While leaders throughout Southeast Asia continue to talk up the benefits of a single market, the man who aspires to lead the region’s biggest economy has been making decidedly protectionist noises.
Joko “Jokowi” Widodo, the frontrunner in the campaign for the Indonesian presidential election on July 9, has been talking about the possibility of erecting barriers to curb inflows of some foreign goods. He might also make it a bit more difficult for some foreign businesses to obtain permits.
The popular former governor of Jakarta took the nationalistic and protectionist stand in response to questions from his rival, retired three-star general Prabowo Subianto, about his views on the Asean Economic Community (AEC) during their second debate.
“We should not let foreign business to penetrate our domestic market. One of the strategies could be through [business] licensing. I think we can speed up the process for local and domestic investors. But for foreign ones, it’s all right to make it a bit difficult. All countries are doing this, setting up barriers, though they are invisible,” said the former furniture business owner whose exports reached Europe.
However, Widodo also expressed optimism that with good economic growth, strong penetration in the global market and better support from the government, Indonesian businesses would have no problem competing in the integrated regional market and would be among the first to tap into foreign markets.
Prabowo pressed on, asking his opponent to explain in detail how he would protect the lucrative banking sector against larger and better-run foreign rivals, and its aviation sector under the Asean Open Sky policy.
Widodo maintained that Indonesia should set up regulations that can act as barriers so that foreign businesses won’t be able to easily set up shop. In the banking sector, he said he would emphasise the principle of reciprocity because unlike their foreign counterparts, Indonesian banks find it difficult to open branches abroad.
“I think the government should have clear regulations that we are open [for business] while at the same time establishing 'invisible barriers' through central and regional government regulations,” Widodo said. “The most important thing is to protect our economy, especially aspects pertaining to the people’s economy. We can’t totally open our skies. I think this is why we need to impose barriers. We always find barriers when we are investing in any other countries.”
While Widodo’s statements seem to fly in the face of Asean member states’ efforts to simplify trade relations and reduce barriers ahead of the formation of the AEC next year, he is not advocating hardline protectionism per se, according to economist Zamroni Salim.
“He isn’t going to reinstate the barriers that we have already reduced, but Widodo wants to impose some kind of technical barriers to provide better support for local business operators or small and medium entrepreneurs and empower them to be more competitive,” said Salim, an economic researcher at The Habibie Center, a think-tank founded by former president BJ Habibie.
Salim said Indonesia may not have taken full advantage of loopholes in World Trade Organization regulations to enable technical barriers based on research and empirical data in order to protect local businesses in a free market.
“It’s all about taking sides with the domestic business players,” he told Asia Focus.
Ratna Shofi Inayati, an Asean expert from the Indonesian Institute of Sciences (LIPI), believes that given his business experience, Widodo should be well aware about what needs to be done to prepare for the AEC.
She said that Widodo seemed to be focusing on how to protect domestic businesses in the country’s outlying islands so that they can compete in a more open market.
“Widodo could do that by imposing better controls on imported products’ compliance with national standards, tightening supervision of foreign goods in the local market, and empowering local business, especially small and medium ones so that their products can compete with imported goods,” she said.
“He may be speaking from his own experience as a furniture exporter.”
In any case, Widodo is aware of the need to solidify his position with the voters as he sees a once-unassailable lead slipping away.
Recent polls show that the popularity of Prabowo and his running mate Hatta Rajasa is soaring and they are narrowing the gap with Widodo and his vice-presidential candidate Jusuf Kalla. One poll even shows the Prabowo-Hatta ticket leading in Jakarta, which until recently had Widodo as its governor before he took a leave of absence to run for the presidency.
With only two contenders on the ballot this year, it will be winner-take-all on July 9 with no need for a runoff vote. The victor will officially take office in October for a five-year term and the president would be eligible to run for another term.