The Indonesian Economy in 2011 -- 8% Growth

The fun and games have begun in terms of promising the world. Jusuf Kalla (photo courtesy of Viva News and showing the current Vice President's plan for balancing the budget) has promised the Indonesian Chamber of Commerce and Industry (Kadin) that if he is elected president in the upcoming presidential elections that his government will deliver economic growth of 8% per year starting in 2011.

However, what is more interesting is the probable means that are to be employed in funding this proposed growth. According to Kalla 8% growth can be achieved because his government would be decreasing state spending (read slash already limited public spending) slashing public spending is most likely to impact most heavily on the poor and those less able to absorb any cuts to public spending.

The second part of the plan is a progressive tax system. It is unclear whether the intent here is to broaden the tax base or ramp up the amount of tax paid by higher income earners or simply better collection practices through enhanced enforcement of the current code. Nevertheless, it is unclear how investors or both domestic and foreign origins will feel about bearing a greater tax burden.

The next plank of the 8% growth platform is a decrease in fuel subsidies. Now, this is always a winning policy amongst the masses, not! However, it seems that Kalla believes that the conversion program from kerosene to gas has worked and that any reduction in fuel subsidies is unlikely to draw the negative public reaction that it has in the past. My guess would be that he might need to think again on this one. That is not to say I am not against the idea of a continual reduction in fuel subsidies, but rather going into a presidential election with this as part of one's election platform is risky at best and silly at worst.

The rest of the measures appear to be linked ot administrative and bureaucratic reforms. The idea of reforming the administration and the bureaucracy is a standard policy platform adopted by just about everyone. However, in the more than 10 years of reformasi to date, it is arguable how much the regimes of Habibe, Gus Dur, Megawati, and Yudhoyono have delivered on reform of the administration and bureaucracy platform. Personal experience on this front would suggest very little at the lower levels of the chain.

I guess if you are inclined to believe Kalla and his arguments for 8% growth then you should vote for him and then if enough people are convinced of his claims then you can wait and see until 2011 and see if he delivers.

My guess is though that people will still choose the incumbent president and his new vice-presidential candidate. SBY needs to hope that not everyone who supports him thinks he is a shoe-in and actually get out to vote. Don't you just love a potential upset?