Indonesia’s FinMin Warns Presidential Candidates About Nationalistic Policies

Indonesia’s presidential candidates are touting nationalist economic policies, but the next leader has to be open to foreign investment to achieve job creation and poverty reduction, said outgoing Finance Minister Chatib Basri.

“Whoever becomes president, in order to maintain the political support, needs to provide jobs to reduce poverty,” Basri told CNBC late Thursday in the run-up to the July 9 election between former military commander Prabowo Subianto and the popular governor of Jakarta Joko Widodo.

The economy needs to grow at an annual rate of 7 percent to create jobs, he said, up from 5.8 percent in 2013. The investment share of gross domestic product (GDP) would have to rise to 37-38 percent from around 33 percent currently.

With the domestic savings rate at 32 percent of GDP, foreign direct and portfolio investments are the only options, he said.

Both presidential hopefuls struck nationalistic tones in recent televised debates. Prabowo said he would protect the country’s natural resources from being exploited by foreign powers. Meanwhile, Widodo said Indonesia must protect its domestic economy when the ASEAN becomes an integrated community in 2015.

The latest surveys show that Widodo’s lead narrowed to 3.1 percent as Prabowo makes more in-roads among undecided voters.

Uncertainty over who will lead Southeast Asia’s largest economy triggered renewed weakness in the rupiah, which has depreciated 4.5 percent against the U.S. dollar in the past month.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza