Indonesia's President Joko Widodo had a rocky first year in office after his election victory in late 2014. His second year, however, appears to have started on a much more promising note.

Vikram Nehru
Nehru was a nonresident senior fellow in the Carnegie Asia Program. An expert on development economics, growth, poverty reduction, debt sustainability, governance, and the performance and prospects of East Asia, his research focuses on the economic, political, and strategic issues confronting Asia, particularly Southeast Asia.
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His coalition, earlier a minority in parliament, was bolstered by political parties defecting from the opposition coalition and now enjoys a commanding 62% majority. And over the past several months, his reshuffled cabinet introduced no fewer than 10 economic reform packages which have been welcomed by markets and investors. A recent poll showed his popularity has soared, boosted no doubt by his government's newfound momentum.

The question now is whether Widodo can maintain this momentum and become the transformational leader his supporters hoped he would be. To achieve that, he needs a performance plan for 2016 against which the country can evaluate his progress.

There are six specific policy issues that deserve to be on his priority list and which, if successfully implemented, would strengthen him politically and almost guarantee his re-election in 2019.

The first of these is to strengthen the Corruption Eradication Commission (Komisi Pemberantasan Korupsi, or KPK). Widodo's integrity has never been in doubt, but he still has to burnish his anti-corruption credentials after several missteps last year. Ever since he came to office, he has been dogged by attempts by Indonesia's most corrupt institutions -- the police and political parties -- to weaken the KPK, the country's most trusted body.

After being mauled by police investigations which cast doubt on its integrity, the KPK, which has a 100% conviction record, was re-launched when Widodo swore in a new bench of commissioners selected by parliament. Although far from being a dream team, the new commissioners set to work, but had barely begun when parliament moved to revise the 2002 law that had created the body. The sole intention of the revisions was to weaken the KPK further, notably by restricting its wiretapping authority.

Widodo, unfortunately, stayed silent on the sidelines until the new chairman threatened to resign and a crescendo of public opinion could no longer be ignored. He then convinced parliamentary leaders to "delay" passage of the revisions -- thereby merely postponing controversy.

In 2016, a key performance criterion for the president should be promotion of the independence and investigative powers of the KPK and resolute defense against efforts by the police or parliament (or anyone else, for that matter) to weaken this important institution.

Economic momentum

The second performance area for 2016 will be to keep up the pace of economic reform. The 10 reform packages introduced by Widodo's new economic team are steps in the right direction and will help combat slowing growth and counter the drag of a lethargic global economy.

Admittedly, most of the packages are not earth-shattering, but mere tweaks to existing regulations. But taken together, they signal a genuine and determined effort to streamline Indonesia's notoriously labyrinthine regulatory framework in a bid to stimulate private investment, particularly from abroad. The latest package, announced mid-February, permits foreign direct investment in 35 sectors previously on the "negative list," and in many cases raises the potential share of ownership by foreign entities to 100%.

Drilling down into the economic reform agenda, Widodo faces some challenges. The first is to actually implement the announced economic changes. In some cases, this may require new laws and accompanying regulations; in others, it may need just new regulations. As important, Widodo must ensure his ministers, some of whom remain unconvinced by his initiatives, do not undermine them through administrative means.

Finally, the economic team should not rest on its laurels. Indonesia's international ranking in the World Bank's Doing Business indicators remains abysmal. There is still a huge backlog of measures to lower trade and investment barriers and this must be tackled in the same steady manner as the first 10 packages.

The third area by which Widodo's performance in 2016 can be measured is his action to keep the budget deficit within legal limits. As many feared, the government almost breached its legal limit for the budget deficit (which is 3% of gross domestic product) in 2015. The minister of finance had to resort to some extraordinary last-minute maneuvers to come within the target. Low oil prices translated into lower oil revenues in the budget and the shortfall could not be compensated by increases in non-oil revenues.

The minister's task in 2016 will be even more difficult. His budget projections were built on even more unrealistic estimates than in 2015, and international oil prices have remained stubbornly low. Not only will mid-year cuts in government spending be inevitable, they will also need to be fairly drastic (approaching 2% of GDP).

In 2016, not only must Widodo revise the budget to make it prudent and responsible, he must do so without gutting his signature infrastructure program. That means he will need to wield the axe on such politically sensitive items as fuel subsidies, the village fund (allocated to villages to combat poverty and radicalism), civil service salaries, and military expenditure.

