Can Indonesia’s Joko Widodo Deliver on His Infrastructure Promises?

Indonesian voters elected Joko Widodo as president last year, enraptured by his promises of political stability and rising investment, especially on infrastructure. With little visible progress eight months after he took office, however, investors are becoming restless. “We have to reinvent our economies; we have to reinvent our societies,” proclaimedJokowi, as the Indonesia president is locally known, at the recent World Economic Forum on East Asia in Jakarta. “We must change ... from consumption to investment in our infrastructure, investment in our industry, but most importantly, investment in our human capital, the most precious resource of the 21st century.”

Indonesia, the largest economy in Southeast Asia, holds tremendous promise. It has powerful demographics, a low debt-to-GDP level of 26 percent and a solid trend growth rate of 5.4 percent over the past 15 years, better than the 5.1 percent average for countries of the Association of Southeast Asian Nations. But softer global growth has hurt an economy dependent on exports, such as棕榈油and coal. Indonesia’s growth rate touched a five-year low of 4.7 percent in the first quarter of this year, and the rupiah is one of emerging Asia’s weakest currencies, having fallen nearly 13 percent in the 12 months ended May 21.

财政调整开始具有将国内需求带入供应的预期效果。政府利用全球油价下跌，以11月修剪燃料补贴，然后在1月1日淘汰他们，进口量减慢，促使五个月的贸易顺差。Indonesia has bolstered its foreign exchange reserves to $111 billion, up from $92 billion in 2013. “There is a bit of slowdown, but it’s happening for all the right reasons,” contends Jan Dehn, head of research at London-based emerging-markets specialist Ashmore Group.

The concern is that improvements in the trade balance are driven by weaker imports and slower domestic demand rather than rising exports, says Dehn. The Bank Indonesia, historically susceptible to political interference and often late in making interest rate decisions, is facing pressure to slash rates to help the government achieve its growth target of 7 percent. If the central bank obliges, consumption will bloom, imports will rise and the deficit is likely to reappear.

恢复增长而不恶化的贸易平衡的方式是提高生产力，索赔Dehn。出口变得更具竞争力，改进 - 如技术进步 - 往往是永久性的，所以经济发展更加持久。“基础设施问题，任何想象力，都是印度尼西亚最重要的问题，”据探索。世界银行估计，基德锁交通和电力停电以及2004年以来每年的经济增长损失1％。Jokowi的经济计划的核心是为了减轻这种制约因素 - 他的政府旨在在未来五年内将基础设施从约2.5％的GDP筹集到GDP的约4％，建造15个机场和24个海港，建造更多住房。然而，投资者必须耐心等待，因为全国计划需要风险的上行开发成本和长期融资。“基础设施可能是政府可以做的最复杂的事情，”Dehn说。

Jokowi’s plans enjoy widespread support, but he risks being rendered a lame duck if he fails to deliver. The president’s approval rating is tumbling, down to 57.7 percent in April, according to Indo Barometer, compared with 75 percent when he entered office.

Although, five months into 2015, the administration has committed only 1.5 percent of the year’s projected capital budget, progress has been made on feasibility studies and inviting bids. Ashmore Group anticipates infrastructure spending to vault in the next 12 months. Investors are beginning to recognize this, says Dehn. Foreigners own up to 39 percent of all Indonesian local-currency bonds, a near record share. “It’s going to continue to be a story that rewards investors that take a longer-term view in Indonesia,” says Dehn.