Widodo Starts Jakarta Rail Project in Drive to Reactivate Agenda

  • Measures to revive economy to be announced this afternoon
  • President also pledged to start rail projects outside Java

Indonesian President Joko Widodo broke ground on a light-rail project in Jakarta and promised more to come, extending a drive to revive his economic agenda as he prepares to unveil the first elements of an economic stimulus package Wednesday.

Jokowi, as the leader is better known, officiated the start of the Jakarta project Wednesday after signing a presidential regulation to expedite the light rail transit Sept. 2. Construction on the 86-kilometer line in Jakarta will begin before the end of the year and building will also start soon on rail projects in Sulawesi and Papua, he said.

“The most important thing is that all works must be started immediately,” Jokowi said. “And I want to convey that works of transportation infrastructure aren’t only in Java.”

The president has struggled to overcome government spending and public works bottlenecks in his efforts to rejuvenate Southeast Asia’s biggest economy, which is growing at the slowest pace since 2009. In recent weeks, he’s been on a mission to break the impasse, reshuffling his economic team and forcing through the start of long-delayed projects like a power plant and dam. He is due to outline stimulus measures at 4 p.m. local time Wednesday.

The president’s challenges have hurt investor sentiment, increasing risks as a slowdown in China and the prospect of higher interest rates in the U.S. helped spur $1.5 billion of outflows from Indonesian stocks and local-currency sovereign debt this quarter. The rupiah has slumped 13 percent against the dollar this year.

“In the current global slowdown climate, not much can be done by the government,” said Wilianto Ie, the Jakarta-based head of research at PT Maybank Kim Eng Securities. Authorities should avoid introducing regulations that interfere with market mechanisms, he said.

The Jakarta Composite Index of shares rose 0.4 percent as of the midday break, tracking a rebound in regional shares on optimism China will be able to stabilize its financial markets. The gauge is down 17 percent this year. The rupiah strengthened 0.1 percent to 14,268 a dollar and government bonds advanced, pushing the 10-year yield down one basis point to 9.09 percent.

Stimulus Package

The government has promised an economic stimulus package that aims to lure investment and revive Indonesia’s slowing economy.

An expansion of existing tax holidays for industrial investors announced late August was described by the government as an “appetizer” for a more comprehensive set of steps. Coordinating Minister for Economic Affairs Darmin Nasution said last week the president had asked ministers to focus on “deregulation” for the stimulus package.

Indonesian exporters should follow an existing recommendation and bring their earnings back home to boost domestic dollar liquidity, Jokowi said at a banking conference in Jakarta on Wednesday after the ground breaking.

The Jakarta rail plan had been discussed as early as 2012, and the city needs to connect transport networks from Jakarta’s outskirts to all transportation modes in the capital, the president said Wednesday.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE