Indonesia looks to Islamic finance for infrastructure needs – Nikkei Asian Review

JAKARTA — Measures to boost Indonesia’s relatively small Islamic finance sector could help the government implement an ambitious infrastructure modernization program across the 13,000-island archipelago, according to the country’s recently appointed finance minister. A week after she was appointed finance minister by President Joko Widodo in a cabinet shake-up, Sri Mulyani Indrawati described Indonesia’s infrastructure development needs as “huge.” Indrawati was speaking at the World Islamic Economic Forum in Jakarta. After taking office in late 2014, Widodo pledged to improve Indonesia’s notoriously rickety infrastructure by building or improving dozens of ports, airports, power plants and roads. Total spending could reach around $500 billion — equivalent to more than half the country’s gross domestic product — an outlay that the government says it cannot fund alone. “I am sure there is the potential to develop instruments for financing based on Shariah (Islamic law), we will look at this, the need is there,” said Indrawati, who resigned from a senior World Bank role to rejoin the Indonesian government.

New finance minister Indrawati chops $10bn from Indonesia’s budget – Nikkei Asian Review

JAKARTA — Sri Mulyani Indrawati, Indonesia’s new finance minister, said on Wednesday that 133.8 trillion rupiah ($10 billion) will be cut from government spending this year in anticipation of a widening shortfall in tax revenue. The former World Bank Group managing director, who also served as finance minister from 2005 to 2010, was brought back into cabinet a week ago. “The President’s theme is strengthening credibility, confidence, and trust,” Indrawati told reporters on Aug. 3 following a meeting with President Joko Widodo and his economic ministers. A day later, speaking to reporters at the World Islamic Economic Forum in Jakarta, Indrawati said the finance ministry should use “all tools to improve the business climate”. “Job creation is not coming from the government — it is from the private sector,” the minister said.

Ikea fracas raises questions over ‘big bang’ liberalization – Nikkei Asian Review

TANGERANG, Indonesia — On a recent Saturday morning at Ikea’s new outlet in Tangerang to the west of Jakarta, there was scant sign that the company was facing the kind of pressure that might follow the potential loss of the right to use its world-famous brand name in a country as big as Indonesia. Families strolled around, some trying out couches and chairs for size and comfort, while others wheeled trolleys and loaded up the Ikea signature flatpack boxes of assemble-it-yourself furniture. Upstairs, dozens more lined up in the Ikea canteen as staff ladled out plates of Swedish meatballs and creamy mashed potato. In early February, Indonesia’s Supreme Court published a ruling suggesting that Ratania Khatulistiwa, a Surabaya-based furniture company, had successfully challenged Ikea’s right to use its brand name in Indonesia, which is home to around 250 million people and a vast market for Ikea’s wares. Shoppers were mystified by the decision against Ikea. Santoso, a 50-year-old businessman from east Jakarta, was loading up “6 or 7 million rupiah” worth of furniture on a trolley as he made his way between the towering shelves on the shop floor. “Everybody knows this company, it was founded a long time ago. I don’t think they will be stopped from using their name in Indonesia.”

Indonesia reflects regional doubts on economic integration – Nikkei Asian Review

JAKARTA — In a small fourth-floor office amid a jumble of buildings that make up Indonesia’s trade ministry, several staff members work on pamphlets and posters to inform Indonesian businesses about the new Economic Community of the Association of Southeast Asian Nations, known as AEC. “It is mostly smaller businesses we talk to. They need the information about the AEC more than the big companies, who know about it already,” said Firlana Herva Mulia at the AEC Center. “They ask us about the opportunities, the strategy, the best way to deal with the AEC.” Many of her AEC Center colleagues are out on the road, part of a last-minute drive to spread the word to businesses in rural Java.

Indonesia’s local elections indicate few surprises – Nikkei Asian Review

SOLO — In Indonesia’s recent local elections, Hadi Rudyatmo, a former sidekick of President Joko Widodo, seemed set to easily retain the mayor’s job in this city of around half a million people in central Java. But that does not say much about the current standing of Widodo himself in the national political scene. The nationwide vote for mayors and other local government positions was staged on Dec. 9. Although the country’s election commission is not due to announce results until Dec.18, provisional results indicate that Rudyatmo is likely to win Solo with around 60% of the vote. Siska Sitiawan Sanjaya and her brother Sandro voted together in central Solo early on polling day. Both opted for the incumbent who, like his better-known predecessor as mayor and current president, Widodo, goes by a nickname. “I choose Rudy,” Siska said. “I think he can manage Solo city well, and can make it better.”