It would be wrong to rely on his proposed tax amnesty to bail the government out, since parliament is in a confrontational mood. Only one of every 33 Indonesian taxpayers pay what they owe. The tax amnesty bill, offers immunity and attractive tax rates to tax evaders who repatriate their funds to Indonesia. Even if the amnesty bill passed and if it succeeded in its aim of raising $4.4 billion in additional tax revenue in 2016 (both big "ifs"), the windfall gain should be used to lower debt rather than finance recurrent expenditures.

The botched budget has triggered rumors that the minister of finance will be replaced in a second cabinet reshuffle. If true, it is critical that Widodo replace him with a competent and experienced technocrat well-versed in public finance and macroeconomic policy, and not choose a political factotum to accommodate his new coalition partners.

Police and military reform

The Indonesian police deserve credit for having dealt efficiently and effectively with the terrorist incident in the heart of Jakarta on Jan. 14, 2016. But the attack by gunmen on several points around the city, and the likelihood of further such incidents, points to the need to implement much-delayed reforms in Indonesia's security apparatus.

In 2016, the police's counter-terrorist unit, Detachment 88, needs to be strengthened with additional men, equipment, and training. It has successfully thwarted several terrorist incidents, but it needs more resources if it is to tackle a growing security challenge. In addition, the police must tighten security in prisons where many of Indonesia's terrorist plots have been hatched and from which convicted terrorists continue to exert influence. Finally, the military must be prevailed upon to share its counterterrorist intelligence with the police, and the latter, for their part, should seek presidential authority for military support in situations where they need additional firepower.

Widodo also needs to commission a civilian blue ribbon panel in 2016 to review the entire national security system, with equal attention given to the police and the military. Military expenditures as a share of GDP (now at 1%) are the lowest in Asia, but additional resources should only be provided if they are accompanied by fundamental reforms.

A fifth area of focus for 2016 should be in strengthening the president's office. Former president and strongman Suharto had a national secretariat. Widodo's immediate predecessor President Susilo Bambang Yudhoyono had the Presidential Delivery Unit. Both employed powerful offices to ensure cabinet and presidential policy decisions were implemented and coordinated between ministries.

Widodo has no such mechanism. His cabinet secretariat has no muscle. He has very few advisers who can help him think strategically about policy decisions, monitor implementation, and keep projects on track. His coordinating ministers do not have line authority over the ministries they oversee. Moreover, ministers have the same cabinet rank as coordinating ministers and often represent different political parties, so cooperation is not always forthcoming. Finally, the president has neither the time nor the inclination to ensure his five coordinating ministers (and the planning commission, Bappenas) work as a team.

Widodo needs to establish a strong presidential oversight office to help ministers set priorities, follow through on commitments, craft monitoring plans, and track results. To head it, he should appoint an outstanding manager who has the confidence of the president and is capable of getting things done. In the longer run, the president's coordination office should replace the coordinating ministries, which have become an anachronism.

Combat intolerance

Intolerance is on the rise in Indonesia. A recent report by the Wahid Institute, a research center on Islam, recorded a 23% increase in violations of faith and religion across the country in 2015 compared to the previous year. These included closing or destroying houses of worship, prohibiting their construction, and obstructing rituals.

Most of the violations were by the police and local authorities and were concentrated in West Java and Aceh, areas where conservative Islam is well entrenched and where hardline groups have been growing most rapidly. The victims were mostly Christians and minority Muslim groups such as Ahmadiyas and Shiites. A key factor in the recent upsurge in intolerance is the proliferation of local laws discriminating against minorities supported by local governments, often under pressure from hardline Islamists.

In 2016, as his final area of focus, the president should not put up with intolerance in any of its guises. He should initiate a process to strike down local laws that discriminate against minorities and violate the constitution. The police should be required to prevent violence under the pretense of religious piety and perpetrators of violence should be dealt with swiftly under the law. Indonesia is a secular state and should act like one.

These six criteria to gauge Widodo's performance in 2016 may look demanding. But they recognize his extraordinary political capabilities and his potential to be a transformative leader. He has already made progress on many of these fronts. If he maintains this momentum, he will demonstrate that effective collective action and a vibrant democracy can coexist in Indonesia. That alone would be worthy of a second term.


This article was originally published by the Nikkei Asian Review.