Jokowi Pitches Strategy on Tax Reforms, Fuel Subsidies at G-20

Jakarta Globe, Robertus Wardhi, Nov 16, 2014

Australia's Prime Minister Tony Abbott greets Indonesia's President Joko Widodo
 in the Reading Room at Parliament House during the G20 Leaders' Summit in Brisbane
in this Nov. 15, 2014 handout.(Reuters Photo/G20 Australia/Handout via Reuters)

Brisbane. President Joko Widodo again pitched how he would make Indonesia’s business climate friendlier to investors, by implementing tax reforms and cutting fuel subsidies to pay for the nation’s infrastructure projects, as he delivered his speech before other leaders of the world’s 20 biggest economies on Saturday at the Group of 20 forum.

This is not the first time Joko talked publicly about his plans for tax reforms and the establishment of a one-stop service for investors. Taking advantage of his first G-20 forum after his presidential inauguration last month, Joko promoted his plans and promised to tidy up the country’s business sector, to lure more money in from international investors.

The G-20 meeting in Brisbane from Saturday to Sunday is part of Joko’s international debut, following the Asia-Pacific Economic Cooperation summit in Beijing on Nov. 10-11 and the Association of Southeast Asian Nations Summit in Naypyidaw, Myanmar, on Wednesday and Thursday last week.

Joko began his speech during a retreat session of the G-20 heads of states’ gathering by saying he was there to introduce himself among other members of the club. At the beginning, he had reportedly been unsure whether he needed to attend the meeting.

And then he briefly shared his experience while serving as the mayor of Solo, Central Java, from 2005 to 2012 and his short stint governing Jakarta afterward.

Joko said he had managed to finance development in Solo after boosting the city’s income through tax reforms, which included the introduction of an online tax payment system to ensured a transparent and accountable process.

“After four years, the city’s income rose by up to 80 percent,” Joko said.

To tidy up unruly parts of the city, Joko said he established dialogues with the people who would be most affected by his policies, and won them over after persistent efforts to talk them into supporting his programs.

His trademark “blusukan,” or impromptu visits to constituents by state officials, have been very helpful to learn directly from those involved and affected how his policies would best serve the public, Joko added.

“I used similar approaches after elected as the governor of the capital Jakarta, in 2012,” the president said.

“Based on my experience in Solo, I also improved Jakarta’s tax payment mechanism with the introduction of an online system. As a result, after a year the regional tax income rose by 50 percent.”

Joko said he would use those experiences in Solo and Jakarta and scale them up for the national level during his term as Indonesia’s president.

As part of his priority programs, he said he promised to boost the country’s tax-to-gross domestic product ratio from below 13 percent at present to 16 percent. There will be a tax system revamp; to complete an “integrated” one-stop national service for investment and business licensing in six months; to cut fuel subsidies and divert the funds for infrastructure financing, as well as to support human resources development and people’s welfare.

“We will do all of these efforts simultaneously. This will be our method to tackle with, and avoid the ‘middle-income country trap,’ aside from eradicating corrupt practices that have overridden developments in Indonesia,” said the former businessman-turn-president.

He added Indonesia’s average economic growth of 5.8 percent during the past eight years had depended a lot on the growing middle-income class, who make up a quarter of the country’s population.

In order to keep the economy growing, he said he would maintain the purchasing power of the middle-income people, while improving that of low-income families.

“Our growth patterns will be inclusive, based on the growth of groups [of society] that all these times haven’t had adequate access to development,” Joko said.

“I think this is in line with G-20 nations’ joint goals toward strong, sustainable and inclusive growth. In the next five years, Indonesia will adopt [such growth] to recover its economy, and in turn contribute to the global economic growth.”

Sideline meetings

On the sidelines of the G-20 meeting, Joko met up with several other heads of state in separate bilateral talks.

On Friday evening, upon arrival from the Asean Summit in Myanmar, Joko invited Australia to invest in Indonesia’s trade sector and infrastructure projects during a dinner with Australian Prime Minister Tony Abbott.

On Saturday morning, before the opening of the G-20 Leaders’ Summit, Joko met with Italian Prime Minister Matteo Renzi.

“[We talked about] cooperation in sectors of creative economy; on leather and fashion products,” Joko said after the meeting.

He added he also hoped Indonesia would be able to sell its palm oil products to Italy and other European markets.

On Sunday morning, before the closing session of the G-20 forum, Joko held separate bilateral meetings with German Chancellor Angela Merkel, French President Francois Hollande and Turkish Prime Minister Ahmet Davutoglu.

The outcomes of the last three meetings, though, were not immediately known.

Joko was accompanied by Indonesian Foreign Minister Retno Marsudi, Finance Minister Bambang Brodjonegoro and Cabinet Secretary Andi Widjajanto during the bilateral talks.

Retno separately attended two minister-level meetings; the first being with other foreign ministers grouped under Mikta (Mexico, Indonesia, South Korea, Turkey and Australia) and the second being with her Argentine counterpart.

On the sidelines of the G-20 forum and the bilateral talks, Joko met with Indonesian citizens in Brisbane during a Friday night event at the Queensland University of Technology campus in Brisbane.

“Our nation is a big nation. Don’t feel inferior. We must show others that we are a big nation,” Joko told the gathering.

Ending his nine-day first official overseas visit as Indonesia’s president, Joko is scheduled to leave Brisbane on Sunday afternoon and land back in Jakarta later that evening.