Frustrated Indonesian Leader Launches Charm Offensive With Investors

By Kanupriya Kapoor & Randy Farbi 2 July 2015

JAKARTA — Exasperated by the performance of his economics team, Indonesia’s president has personally taken on the job of promoting Southeast Asia’s largest economy to skeptical investors, said palace officials and economists.

Joko Widodo’s unusual intervention in a closed-door meeting with fund managers and economists has so far failed to turn the tide of disappointment in his policies, less than a year after his election was hailed as a new era for a country plagued by corruption, red tape and rickety infrastructure.

Palace officials and economists said that over the past two weeks, a “who’s who” of fund managers and economists have met with Widodo and his closest advisers as part of a new campaign by the palace to turn around souring sentiment.

The president is considering holding such meetings on a monthly basis, according to economists.

“We need to be better at informing the market on the progress we’re making,” a palace official who attended one of the meetings told Reuters.

“The ministries are not doing that and the truth is we are making some progress. But nobody’s able to see that, so that’s why we are holding meetings like these.”

Widodo came to power with strong business-friendly credentials and a promise to beef up the country’s creaking infrastructure, but has been hamstrung by rifts inside his own political party and squabbles between government agencies.

On Monday, the president met privately with 11 economists to highlight the government’s achievements so far, including the ground breaking of the Trans-Sumatra highway.

Economists said Widodo, speaking calmly and softly, told them that the government’s economic performance would improve in the second half of this year as it resolves bottlenecks in stalled infrastructure projects.

The president also promised to conduct more on-the-ground inspections to ensure top projects, such as Jakarta’s light rail train, were on track.

Presidential chief of staff Luhut Panjaitan held a similar meeting with nearly 20 fund managers, including local representatives from Deutsche Bank, Schroders, and investment firm CLSA.
But some attendees were not immediately swayed by the administration’s pledges.

“The meeting doesn’t really change much,” said Anton Gunawan, a Bank Mandiri economist who was at the Jokowi meeting. “The problem cannot be solved quickly.”

Participants said the president needed someone with “star power” on his economic team who had the respect of the market and could convince investors to keep their funds in Indonesia.

Some recommended the president appoint World Bank managing director and former Indonesian finance minister Sri Mulyani Indrawati to his team.

The president’s current economics team, led by chief economic minister Sofyan Djalil and finance minister Bambang Brodjonegoro, are under fire for not showcasing the government’s achievements better.

Investors have tended to focus on the negative: the weakest economic growth since 2009, sluggish consumer demand, long-stalled infrastructure projects and rising unemployment and inflation.

“The president is of the view that our economic fundamentals are good and that it is the perception that is bad,” said presidential spokesman Teten Masduki.

The president has come under increasing pressure, notably from his own party and the vice president, to reshuffle his cabinet due to poor performance.

At the closed-door meeting with economists, Widodo “admitted that there are problems in his cabinet, but he didn’t mention anyone,” said Destry Damayanti, another Bank Mandiri economist who was among the attendees.