Jokowi emphasizes inflation battle over global trade in cabinet

JAKARTA — Indonesian President Joko “Jokowi” Widodo’s appointment of his latest trade minister in mid-June points to growing political pressure on him ahead of the country’s 2024 national elections, with his latest choice for the “lucrative” post taking place against a backdrop of rising inflation. 

Zulkifli Hasan, chairman of the National Mandate Party (PAN), was sworn in on June 15 as the new trade minister, the sixth since Widodo was elected in 2014. This is after PAN, previously part of the opposition, joined the ruling coalition last year.

Hasan replaced Muhammad Lutfi, who had only been in the job for a year and a half and was fired amid shortages and sharply rising prices for cooking oil. Indonesia is the world’s largest producer of palm oil. Lutfi’s dismissal had been expected: He failed to bring down domestic cooking oil prices and a senior Trade Ministry official and a business consultant he recruited were arrested earlier this year over alleged bribery related to the issuing of palm oil export permits. Lutfi himself was grilled by prosecutors for 12 hours on Wednesday as a witness in the case.

Hasan’s appointment, however, is a disappointment to some political observers. He previously served as the speaker of the People’s Consultative Assembly and as forestry minister, but he has no background in trade.

Widodo appointed his sixth trade minister on June 15.

  © Reuters

The reshuffle comes against a backdrop of concern over supply disruptions triggered by the Russia-Ukraine war, and after Indonesia’s trade surplus fell to $2.9 billion in May following a one-month ban on palm oil exports. In April, the surplus reached a record $7.56 billion.

“The homework is getting more difficult, but a politician was appointed instead. Jokowi doesn’t seem to think there’s a serious problem in the trade sector,” Bhima Yudhistira, an economist and executive director of the Jakarta-based Center of Economic and Law Studies, told Nikkei Asia.

He added Hasan’s lack of relevant experience raises doubts that the government will be able to control inflation and maintain the trade surplus. “I think it’s tough, especially because he’ll only work effectively for a year.” 

Indonesia will simultaneously hold elections for president, members of parliament and regional legislatures in February 2024. Politicians, especially political party leaders like Hasan, are expected to be fully focused on coalition talks and election campaigns next year.

Trucks laden with palm oil fruit wait to unload at a factory in West Aceh in May. That month Indonesia temporarily halted palm oil exports to boost domestic supplies of cooking oil.

  © Antara Foto/Reuters

Indonesia’s combined trade and commerce minister has two distinct roles that sometimes conflict: The trade minister is responsible for promoting exports, but the commerce minister is tasked with promoting smooth domestic commerce and keeping consumer prices stable.

Palm oil highlights this dilemma. It is one of Indonesia’s leading exports, but encouraging such exports in the current circumstances has led to a domestic cooking oil shortage and higher prices. But prioritizing adequate domestic supplies draws cries of protectionism from Indonesia’s trade partners.

Hasan is not the only trade minister appointed for political reasons during Widodo’s presidency. The job has changed hands more than any other ministerial post.

Enggartiasto Lukita, a businessman and politician with the National Democratic Party, served from 2016 to 2019. He was replaced by Agus Suparmanto, a little-known National Awakening Party politician widely seen as ill suited to the post given the U.S.-China trade war, which was heating up a the time, and the intensive negotiations ahead of the signing of the Regional Comprehensive Economic Partnership in late 2020.

Suparmanto was replaced by Lutfi, a seasoned businessman with international connections. He had previously served as the head of Indonesia’s Investment Coordinating Board and the country’s ambassador to Japan, and later the U.S. Lutfi, however, proved powerless in the face of rising prices, as inflation in May rose to 3.55%, the highest year-on-year increase since December 2017.

Thomas Lembong, a businessman and Harvard graduate who served as trade minister from 2015 to 2016, once publicly expressed Indonesia’s willingness to join the Trans-Pacific Partnership, a free trade agreement, in line with Widodo’s open market policy at that time. But the comment drew domestic criticism and he was replaced just 11 months after his appointment.

The Center of Economic and Law Studies’ Yudhistira calls the trade minister’s post “lucrative,” which leads to short stints and nakedly political appointments. It is one of several positions in the cabinet seen as financially strategic for political parties, given the Trade Ministry’s power to issue permits for activities ranging from opening grocery stores to exports and imports.

Widodo argues that Hasan’s “field work experience” will help the government tackle food price hikes. “Exports are the trade minister’s job, but more important are domestic essential needs,” he said.

People shop at a traditional market on the outskirts of Jakarta: Taming inflation is a top priority for President Joko Widodo’s administration.

  © Reuters

Abetnego Tarigan, an official with the presidential office, added that Hasan’s vast local connections as the chairman of a party, with its provincial and subdistrict branches across Indonesia’s 34 provinces, will help him in his job as trade minister.

“We’ve seen how the cooking oil problems didn’t just lead to the export ban, but also [other] complications for the public, especially farmers,” Tarigan said in an interview with CNN Indonesia. “Surely this needs people who have networks down to the grassroots.”

Widodo barely hid political motives in his latest cabinet reshuffle. Shortly before the inauguration of the new members, the president held a luncheon with all leaders of the political parties in the ruling coalition.

Some analysts said the gesture was likely intended to send a message of unity to the public and coalition members alike. Such messaging is important given the political maneuvering by some parties in the coalition and rumors of a rift between Widodo and the chairwoman of the Indonesian Democratic Party of Struggle, Megawati Sukarnoputri, who was president of Indonesia from 2001 to 2004. Widodo and Megawati belong to the same party and were said to be at odds over its next presidential candidate.

“The reshuffle … is like giving parties political vehicles toward 2024,” said Hendri Satrio, founder of KedaiKOPI, a think tank. “This is more about political consolidation, rather than improving performance.”

Additional reporting by Ismi Damayanti.