Indonesian President Joko Widodo raised a few eyebrows with his cabinet line-up announced on Wednesday October 23, 2019. The selection of opposition leader and presidential rival Probowo Subianto as the new Minister of Defence surprised many observers while having Go-Jek founder Nadiem Makarim as the new Minister of Education is a bold move that promises to revamp the moribund education sector.
Historically the Education Ministry has been helmed by heads of religious organizations so having a tech tycoon as the next minister is a strong nod towards fulfilling the president’s campaign promise to focus on human capital and improving the country’s untapped talent pool.
Makarim is a Harvard University graduate who has built Indonesia’s first decacorn. His appointment was widely praised given his entrepreneurial and technology background, which will provide a fresh perspective and direction for the country’s 60 million students currently enrolled in schools and universities.
More critically, note some political observers, the move to appoint Makarim, Subianto and former military deputy commander Fachrul Razi as the Minister of Religion, is an effort by the president to push back against Islamic radicalization in schools and universities. There have been rising concerns in many circles that Islamic radicals had infiltrated the state school system, especially secondary schools and universities.
Retired Indonesian Military Deputy Commander, now new Religious Affairs Minister Fachrul Razi. Photo: Raka Denny / Jawa Pos
Indonesia hosts the largest education system in Southeast Asia and the fourth largest in the world after China, India and the US. The Ministry of Religious Affairs controls 81,000 religious schools across the country, many of them fertile breeding grounds for radicals.
Given his military background, Subianto is seen a safe choice for the Defense post although there are concerns amongst human rights activists over his past alleged involvement in human right abuses. It is important to note that the head of the Gerindra Party was never charged for any of the alleged abuses.
“Safety and social stability are key to attracting foreign direct investments to Indonesia,” noted Harry Su, Managing Director Head of Equity Capital Markets at PT Samuel International. “With safety and social stability, we will see higher economic growth and greater investor confidence.”
Investors stay cautious
Market reaction to the new cabinet lineup was subdued with equity markets flat for most of the day. “Overall fund managers are Ok with the cabinet lineup but the equity market has not been euphoric,” noted Su.
Finance Minister Sri Mulyani Indrawati is seen as safe pair of hands on the country’s macro-economic stability and she is expected to continue to prioritize stability over growth for the next five years.
The appointment of Erick Thohir as the new minister for State-Owned Enterprises could prove to be a boon for the private sector as he is seen to be more open to working with private corporations to build infrastructure. Under former minister Rini Soemarno, state-owned- enterprises were the dominant players in the government’s massive infrastructure program.
The media mogul and venture capitalist, Thohir, is expected to boost the profitability of state-owned enterprises by being more stringent in terms of approving projects in which they can participate.
There have also been concerns over the rising foreign debt amongst state-owned enterprises which totaled US$51 billion at the end of August 2019, up from US$36.45 billion in August 2018.
Overall, President Joko Widodo has injected fresh blood and new perspectives into the government while also maintaining a sense of continuity with the likes of Sri Mulyani as Minister of Finance and Luhut Pandjaitan the Coordinating Minister for Maritime Affairs and Investment.
With his added portfolio and close personal ties with the president, Pandjaitan could emerge as the most powerful minister in the government over the next few years.