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Experts like the signs in Jokowi's cabinet reshuffle

Indonesian president Joko Widodo.
Dimas Ardian | Bloomberg via Getty Images
Indonesian president Joko Widodo.

Indonesian President Joko Widodo's unexpected cabinet reshuffle this week is a signal he remains committed to his clarion call for growth, analysts say.

Widodo, widely known as "Jokowi", made six changes to his 34-member cabinet on Wednesday, surprising political watchers with the appointment of experienced technocrats to key economic positions.

Analysts had expected any reshuffle, implemented in response to stalling growth in Southeast Asia's largest economy, to be dominated by political appointees that would give the President an upper hand in parliament. Jokowi's coalition currently lacks a majority in parliament, which has circumscribed the new leader's ability to push through much-needed reform projects and steer away from vested political interests.

For one, he had filled his first cabinet nearly 10 months ago with mostly political allies from his ruling Indonesian Democratic Party of Struggle (PDI-P) and other political parties that backed his campaign, leaving analysts to describe the selection as a "cabinet of compromise."

Hence this week's reshuffle, which brings in individuals with strong experience in economics and bureaucracy, is a welcome change.

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"It may not appear as a 'big bang' in nominal terms, but it is still a substantial 17 percent change in the composition of the government," Cynthia Kalasopatan, market economist at Mizuho Bank, said.

"The reshuffle targeted key economic positions... the mix of professional and political background was also maintained. The strong credentials of the new ministers are also positive," she added.

The announcement of the cabinet revamp days ahead of his inaugural State of the Nation Address on Friday was also an astute move by Jokowi, whose approval ratings are plummeting, political analysts said. According to a survey done by the Saiful Mujani Research and Consultant (SMRC) last month, public approval for the President had dropped to 40.7 percent, from around 70 percent when he took office last October.

"Cabinet shake-ups often create controversies and questions, so it seems that Widodo wanted to get this over with before the speech. This would allow his cabinet to leave political controversies behind and focus on the job after the national address," Philips Vermonte, head of department of politics and international relations at the Centre for Strategic and International Studies, said.

As of Friday morning, Jokowi was addressing the nation ahead of Indonesia's Independence Day celebrations on August 17.

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Key ministers to watch

Among the changes made, analysts have mostly praised the appointment of Darmin Nasution, former governor of Bank Indonesia from 2010-2013, as the Coordinating Economic Minister. The 66-year-old replaces Sofyan Djalil, who will be assuming the role of Minister for National Development Planning.

On Wednesday, Nasution pledged to tackle rising food prices and streamline import policy at a time when the administration has faced criticism for passing measures many see as protectionist.

"Nasution has a lengthy bureaucratic track record. We think his appointment opens room for improvement in terms of coordination among ministries, with the eventual hope of minimizing future policy flip-flops," Citi economists wrote in a note.

Pramono Anung, a political heavyweight in the PDI-P, takes the role of cabinet secretary in a move that will likely please one of Jokowi's most important political sponsors – former President Megawati Sukarnoputri – according to analysts.

Megawati, chairwoman of Jokowi's party, has made no secret of her demands on the President, which were underlined with the message "You're a product of the party, and you remain at its service" she delivered at a political party speech in April.

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"Anung is a high-ranking official [in] the PDI-P. His appointment could act as a communication bridge between the President and Sukarnoputri," Citi added.

Meanwhile, Luhut Pandjaitan, a close aide to Jokowi, retained his role as chief of staff in the President's office and was also appointed as Coordinating Minister for Security and Political Affairs.

Harvard-educated investment banker Thomas T. Lembong takes on the role of Trade Minister. According to Reuters, Lembong was a senior vice president at the Indonesian Bank Restructuring Agency that was set up to revive the banking system after the Asian financial crisis in 1998.

Rizal Ramli, former Minister for Economics from 2000-2001, will be the new Coordinating Minister for Maritime Affairs.

"With the new cabinet, Jokowi aims to strengthen the coordination of his team, to boost confidence and to revitalize his reform program. Such move may underpin growth while at the same time contribute to restore the government's political capital." Mizuho's Kalasopatan said.

All good to go?

Widodo, 54, is Indonesia's first leader not to come from the military or the country's political elite. Prior to becoming the president of the world's third-largest democracy, Widodo was the governor of Jakarta and a furniture businessman, whom supporters view as the right person to root out long-standing corruption practices and reignite the stalling economy.

But bureaucratic hold-ups and internal turf wars have weighed down the young administration, which is facing increasing pressure as Indonesia's economic growth dropped to its slowest since 2009 in the second quarter. Apart from domestic factors, weak commodity prices and a slowdown in China have exacerbated the woes of the country, bringing down the rupiah to its lowest level against the U.S. dollar since the Asian financial crisis 17 years ago.

While the revamped cabinet attracted some positive reviews from analysts, it is unlikely to have an immediate impact on the country's fortunes.

"Possible upside [on near-term economic growth outlook] is limited to a minimization of policy flip-flops," Citi analysts said. "However, the overall bureaucracy will still be facing an environment of perceived legal risks... and a potential shortfall in government revenues which are cyclical and may not be easily reversed despite these personnel changes."