Former military general Prabowo Subianto was sworn in as Indonesian president with ambitious plans to boost growth while claiming a greater international role for Southeast Asia's largest economy.
Prabowo, 73, succeeds Joko Widodo eight months after a landslide victory in February's presidential election. Gibran Rakabuming Raka, the eldest son of his predecessor, will be his deputy.
The inauguration caps a remarkable turnaround for Prabowo, a former commander of the country's feared special forces who was removed from military service and once banned by the United States for the alleged kidnapping of democracy activists. Prabowo has always denied these accusations.
The former general won over millions of Indonesians with the support of the very popular Widodo and by promising the continuity of his policies as well as free school meals, a massive program which is expected to cost 28 billion dollars. He also pledged to boost economic growth to 8 percent. per year, up from the 5 percent rate that Indonesia has maintained for more than a decade.
But Prabowo has already indicated he is departing from his predecessor in everything from government spending to foreign policy. He is willing to take on more debt to fund welfare programs and plans to expand the cabinet by a third to accommodate his political allies.
He also wants Indonesia to play a more active role on the international stage. Widodo avoided international events. During his 10 years in office, he never attended the annual United Nations General Assembly in New York in person. Prabowo, by contrast, made more than a dozen international trips between Election Day and Inauguration Day.
The most significant break between Prabowos' policies and those of his predecessor would be his foreign policy direction, said Kennedy Muslim, a political analyst at Indikator Politik Indonesia. While Jokowi has resolutely focused his pragmatic foreign diplomacy on attracting foreign business investment, Prabowos is more strategic in nature since he is inherently much more interested in geopolitics than his predecessor.
Prabowo will maintain Indonesia's historically neutral foreign policy stance but seek to play a larger role and increase its engagement in global issues. As defense minister in the Widodos government, Prabowo last year proposed a demilitarized zone and a UN referendum to end the conflict between Ukraine and Russia, a plan that was rejected by the Ukraine. This year, Prabowo said Indonesia was ready to send peacekeeping forces to Gaza.
His first trip abroad since his election victory was to China, where he met Xi Jinping. Beijing is Indonesia's largest trading partner and second-largest source of foreign direct investment, pouring money into economically important sectors such as metals, mining and infrastructure. Prabowo also met with Russian President Vladimir Putin and the leaders of Japan, France and its Southeast Asian neighbors.
In the country, social assistance programs are a priority. While Widodo focused on building roads, ports and other infrastructure, Prabowo wants to ensure food and energy security, eradicate poverty and provide free meals and health screenings.
One of its immediate priorities is to tackle the social side of its program, said Brian Lee, an analyst at Maybank. Jokowi was talking about physical infrastructure. Prabowo studies initiatives that target not only the national economy as a whole, but also households.
But Prabowo will also need to attract investment to achieve its growth targets. Eight percent is going to be very difficult, Lee said. It essentially needs to attract much more investment, both domestic and foreign direct.
Prabowo takes over an economy that, during Widodos' 10 years in power, transformed into a central player in the global energy transition effort, thanks to Indonesia's vast nickel reserves. Still, GDP growth fell short of Widodos' initial target of 7 percent.
Widodo has also relaxed rules to attract foreign investors, with the metals and mining sectors in particular attracting record funds. Although Prabowo said he would be investor-friendly, he has yet to present detailed plans.
One of Prabowos' economic advisers told the Financial Times that focusing solely on mineral processing would not be enough to meet the GDP target. We need new growth drivers, he said, citing the digital sector, energy transition and higher quality manufacturing as possible areas of growth.
Fiscally, Prabowo plans to be much more liberal than Widodo, mainly to finance his welfare programs. His brother and close adviser, Hashim Djojohadikusumo, said Prabowo planned to increase the country's debt-to-GDP ratio to 50 percent from the current 39 percent. To support higher debt, Prabowo hopes to increase tax revenues and sell state assets.
Even though Indonesia's debt levels are lower than those of its regional peers, economists warn that a sharp increase in short-term borrowing could hit the currency, jeopardizing the country's credit rating. Indonesia and have a ripple effect on the economy.
Prabowos' team has reassured investors of their fiscal prudence in recent months, but concerns remain. Potential fiscal stresses could increase over time as [Prabowos] new programs are flourishing, Helmi Arman, Citis Indonesia chief economist, said in a recent research note. He also expressed concern that Prabowo's key programs appeared to be focused on the domestic market and not exports.
Prabowo will also have to skillfully manage his political allies, notably his former rival Widodo. Analysts said the former president had been trying for months to maintain his influence to protect his legacy.
Prabowo knows that people still love Jokowi…however, Prabowo wants to control power in his own hands without any interference from Jokowi, said Arya Fernandes, a political analyst at the Jakarta-based Center for Strategic and International Studies, adding that Widodo could be given an advisory role.
Several Widodos ministers are expected to obtain positions in the Prabowos government. One indication of the outgoing president's influence could be the importance of the role his son Gibran holds as vice president, a traditionally unimportant position.
Prabowo also plans to install a bigger government, expanding the cabinet from 34 to 46 members, adding to concerns over budget spending. His advisers said the main aim of a larger government was to appease the ruling coalition partners.
Compromises are inevitable, Indikator Politiks Muslim said, notably between political stability and internal cohesion, as well as the effectiveness of government within its grand coalition.
