Yudhoyono Says Second Term Will Clear ‘Bottlenecks’ to Growth

By Achmad Sukarsono

Oct. 20 (Bloomberg) -- Indonesian President Susilo Bambang Yudhoyono starts a second five-year term today with a mandate to speed growth in Southeast Asia’s biggest economy. To do that, he must reconcile national and local policies, analysts say.

“Many targets couldn’t be reached because of bottlenecks,” Yudhoyono said earlier this month. The goal in the second term “is very clear,” he said. “Solve these clogs. That’s why we will reform bureaucracy, rearrange permits, control programs, and prevent incorrect practices.”

Yudhoyono won the July 8 election on pledges to end corruption and rein in terrorism. A July 17 suicide attack on two Jakarta luxury hotels was the country’s first in almost four years, and anti-terror squads killed most-wanted terrorist Noordin Mohammad Top last month. The president still must build roads, power plants and ports vital for growth, said Umar Juoro, of Jakarta-based Center for Information and Development Studies.

“The strength of Yudhoyono’s economic team has been in the macro level,” Juoro, who is also a commissioner at PT Bank Internasional Indonesia Tbk, said in an Oct. 19 phone interview. “When we see the results in the real sector like mining, agriculture and infrastructure, we will find many policies that didn’t run properly.”

While Indonesia made more key changes in easing business regulations than other East Asian and Pacific economies, as the World Bank’s 2010 “Doing Business Report” showed last month, a number of regional laws contradict national policies, creating legal uncertainty for investors, said Chris Kanter, vice president of the Indonesian Chamber of Commerce and Industry.

Professionals, Politicians

Yudhoyono’s next cabinet will be a combination of professionals and members of the five parties that have joined his Democrat Party in the ruling coalition. The latter group doesn’t represent “something the markets will be cheering over,” said Helmi Arman, an economist at PT Bank Danamon Indonesia Tbk in Jakarta, in an Oct. 19 E-mail.

“Partisan politics apparently still played a significant role in the assignment of other key ministerial posts,” Arman said. The president has “the added burden” of ensuring a consolidated agenda and “making sure that partisan cabinet ministers don’t go their separate ways,” he said.

Yudhoyono has told candidates for his next cabinet, which may be announced tomorrow, they should make Indonesia investment-friendly.

The crux of the interviews is that “we must embark on some acceleration in our economy”, said State Secretary Hatta Rajasa whom analysts and the Indonesian media have said may take the post of coordinating minister for economic affairs.

‘Political Shield’

Rajasa has “limited economic experience but he’s hoped to be able to give political shield for economic ministers under him in the parliament,” Fauzi Ichsan, chief economist at Standard Chartered Plc in Jakarta, said in an Oct. 19 interview.

Before serving as state secretary, Rajasa was Yudhoyono’s transport minister, and ran his successful re-election campaign. Rajasa comes from the National Mandate Party and was the Muslim- based group’s secretary-general from 2000 until 2005.

The former oilman also was his party’s parliamentary leader from 1999 to 2000. National Mandate has been a member of the president’s coalition since 2004.

Yudhoyono’s coalition holds 75 percent of the parliament after Golkar, the second largest party in the house, joined after Aburizal Bakrie, a Yudhoyono ally and a businessman who served in the president’s first-term team as chief social welfare minister, was elected as Golkar chairman Oct. 8.

Almost Tripled

Yudhoyono’s Democrat Party, which held 10 percent of the parliament during his first term, almost tripled its share to 148 seats in April 9 legislative elections, making it the biggest party in the 560-strong body.

The party’s legislative clout means “the political condition should be easier” for Yudhoyono to push his policies forward, said Ichsan.

Yudhoyono’s inauguration will be attended by envoys that include U.S. Ambassador Cameron Hume and heads of governments like Australian Prime Minister Kevin Rudd. About 18,000 policemen and soldiers will guard the ceremony, according to Rohimullah, secretary general of the Indonesian legislature.

To contact the reporter on this story: Achmad Sukarsono in Jakarta at asukarsono@bloomberg.net