Indonesia’s Next Leader Targets Energy Subsidies in First Move

Prabowo Subianto, poised to become Indonesia’s next president, took aim at energy subsidies to fund some of his campaign pledges in his first policy proposal.

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(Bloomberg) — Prabowo Subianto, poised to become Indonesia’s next president, took aim at energy subsidies to fund some of his campaign pledges in his first policy proposal.

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The ex-general, who on Wednesday claimed victory after securing nearly 60% of votes in unofficial quick counts, could also invite his rival candidates and parties to join his government as he seeks to consolidate power to push ahead with his policies, Eddy Soeparno, vice-chairman of his campaign team, said in a Bloomberg Television interview with Haslinda Amin.

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Prabowo’s government could fine-tune energy subsidies over the next two to three months after taking office in October, Soeparno said on Thursday. About 80% of the 350 trillion rupiah ($22 billion) the government spends to subsidize diesel and cooking gas mainly benefit middle- and higher-income Indonesians, he said.

The government must also plug loopholes in its tax collections to bring in more revenue. Soeparno noted that Indonesia’s tax receipt is only equivalent to about 10% of gross domestic product, while Southeast Asian neighbors have ratios as high as 14%.

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The revenue reforms should help free up funds for Prabowo’s flagship campaign promise to provide lunch and milk to 80 million Indonesian school children, helping boost health and education outcomes, while creating employment for women and entrepreneurs, Soeparno said.

The program is estimated to cost over 400 trillion rupiah, more than the entire budget deficit for 2023. Uncertainty about the would-be president’s fiscal discipline are already weighing on Indonesian bonds.

“If you talk about investors, the first thing they will look for – is there going to be continuation of fiscal discipline? This will be an important area for the incoming president-to-come to address,” former Indonesian Trade Minister Mari Pangestu said in a separate Bloomberg Television interview.

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To help smooth the way for Prabowo’s reforms, Prabowo will look to build a strong coalition in parliament, inviting other parties such as the frontrunner PDI-P and possibly even tap other presidential contenders Anies Baswedan and Ganjar Pranowo to join his government.

Prabowo, who ran against President Joko Widodo in 2019, was later appointed to be the incumbent’s Defense Minister. “He’s seen that that is a successful formula for building a stable government going forward,” Soeparno said.

Other Highlights

  • Prabowo’s votes in the unofficial quick counts were much higher than the 54%-55% the campaign team predicted. Soeparno expects his votes to stay in the 57%-58% range as the quick counts wrap up
  • Prabowo always had the intention to have a young vice-presidential candidate and narrowed his options down to selecting Gibran Rakabuming Raka, the eldest son of Jokowi, as the president is more popularly known
  • Prabowo will continue Jokowi’s successful policies, including his diplomacy. He considers both the US and China as important partners to Indonesia

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