Hatta-nomics Protectionism

Buat yang tidak bisa baca WSJ, ini yang dimaksud sama Hatta Rajasa yang sedang kampanye kalau dia Nasionalis, bahkan mitra asing kepanasan akibat kebijakan dia.

Ini diambil dari http://online.wsj.com/article/SB10001424052702304707604577421862141300468.html

The Politics of Indonesia’s Protectionism

Jakarta’s new policies aim to keep the ruling party in power, but might do just the opposite.

By KEVIN O’ROURKE

Indonesia has enjoyed a recent spell as a darling of global investors looking for promising alternatives to China and India. With a large pool of consumers boasting increasing incomes, rich natural resource endowments and a growth rate above 6%, it’s easy to see why. Yet lately a threat to this streak has emerged. Locals call it “Hatta-nomics.”

With only 30 months remaining in his second and final term, President Susilo Bambang Yudhoyono has empowered his Coordinating Economics Minister Hatta Rajasa, who also chairs the Islamic-oriented National Mandate Party, to start heading in the wrong direction. Mr. Yudhoyono has enjoyed great success by trying to make Indonesia more open to investment—especially by cracking down on the endemic corruption that still discourages many foreigners. But Hatta-nomics involves a heavy dose of protectionism and government interference in the economy.

Mr. Rajasa espouses a “master plan” to develop infrastructure through “economic corridors,” but it overlooks the need to build institutions through civil service reform, which can allow the plan to be implemented properly. Meanwhile, the plan requires massive private-sector financing, but other aspects of Hatta-nomics serve to deter such investment.

Mr. Rajasa has in mind foreign ownership limits, export restrictions and import quotas. In mining, the government earlier this year mandated that foreign investors have to sell their majority stakes in 10 years. It has put in place a ban on raw ore exports and is also contemplating one on exports of certain types of coal. Jakarta is also looking to renegotiate old mining contracts.

Then there are quotas for beef imports and plans for similar rules for fruit and vegetables. The government has reimposed restrictions on finished-goods imports, requiring manufacturers to use specially licensed importers. A ban on raw rattan exports artificially depresses domestic rattan prices, benefiting owners of furniture factories at the expense of smallholders.

In the management of state enterprises, the government has canceled all but one of the privatizations planned for 2012. On labor issues, the government has approved Jakarta-area minimum-wage hikes of 15% for 2011 and 19% for 2012, vastly exceeding inflation. Plans are underway to make outsourcing illegal, but without a concomitant moderation of the regulatory rigidities that make it hard to keep manufacturing onshore.

Hatta-nomics is being sold as a way to strengthen national businesses, achieve food self-sufficiency and add value to raw materials. But plentiful experience elsewhere shows that protectionism and interventionism tend to benefit special interests at the expense of consumers.

Political considerations may be driving Hatta-nomics more than economic ones. The ruling party is worried about a future government run by the current opposition, which could investigate allegations of corruption against top officials. Hatta-nomics could be the government’s way to weaken opposition parties and simultaneously groom Mr. Rajasa—an in-law of Mr. Yudhoyono—for higher office in 2014.

In the last two years, the independent Anti-Corruption Commission has exposed extensive kickback scandals that implicate senior members of the ruling Democrat Party. The scandals have devastated the top ranks of the party, which now lacks viable nominees. Thus the need for Mr. Rajasa to be seen as a rising star who can be counted on to defend the Yudhoyono legacy, perhaps as vice president in a future administration.

Mr. Rajasa’s economic policies appear slanted against rival forces. For example, there is reason to suspect that recent policies toward the minerals mining industry intend to recentralize authority and stifle regional exporters. Typically, these producers only confer benefits on regional political leaders, many of whom align with the Golkar or PDI-Perjuangan parties—parties that are likely to nominate their own chairs for president in 2014. Banning ore exports might constrict flows of financing to these rivals.

Hatta-nomics may also be aiming to curry favor with domestic conglomerates that can finance campaigns. This strategy, though, would likely backfire. A common expression during election-time goes: “If someone offers money for your vote, take the money and vote for the other one.” Voters have done just that in three successive elections, as better financed contestants have lost to those with cleaner images, better records and more compelling messages.

Voters are likewise unlikely to be impressed with Hatta-nomics’ antiforeign posturing. The electorate is savvy and independent-minded. Public opinion correlates closely with real conditions, such as prices, job-creation and clean governance. A February 2012 poll by the Survey Institute noted that perceptions of political and law enforcement conditions are at low points for the Yudhoyono era. In a telephone poll conducted this month by the Kompas newspaper, 11% of respondents said that basic needs are affordable and 12% said that the supremacy of law is enforced, while 70% cited the need for a reform movement.

Since Hatta-nomics isn’t going to deliver on any of those things, it will be counterproductive for the Democrat Party economically and politically. Voters are less and less supportive of the president’s entrenched inner circle and its vested interests. They are sick of the patronage-style principles of largesse-for-loyalty that prop up much of the political elite.

The outgoing Mr. Yudhoyono has an opportunity to secure lasting renown as a transformational champion of democracy and development. But with Hatta-nomics he is opting instead to eschew reform and sacrifice efficiency. Once voters see this, the president’s rivals stand to gain.

Mr. O’Rourke is the author of a report on Indonesian politics and policy making, Reformasi Weekly.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s