Sumber : The Jakarta Post
THE 2024 political year is about to end. A new government regime under the leadership of Prabowo Subianto will officially replace President Joko Widodo (Jokowi) on October 20, 2024. At the inauguration, Prabowo Subianto, together with his vice president Gibran Rakabuming Raka, will announce the names that will fill his cabinet.
The discourse surrounding the zaken kabinet (expert cabinet) that Prabowo Subianto is expected to form seems to be mere rhetoric. In a zaken kabinet, ministerial seats are filled by experts highly competent in their fields, without regard to the number of seats in parliament. But the political reality is different. This is similar to what Jokowi did when he initially aimed to simplify the bureaucracy in 2014, but what was implemented was quite the opposite. Jokowi’s cabinet turned out to be a “bulky”, and in 2019, he even added 12 deputy ministerial positions.
While Jokowi had 34 ministers/ministers of equal rank, Prabowo will likely have at least 44 ministers, as a consequence of the large coalition of political parties supporting his government. To provide legal grounds for this, Law No. 39 on Ministries, which limits the number of ministers to a maximum of 34, was revised and passed by the House of Representatives (DPR) in the final days of their term. Some ministries will be split into two or three, and there will be new coordinating ministers as well as ministerial-level agencies.
According to Infobank sources, Prabowo will also make progressive adjustments to ministries. The Directorate General of Customs and Excise, the Directorate General of Taxes, and the Directorate General of Budget, which are related to Non-Tax State Revenue (PNBP), will be separated from the Ministry of Finance and placed under a new body called the National Revenue Agency (BPN). The BPN is expected to increase the country’s revenue ratio from 10% to 23% of the gross domestic product (GDP).
Prabowo will also revert the Ministry of Tourism and Creative Economy to its previous structure, separating it into two ministries: the Ministry of Tourism and the Ministry/Agency for Creative Economy. Signs of this separation can already be seen in the budget for the Ministry of Tourism and Creative Economy, which has been cut from IDR 3.2 trillion to IDR 1.7 trillion in the 2025 state budget.
The Ministry of State-Owned Enterprises (BUMN) will be transformed into the BUMN Agency. If the BUMN Agency functions like Temasek, the super holding in Singapore, this could be a significant step forward in freeing the management of BUMN from political and bureaucratic influences.
Before taking office, Jokowi promised 7% economic growth per year, but the results over 10 years from 2014 to 2023 only averaged 4.11% per year, or 4.90% per year excluding the pandemic year of 2020. So, what about Prabowo Subianto, who is targeting 8% economic growth in the next two to three years?
TO MAKE 8% ECONOMIC GROWTH INTO A REALIZATION
An economic growth target of 7%-8% would be sufficient for Indonesia to address its main economic problems: poverty and unemployment. According to data from the Central Statistics Agency (BPS), as of March 2024, there were 25.22 million people living in poverty, or 9.03% of the total population. This is based on BPS criteria, which define the poor as those with expenditures of IDR 582,932 per month or IDR 19,431 per day. However, using the World Bank’s 2022 calculation, which sets the extreme poverty line at $2.15 per person per day, the number of people in poverty in Indonesia reaches 44 million. Previously, the World Bank’s extreme poverty line was set at $1.90.
Additionally, assuming 7% economic growth per year, Indonesia would escape the middle-income trap by 2038. This could happen even sooner if economic growth reaches 8% per year. Conversely, with 6% growth, Indonesia would only escape the middle-income trap by 2041. If growth is only 5%, Indonesia would still be stuck as a middle-income country when celebrating its Golden Year (Tahun Emas) in 2045.
The problem is that Indonesia’s GDP growth engine does not have the capacity to produce growth rates above 6%. Economic growth above 7% was only achieved during the New Order era, specifically in 1977, 1978, 1980, 1981, 1989, and 1990.
In its 2024 Article IV Consultation, the International Monetary Fund (IMF) predicted that Indonesia’s economy would grow at a steady 5.1% annually from 2025-2029. This means that economic growth would be slightly better than what was achieved during Jokowi’s administration. In fact, Indonesia still has significant economic resources in the form of natural resources and a population dominated by people of productive age. However, economic growth struggles to break through the 7% barrier due to various classic problems.
According to Infobank’s Research Bureau in its 2025 Banking and Financial Outlook study, there are several issues that hinder Indonesia from achieving high economic growth.
First, corruption and rent-seeking, which are Indonesia’s main enemies, continue to pervade the bureaucracy and business ecosystems. Transparency International also reported that Indonesia’s Corruption Perception Index in 2023 fell to 115th place, worse than its ranking of 110 in 2022 and 96 in 2021.
