Toward the Handover

INDONESIA - Report 26 Sep 2014 by Cyrillus Harinowo and Maria Kartika Purisari

Executive Summary

Having been confirmed by the Constitutional Court, President-elect Joko “Jokowi” Widodo and his running mate moved relatively quickly to prepare for the political transition. The Transition Team, headed by former Minister of Trade, Rini Soewandi, has finalized the structure of the New Cabinet. While the total number of ministries is unchanged at 34, the content of the ministries could be different. Jokowi also announced that of the 34 ministerial portfolios, independent professionals would fill 18 positions, while professionals from political parties can fill the rest. The names of the candidates for ministers have not yet been finalized. The candidates have been sourced relatively openly, but at the end of the day, it is the prerogative of the president to appoint them.

In the midst of this activity, Prabowo’s camp in Parliament has tried to seize an opportunity by changing the political map. Under the current system, provincial governors, mayors and district heads are elected directly by the people. Direct election was felt to create high costs for the candidates. Therefore, the Ministry of Home Affairs proposed changes in the electoral system to an indirect election of the regional heads by local representatives. This created an opportunity for the Prabowo’s camp, which lost in the presidential election, to change the rules of the game at the provincial and district levels. Since in the recent election his camp has majority positions in most of the regional legislatures, by the proposed system they could win most of Regional Chief positions throughout Indonesia. Thus, even though they lost the battle for the presidency, they thought they could manage to dominate on the regional side. In the General Session on September 25, 2014 Prabowo’s camp won the vote, and the draft law will soon be enacted.

In the most recent report, the Central Board of Statistics (CBS) announced the Balance of Trade for July. This year, July was the month of Ramadan, the Moslem fasting month. In fact, the last week of July was the week during which people made their annual “pilgrimage” to their hometowns. Thus the one-week holiday at the end of July completely shut down economic activity, including export and import activities. Therefore it is understandable that exports and imports for the month declined both month on month and year on year. The trade balance in July registered a surplus, albeit a small one. Exports declined to $14.18 billion, while imports declined more sharply, to $14.05 billion, for a $124 million trade balance surplus. Meanwhile, the Foreign Exchange Reserves of Bank Indonesia at the end of August 2014 also increased, reaching $111.2 billion, an increase of $700 million from July.
August inflation was recorded at 0.47%, with year-on-year inflation declining to 3.99%. With that development, Bank Indonesia affirmed that inflation was under control and maintained the reference interest rate at 7.50% at its policy meeting in September 2014.

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