Indonesian President Joko “Jokowi” Widodo’s visit to the United States was cut short this week. Jokowi decided to return to Indonesia less than halfway through his trip to America in order to deal with the haze crisis in Indonesia. Parts of Sumatra and Kalimintan have been devastated by the haze, which is closing businesses and causing hundreds of thousands of respiratory ailments. Jokowi will “possibly fly directly to the haze-devastated provinces of South Sumatra or Central Kalimantan…He made the decision [to cut the trip short] after he received news that conditions in these provinces had deteriorated over the last two days,” the Straits Times reported.
However, during his shortened visit Jokowi did make several important announcements. In Washington, he met President Barack Obama and delivered several important messages as part of Jokowi’s attempts to woo the U.S. business community and convince investors in general that Indonesia is becoming a more attractive climate for business. At the White House, the two leaders affirmed their commitment to combating climate change, and discussed closer maritime security cooperation. Jokowi attended a dinner for him hosted by the U.S. Chamber of Commerce. More notably, the Indonesian president announced that Indonesia intends to join the Trans-Pacific Partnership---a supposed sign that, under Jokowi, Indonesia will be open for business. “Indonesia is an open economy and with a population of 250 million, we are the largest economy in Southeast Asia,” Jokowi said at a meeting in the Oval Office.
Joining the TPP would force significant economic reforms in Indonesia, and if Jokowi could follow through on his pledge, it might also consolidate the president’s power and quiet the doubters who believe he does not have the political skills to run Indonesia. Joining the TPP also could prod other Southeast Asian nations that have been considering joining the TPP, such as Thailand, to follow Indonesia’s lead.
But while Jokowi promised Indonesia would join, it remains unclear whether he can deliver on that vow. Both Indonesian and foreign businesspeople might dispute the contention that Indonesia is an open economy. Red tape, corruption, and economic nationalism remain significant challenges to business in Indonesia; the country ranked 114 out of 189 countries on the World Bank’s most recent Ease of Doing Business Report. (Indonesia came in even lower in the World Bank’s subcategories for Starting a Business and Enforcing Contracts---among the lowest rankings in the world.) It also ranked a lowly 107th in the world in the latest installment of Transparency International’s Corruption Perceptions Index. Since August, when Jokowi shook up his Cabinet and seemed to put some distance between himself and some of his party’s leaders, he has promised a raft of economic reforms, to be delivered at a rapid rate, the way he used to push through fast changes as mayor of Jakarta. But as I noted earlier this month, it could take years to implement Jokowi’s reforms, as Indonesia’s processes for approving investment need to be totally overhauled. Although Jokowi also has suggested he take other steps to loosen the rules for allowing foreign investment, and (before he shortened his trip) had planned to meet CEOs on a jaunt to the U.S. West Coast, most of the largest foreign investors in Indonesia are not convinced---they are waiting to see whether the first round of Jokowi’s proposed reforms actually occurs.
What’s more, if Indonesia was serious about joining the TPP, Jokowi might face significant opposition from the Indonesian public and from many political and business leaders, including leaders of PDI-P. Economic nationalism and suspicion of trade deals have always been potent forces in Indonesia, dating back to Sukarno, founder of the nation. Jokowi himself has, at times, proven a champion of protectionism and of Indonesia’s mostly underperforming state enterprises, which might be forced to liberalize if Indonesia joined the TPP. Jokowi’s administration, for instance, has overseen increases in tariffs on some 1,000 types of imported products. Joining the TPP would require Indonesia to drastically upgrade intellectual property protection and enforcement, change many local content regulations, reduce tariffs, and possibly dismantle some state enterprises, all steps that could alienate some of the most powerful politicians and tycoons in the archipelago.