Second, the low performance of tax collection is due to the lack of integrity among bureaucratic officials, leading to significant revenue leakage. The massive tax evasion in export-import activities, especially in commodities, through the modus operandi of misinvoicing has never been addressed
Third, the low competitiveness of the manufacturing industry has led to a deindustrialization trend. The contribution of the manufacturing industry to GDP has continued to decline from 22.04% in 2010, 21.45% in 2012, 21.08% in 2014, 20.99% in 2015, 20.52% in 2016, 20.16% in 2017, 19.86% in 2018, 19.70% in 2019, 19.87% in 2020, 19.24% in 2021, 18.34% in 2022, 18.67% in 2023, and 18.52% in the first half of 2024.
The three factors above align with the high incremental capital output ratio (ICOR), an indicator of the high cost of doing business in Indonesia. Indonesia’s ICOR in 2023 reaches 6.5, far above the ASEAN average of 3.7. The higher the ICOR, the more inefficient the economy. In Indonesia, to push economic growth by 1%, an additional investment-to-GDP ratio of 6.5 is required.
Many factors contribute to Indonesia’s high ICOR, including bureaucratic corruption, high production costs, and high logistics costs. From the New Order government until now, Indonesia has remained among the most corrupt countries in the world. Government officials, including law enforcement officers who are supposed to uphold the law, are involved in this.
According to Infobank Research Bureau, since the issue involves people, Prabowo Subianto must have a commitment to building a clean government through at least three actions.
First, to curb corruption, President Prabowo Subianto needs to issue a Government Regulation in Lieu of Law (Perppu) that requires all government employees from the executive, legislative, and judicial branches to accurately fill out the State Officials Wealth Report (LHKPN), which can be scrutinized for fairness and their assets confiscated if they cannot justify their legitimacy. The Perppu could be a way to revolutionize the mindset of state officials, especially since there are no legal penalties, and no Reverse Proof Law (Undang-Undang Pembuktian Terbalik) yet exists.
Second, to increase state revenue, President Prabowo Subianto needs to establish a regulation through the Minister of Finance that mandates annual audits of all companies that have the potential to engage in transfer pricing by external auditors to achieve an “unconditionally appropriate” audit opinion. This will close the loopholes in state revenue, leading to a positive current account balance and state budget (APBN), increased foreign exchange reserves, and better exchange rate stability.
Third, to ensure government spending is effective, President Prabowo Subianto needs to issue a Presidential Decree (Keppres) that requires all ministries and state agencies, including regional government bodies, to consolidate their planning and budgeting under the central planning and budgeting agency, and monitor both the timeline and expenditures strictly.
Soedradjad Djiwandono, a Professor at Nanyang Technological University Singapore and Prabowo Subianto’s brother-in-law, agrees that combating corruption and improving all sectors is necessary if the government aims for 8% economic growth. “The ICOR issue must be addressed with improvements across all sectors, from education to training and discipline. Downstreaming is also very important. Ultimately, it’s about eradicating corruption at all levels, impoverishing those who are corrupt,” said the former Governor of Bank Indonesia to Infobank in late September.
Djiwandono added that, aside from internal improvements, external uncertainties must also be anticipated. “So, whether Indonesia’s economy has the capability to grow by 8% is not easy to answer with certainty because the world is full of risks and uncertainties. But 8% is not something to be achieved in three years, rather throughout Prabowo Subianto’s entire administration,” added this member of the National Campaign Team’s Expert Council, who is rumored to become one of the members of the Presidential Advisory Council.
If the various economic issues can be eliminated, 8% economic growth is actually not impossible. Indonesia is very rich in natural resources (SDA), which were valued by the Ministry of Finance in 2014 at IDR 200,000 trillion.
To transform this wealth into tangible benefits for the entire population, the president and his team in government must have the goal that their purpose in holding power is to work for the nation’s and country’s interests above all else. If their goal in holding power is to gain access to the country’s resources, then the 8% economic growth target is merely empty political rhetoric. Meanwhile, development funds continue to leak, deindustrialization persists, the middle class declines, agriculture deteriorates, the rich get richer, and the poor increase in number. Who cares?
The discourse surrounding the zaken kabinet (expert cabinet) that Prabowo Subianto is expected to form seems to be mere rhetoric. In a zaken kabinet, ministerial seats are filled by experts highly competent in their fields, without regard to the number of seats in parliament. But the political reality is different. This is similar to what Jokowi did when he initially aimed to simplify the bureaucracy in 2014, but what was implemented was quite the opposite. Jokowi’s cabinet turned out to be a “bulky”, and in 2019, he even added 12 deputy ministerial positions.
