Indonesia's presidential candidates are touting nationalist economic policies, but the next leader has to be open to foreign investment to achieve job creation and poverty reduction, said outgoing Finance Minister Chatib Basri.
"Whoever becomes president, in order to maintain the political support, needs to provide jobs to reduce poverty," Basri told CNBC late Thursday in the run-up to the July 9 election between former military commander Prabowo Subianto and the popular governor of Jakarta Joko Widodo.
The economy needs to grow at an annual rate of 7 percent to create jobs, he said, up from 5.8 percent in 2013. The investment share of gross domestic product (GDP) would have to rise to 37-38 percent from around 33 percent currently.
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With the domestic savings rate at 32 percent of GDP, foreign direct and portfolio investments are the only options, he said.
Both presidential hopefuls struck nationalistic tones in recent televised debates. Prabowo said he would protect the country's natural resources from being exploited by foreign powers. Meanwhile, Widodo said Indonesia must protect its domestic economy when the ASEAN becomes an integrated community in 2015.
The latest surveys show that Widodo's lead narrowed to 3.1 percent as Prabowo makes more in-roads among undecided voters.
Uncertainty over who will lead Southeast Asia's largest economy triggered renewed weakness in the rupiah, which has depreciated 4.5 percent against the U.S. dollar in the past month.
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"One of the reasons why many investors become nervous is because of the very tight competition. The rupiah has depreciated quite significantly in the past few weeks. But I will say this is temporary," Basri said.
Investors have also been on edge over comments made by Prabowo's brother and economic adviser Hashim Djojohadikusumo at an investment gathering earlier this month.
Djojohadikusumo said Indonesia was underleveraged and there was scope to borrow more for investment in infrastructure, Reuters reported. He noted for a country like Indonesia there was a consensus that debt equivalent to 50 percent of GDP – nearly double current levels – could be considered prudent.
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Basri said there is not much room for the government to step up spending because the law limits the budget deficit at a maximum 3 percent of GDP. The government set a 2014 fiscal deficit target of 2.4 percent of GDP.
"There is no way you can immediately double your debt. So looking from this perspective, I'm not worrying too much on the fiscal side," he said.