll released last Tuesday put his approval rating at 52 percent, up from a low of 41 percent in June but far below his peak of 72 percent immediately after his election.
Tall, thin and unassuming, he smiled when asked about his approval numbers. He said the public was angry that gasoline prices had risen and the economy had slowed, for which he blamed the global economic crisis.
“I knew our popularity would go down,” he said. “After we can manage the economic situation, and when economic growth is going up again, I’m sure it will go up again.”
The elimination of fuel subsidies has allowed him to divert tens of billions of dollars to big-ticket infrastructure projects including highways, ports, dams and irrigation, which he is counting on to rejuvenate the economy. He said that new central bank figures, which have not yet been published, show the country’s growth rate increasing slightly in the third quarter to 4.85 percent, suggesting that an economic recovery may have already begun.
Whether or not Indonesians approve of his job performance, he said, they should not expect all his promises to be fulfilled overnight.
“When we want to build a house, the first thing is to make the foundation, right?” he said. “But if you ask for the roof first, it’s difficult for me to answer that.”
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