Indonesian cabinet reshuffle: experts respond

Amidst an economic slowdown and crisis in political support, Indonesian President Joko Widodo has replaced six ministers from his cabinet in the hope of boosting the economy and his domestic political clout.

Former Central Bank Governor Darmin Nasution is the new chief economics minister. The president’s chief of staff, former general Luhut Panjaitan, is now coordinating minister of politics, security and justice. Private equity executive Thomas Lembong replaces Rahmat Gobel as trade minister. Rizal Ramli is the new coordinating minister for maritime affairs. Senior PDI-P politician Pramono Anung becomes cabinet secretary. Sofyan Djalil, who was chief economics minister, has been transferred to head the national development planning ministry.

We asked experts on Indonesian politics and economy how they see the August 12 reshuffle:

Calculated timing

Philips Vermonte, Head of Department of Politics and International Relations at Centre for Strategic and International Studies

Indonesia’s economy has suffered the brunt of the slowing down in the global economy. Widodo replaced six ministers in his cabinet, because the country needs people who are known by the international market and who can create good policies to solve Indonesia’s economic problems. Most of the new ministers have experience and are well known by the international community.

The slowing down of the economy is actually not merely caused by internal problems. Nearly all foreign currencies are weak against the dollar. Global commodity prices have been declining during Widodo’s presidency, which is in contrast with Susilo Bambang Yudhoyono’s term. Coal prices, Indonesia’s export commodity, were high during Yudhoyono’s term, and that supported the country’s economy during his presidency.

The president had been delaying the cabinet shake-up for months. He finally reshuffled his ministers because domestic pressure has become so strong.

Widodo also chose to announce the new ministers a couple of days before he addresses the parliament on August 16, a day before Indonesia’s Independence Day celebration. Cabinet shake-ups often create controversies and questions, so it seems that Widodo wanted to get this over with before the speech. This would allow his cabinet to leave political controversies behind and focus on the job after the president’s national address.

The president is wise to replace the coordinating ministers of the economy and security, politics and justice, and not the many technical ministries under them. Changing too many ministers will create political turmoil.

Furthermore, a lot of Widodo’s 30 technical ministers are fresh faces. For the past 10 months, Widodo’s ministers have familiarised themselves with how to deal with bureaucracy and their area of work. Appointing new ministers would prolong the learning curve for the ministers.

Foreign businesses see Indonesia as a potential market. Indonesia is rich in resources. But our bureaucracy is mired in red tape and we have poor infrastructure. Therefore we need coordinating ministers that can lead technical ministries to fix these problems. The new ministers provide some weight and experience to the cabinet.

Economics minister has experience to lead

Agustinus Prasetyantoko, Dean of Faculty of Business Administration and Communication Science at Atma Jaya Catholic University of Indonesia

Indonesia’s new chief economics minister, Darmin Nasution, and new trade minister, Thomas Lembong, have a difficult task in improving Indonesia’s economy. In the 10 months of Widodo’s presidency, the Indonesian rupiah has fallen, to a 17-year low, as has market confidence.

Nasution, as the coordinating minister for economics, must direct the 10 technical ministries under his charge, which include ministries of finance, industry, trade and state companies, to convince investors that the government is with them.

He also needs to give a clear explanation on how the government plans to finance building new public infrastructures - such as roads, ports etc. The chief economics minister must ensure that the government invests well in infrastructure.

Nasution, a former director of Indonesia’s Central Bank, replaces Sofyan Djalil, who now holds the position of minister of national development planning. During his term as chief economics minister, Djalil was unable to carry out a leadership role. His technical ministries were left on their own.

Nasution, however, is believed to have the ability to consolidate all 10 technical ministries for the economy. He is also well regarded by the market. They see his experience as Central Bank director and an official in the finance ministry as a sign that he is capable of solving the country’s economic problems.

With regard to the shake-up in the trade ministry, there were many doubts surrounding Rahmat Gobel, who is now replaced by Thomas Lembong, a Harvard-educated private equity executive. Gobel is more competent in the industry sector. As trade minister he didn’t perform as well.

But the public also see Lembong as a peculiar choice for trade minister due to his background as an investment banker. But if we look at the positive side, he really understands the dynamics of the market. So at least he can appropriately respond to what the market expects, because he was part of it.

What he needs to catch up on is his understanding of the real sector. He needs to be able to ensure adequate food stock – and there are a lot of problems there. We have mafias controlling rice, soy, beef. He’s up to a big challenge.

Managing political support

Part of the problem in Joko Widodo’s presidency is that people who are interested in investing in Indonesia doubt whether Jokowi has enough political backing. He is supported by PDI-P, but the party chairwoman, Megawati Sukarnoputri, often undermines Jokowi’s position as president. She publicly stated that Jokowi works for the party.

One of the problems between Jokowi and Megawati is his chief of staff, former general Luhut Panjaitan. The appointment of Luhut as coordinating minister of politics, security and justice is quite surprising as there are rumours already that retired general Moeldoko, the former military chief, would be picked to fill that post.

However, the appointment can be read as Jokowi’s strategy to appease Megawati. To get through to Jokowi, you have to pass his chief of staff Luhut. And nobody likes that.

As chief of staff, Luhut has free rein, having as much power as Vice-President Jusuf Kalla. Placing Luhut in the cabinet is a compromise for Megawati.

As cabinet minister he doesn’t have as much power because he is now constrained by ministry protocols. Unless, of course, he keeps his position as the chief of staff. At this point, that is still an open question. While Jokowi has mentioned that Luhut could keep both positions, opposition against that is emerging already.

Jokowi also replaced the young Andi Widjayanto with top PDI-P official Pramono Anung as cabinet secretary. Pramono is considered to be very close to Megawati but he has a lot of political knowledge and support. Hopefully he can appease both Megawati and try to rebuild the connection between PDI-P and other coalition members.

Jokowi employed good political strategy in appointing Rizal Ramli as coordinating minister of maritime affairs. Ramli was chief economics minister during Abdurrachman Wahid’s presidency and a huge critic of Jokowi. What better way to silence your critic than by putting him in the cabinet?

My gut feeling is that Jokowi is placing him in maritime affairs because there he would have to deal with two of the strongest ministers Jokowi has: Susi Pudjiastuti and Ignatius Djonan. Susi is the maritime affairs and fisheries minister, while Ignatius is Jokowi’s transportation minister. Both could challenge or at least keep Rizal Ramli’s power in check.

Philips Vermonte has received funding from the Japan Foundation. USAID, and Asia Foundation.

Agustinus Prasetyantoko has received funding from TIFA Foundation and Rajawali Foundation. He is the chief economist at Bank Tabungan Negara (BTN), Indonesia.

Yohanes Sulaiman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.