Local polls capture essence of national politics – Nikkei Asian Review

JAKARTA — Local elections will be held simultaneously across Indonesia for the first time on Wednesday, after the issue of whether to directly elect mayors and other local government leaders spurred ructions, recriminations and walkouts in the national parliament last year. Back then, parties supporting President Joko “Jokowi” Widodo, who had just been elected to office, voted to retain the decade-old system of direct local elections, but the parties backing the losing presidential candidate, Prabowo Subianto, successfully voted to scrap it. Given that Indonesia had just elected Widodo, a former governor of Jakarta and mayor of Surakarta, as president, the assault on voters’ rights prompted a massive public outcry. The backlash was strong enough to not only prompt then-President Susilo Bambang Yudhoyono to issue a decree overturning the vote, but convinced parliament to boost the status of local elections. “There are 365 days in the year, there are more than 540 election locations,” Arief Budiman, a commissioner at the KPU, the Indonesian election commission, told the Nikkei Asian Review. “Before, we were constantly monitoring another election.”

Indonesia: dealing with a divide – Nikkei Asian Review

JAKARTA – Indonesia will hold regional elections on Dec. 9, but Mardiana Deren, a land rights campaigner from the Dayak ethnic group on Kalimantan, is in two minds about what difference the poll will make. Deren has sought to curb the clearing of forests and spread of oil palm plantations on Kalimantan, or Borneo, but despairs of getting political support for her cause. “I have not found any candidate who could be a sympathizer and not sure I would find any,” she said. Despite being an award-winning campaigner, Deren was non-committal about contesting elections herself. “I would need a lot of money to stand,” she said, discussing how parties and candidates have to find the cash to run often expensive election campaigns – an outlay that often blurs the line between legitimate expense and vote-buying and can leave the winning candidate in debt to powerful businesses.

Indonesia’s foreign worker flip-flop – Nikkei Asian Review

JAKARTA – Indonesian President Joko Widodo has signaled a softening of his government’s increasingly stringent visa requirements for foreigners working in the country in an apparent response to strong concerns raised by overseas businesses. Widodo told the cabinet on Aug. 20 that the government would drop earlier plans to require foreign workers to learn the Indonesian language and apply for temporary stay permits of up to a year, known by their local acronym, Kitas. The president’s statement came six weeks after the Ministry of Manpower and Transmigration introduced new rules requiring all companies to hire 10 Indonesians for every foreign employee. Ulf Backlund, chairman of the European Business Chamber of Commerce in Indonesia, known as EuroCham, said while the chamber is “upbeat on the economic prospects of Indonesia,” the hiring restrictions could be “counterproductive in the long run.”

Infrastructure controversies weigh on Widodo’s growth strategy – Nikkei Asian Review

CIPAKU, Indonesia — It might have been just another arcadian Saturday morning on Aug. 1 in Cipaku, a farming village 240km east of Jakarta. The dawn euphony filled the air: a chorus of songbirds, crowing roosters and dogs offering up their first soft barks of the day. Shortly after, as the sun rose and as the first wan sunlight filtered a few beams through the tree-shaded village in West Java, drowsy parents swept doorways and ushered sprucely uniformed children out the gate ahead of the 7 a.m. start of school. That same day — if government plans had gone ahead — the newly completed 110-meter high Jatigede Dam, just 3km away, would have shut its floodgates, blocking the Cimanuk river and submerging Cipaku’s 1,200 homes under water 50 meters deep. But Aug. 1 came and went and the Cimanuk was left to flow as usual, marking yet another delay in the dam’s opening that Public Works and Housing Minister Basuki Hadimuljono attributed to “administrative glitches.”

Indonesia, increasingly protectionist, cracks down on foreign workers – Nikkei Asian Review

JAKARTA — A new government directive requiring companies to hire 10 Indonesians for every expatriate is raising alarm among businesses and compounding concerns about the Joko Widodo administration’s growing protectionism. New labour rules, announced on June 29 by the Ministry of Manpower and Transmigration, were followed three weeks later by the introduction of higher import duties on a variety of consumer goods, such as clothes, carpets, cars, alcohol, tea and coffee. Boston University’s Emeritus Professor Gustav Papanek, who has studied the Indonesian economy for more than five decades, said the stiff new regulations are not the best way to go about reshaping employment conditions. F “Indonesia needs to attract three times as much foreign direct investment as it attracts now, not discourage people,” Papanek said.