Indonesian President Vows To Fund ‘Massive’ Maritime Infrastructure Program

Joko Widodo, Indonesia’s president, gestures as he speaks during an interview in his office at Istana Merdeka, the president’s official residence, in Jakarta, Indonesia. Image via Bloomberg

President Joko Widodo vowed Tuesday to develop all of Indonesia’s frontier areas, including the Natuna Islands close to where it is embroiled in a dispute with China, and outlined plans to fund a massive maritime infrastructure program to accelerate growth in Southeast Asia’s biggest economy.

“We will develop areas such as Entikong, Natuna and Atambua so that the world sees Indonesia as a great nation that pays attention on every inch of its land,” Widodo said in his annual Independence Day speech in Jakarta. His speech also focused on deregulation, social inequality and poverty eradication, as well as the threat of terrorism.

Indonesia’s navy has been involved in several altercations with Chinese fishing boats and coast guard vessels off the gas-rich Natuna Islands in recent months. Beijing claims the waters around the islands as part of its traditional fishing grounds. While Indonesia is not a claimant in the broader disputes China has with several other nations over its South China Sea claims, Widodo has sought to underscore Indonesian sovereignty in the area. On Wednesday, the navy will sink 71 impounded foreign vessels there in a show of force.

Widodo, commonly known as Jokowi, said in his speech Tuesday that Indonesia was committed to the peaceful resolution of international conflicts, including in the South China Sea. “Indonesia has to be actively involved in promoting the resolution on South China Sea spat through negotiation and peaceful measures,” he said.

Later, in a second speech laying out the 2017 budget, Jokowi forecast a growth rate of 5.3 percent next year, well below the 7 percent he said would be achieved within three years of coming to office in October 2014. The deficit was expected to climb to 332.8 trillion rupiah ($25.4 billion), but at 2.41 percent of GDP, debt will be lower than the revised 2.5 percent figure announced earlier this month.

Three Measures

China’s claims to more than 80 percent of the South China Sea were dented in July by an international tribunal that ruled it had no historic rights to the resources within the waters and that its actions there were aggravating tensions. China has rejected the ruling.

Jokowi has said he wants to transform Indonesia, a string of more than 17,000 islands that would stretch almost from New York to London, into a maritime power and has in the past laid out a plan to develop the fishing industry, improve port infrastructure and bolster sea defenses.

Budget Targets

Jokowi said other spending priorities for 2017 included education, tourism, health, food and energy security, as well as maritime sovereignty.

Jokowi’s second full-year budget speech comes three weeks after he revamped his economic team, bringing back former World Bank Managing Director Sri Mulyani Indrawati as finance minister to steer a tax amnesty that Jokowi hopes will boost government coffers by as much as 165 trillion rupiah this year alone.

Jokowi said the rupiah is forecast to be about 13,300 to the dollar next year, compared with today’s close of 13,096. Inflation is expected to be kept at around 4 percent, he said.

‘Fingerprints’

Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore, described Jokowi’s 5.3 percent growth forecast as being in line with OCBC’s own expectations.

“I think it’s more realistic than before. I think it probably has Sri Mulyani’s finger prints all over it,” Wiranto said in a phone interview. “She probably realizes that it’s a lot better to over-deliver than to over-promise in life and in budgets in general.”

Indonesia’s key stock index gained 1.0 percent to close at 5,371.85. The rupiah was steady at 13,096 to the dollar.

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