Jokowi Outlines Plans to Remake Indonesia: Interview Excerpts

(Bloomberg) -- Indonesia’s President Joko Widodo said he’s counting on a stronger political mandate to push through tough reforms in his second term to draw more foreign direct investment and tackle the nation’s high current account deficit.

With political parties in his coalition securing about 62% of seats in the parliament, more than the 38% at the start of his first term in 2014, Jokowi, as Widodo is known, says he can easily win the backing of the legislature on changes to labor and tax laws.

“Parties outside our coalition want to joint us as well,” Jokowi said in an interview at his office in Jakarta on Friday. “I think the politics for me is stronger in the second term.”

Here are some key comments from the interview:

LABOR REFORM

“I hope that by the end of this year, labor law changes will already be finished. I’ve already talked with the unions and my ministers and our parliament. Labor law will be different from wage regulation. Wage is a government regulation, labor will be under law. Everybody will be happy. There are also complaints from unions, but there are complaints from the chamber of commerce, from Indonesian Employers’ Association, Young Entrepreneurs Association. They all complain, so that we’ve to meet halfway. We compare with Thailand and Vietnam and we have comparisons.”

“A lot of investors, when they come to Indonesia, they complain about labor law, tax and business permit. Now there aren’t many complaints because we’ve what we call the online single submission. Before, if you applied for a business permit, you would need 6 months, 8 months or more than one year. Now it takes no more than 3 hours for 9 business permits with online single submission.”

TAX CUT

“We will calculate all components. How to bring down the rate from 25% to the next level. We’re still calculating. We want to bring it down to 20%. I will decide, maybe, in August. We will introduce it in 2021. It will be implemented directly.”

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TRADE WAR

“We want trade to be open and fair, but we’re looking at the facts. There’s a trade war, which presents problems to all countries. I believe that free and fair trade is very important. That’s what Indonesia chooses. Trade is the engine of growth for Indonesia. Every country must do what’s best for their national interests.”

PALM OIL

“There are 16 million people working in the CPO field. Farmers and workers are there. We’ve already talked to the EU about this. For me, if there is discrimination like that, I will fight because of the 16 million farmers and workers in this business. We already have moratorium on new plantations. As you know, palm oil is strategic commodity for Indonesia and since the very beginning, Indonesia has said that ‘let us compare our scientific data.’ Once again, Indonesia will continue fighting against discrimination on palm oil.”

DEFICIT

“We’ve five programs for the next five years, First, we will continue building the infrastructure, but faster. Second is human resources development--vocational training and vocational schools--to improve our workers’ skills. Third is attracting more foreign investors by simplifying business permits, also about labor law and tax. Four, bureaucratic and structural reforms. Five is collecting more income and spending better and in focused manner.”

NEGATIVE LIST

“We continue evaluating the list every two years and relaxing it. I’ve ordered the ministers to expand the list, but it’s still being discussed by them and hasn’t landed at my desk. Petrochemicals, manufacturing and labor-intensive sectors such as textiles, garments and footwear may be open for greater foreign investment. We will provide more incentives for those sectors by tax holidays and tax allowances.”

SECOND TERM

“I know the problems better now. Because this is my last term, so I have no burden. I have nothing to lose. I will do my best for this country and when there’s a regulation or law that is hampering our efforts, I will remove it, including ending the complexity of permits in central and regional governments.

GROWTH RATE

“Of course we want to reach 7% and more, but as you know, now there is a trade war, low commodity prices and then the global economic growth. IMF and World Bank say it will be less than 3.5%. We must be realistic. Even if the central bank cuts interest rate, it will still be difficult for economic growth but we can stimulate private sector to invest, expand and do business.”

RISE OF ISLAMISM

“Indonesia is moderate Islam, modern Islam, tolerate Islam. I’m not worried about that. This is common in politics, very common. It’s often happened in many places and it’s about the politics.”

To contact the reporters on this story: Tassia Sipahutar in Jakarta at ssipahutar@bloomberg.net;Rieka Rahadiana in Jakarta at rrahadiana@bloomberg.net;Arys Aditya in Jakarta at aaditya5@bloomberg.net;Karlis Salna in Jakarta at ksalna@bloomberg.net

To contact the editors responsible for this story: Thomas Kutty Abraham at tabraham4@bloomberg.net;Daniel Ten Kate at dtenkate@bloomberg.net

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