Economists Warn of Large Coalition in Prabowo-Gibran's Cabinet

TEMPO.CO, Jakarta - Several experts appeared in a public discussion held in Jakarta, on Wednesday, May 1, 2024, as input for president-elect Prabowo Subianto in forming his cabinet.

Head of the Center for Industry, Trade, and Investment of Indef, Andry Satrio Nugroho, believes that a large coalition will benefit the government in the next 5 years to streamline its programs. However, this is also an indication of the paralysis of checks and balances in parliament.

The experts also reminded that backsliding democracy, among other things, is created by the absence of parliamentary resistance to all executive policies. The support from an oversized coalition will also create a large cabinet that requires greater fiscal space.

Politicians will likely form large parts of Prabowo-Gibran’s cabinet. According to Andry Satrio, political figures should hold non-economic ministerial seats to maintain market and business confidence. Additionally, the coalition composition must be sustained until the end of Prabowo-Gibran’s term.

Regarding the plan to establish a State Revenue Agency (BPN) by dividing the Directorate of Taxes and the Directorate General of Customs and Excise from the Ministry of Finance, Andry Satrio believes the government must heed the short adjustment period. In addition, the agency must be managed and led by professionals who understand state revenues.

On the other hand, some of Indonesia's economic indicators are still lagging behind other countries. 

Slow productivity of the industry sector

Economist Dr. Imaduddin Abdullah from the Center for Food, Energy and Sustainable Development Indef assesses that Indonesia's industry sector productivity is below that of middle-income countries and at the same level as low-middle-income countries.

Likewise, the Review Component Advantage (RCA) indicator shows that Indonesia has comparatively low export competitiveness with a score of below 1.

He also reminded the elected government that developed countries are keen to intervene in the industry sectors concerning green opportunities and downstream. As a result, the downstream mineral industry will face increasing resistance and competitiveness from developed countries. Therefore, a capable and accountable cabinet is needed.

Three influential factors are detected concerning domestic political and economic challenges; international pressure, elite interests, and citizen participation. Regarding the last factor, the indicator of democracy strongly influences economic growth. 

To formulate the direction of government policy, Indef senior economist Dr. Tauhid Ahmad said future occurrences must be considered. There are several opportunities. However,  in 2025, there will still be global economic stagnation of 3.1-3.2 percent. Meanwhile, world institutions estimate Indonesia’s economic growth to reach 5.2 percent by 2025. The elected cabinet is faced with challenges to ensure Indonesia’s economic growth surpasses the target. It must also be noted that Prabowo Subianto has targeted 6 to 7 percent of economic growth. 

Tauhid Ahmad predicts that whoever becomes a minister will have a hard time if they cannot dynamize the economic situation amidst high global interest rates (The Fed). That will have a big impact on domestic interest rates and the exchange rate.

Nevertheless, several domestic commodity trends have improved slightly, such as coal, palm oil, and CPO. However, nickel prices fell, which poses a problem for the future minister to handle.

ANTARA

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