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Jokowi calls on Indonesia to use COVID-19 to make a 'big leap'

Government lowers GDP forecast for 2020 to between -1.1% and 0.2%

Indonesian President Joko Widodo delivers a speech at the parliament building in Jakarta on Aug. 14.   © Reuters

JAKARTA -- Indonesian President Joko Widodo said the country must use the COVID-19 pandemic to "renew" itself as it aims to reach developed-nation status in the next 25 years.

Widodo's remarks came in his annual state of the union speech to parliament on Friday to commemorate the 75th anniversary of Indonesia's independence. Only a select group was present in parliament, with the rest of the lawmakers watching online to minimize the risk of spreading the coronavirus.

"This is the time for us to fundamentally renew ourselves, to make a major transformation, to implement grand strategies ... We must turn this crisis into an opportunity to make a big leap," Widodo said.

The archipelago was classified as an upper-middle-income country by the World Bank recently and, "Twenty-five years from now, at the centenary of the Republic of Indonesia, we must achieve great progress and make Indonesia a developed country," he added.

Indonesia's economy has been ravaged by the pandemic, contracting for the first time since 1999 in the second quarter. Speaking at a news conference on Friday, Finance Minister Sri Mulyani Indrawati said the government expects growth in gross domestic product to come in between -1.1% and 0.2% for the full year, a downward revision from its previous projection.

Widodo said that amid the pandemic, "fundamental reforms" to the health sector must be accelerated and the nation's food security strengthened.

The president, commonly known as Jokowi, added that efforts are underway to establish energy independence. Indonesia, despite being an oil producer, is a net oil importer. Widodo added that developments are also being made to its mineral resources sector by adding processing capabilities, including in the nickel industry. Nickel is a key component of batteries in electric vehicles.

"This will narrow down our current-account deficits and increase our employment opportunities," Widodo said, adding that it will put Indonesia in an "even more strategic position" in the electric-vehicle supply chain.

Widodo, since taking office in 2014, has been trying to cut red tape to boost foreign investment. His key policy in the second term has been the so-called omnibus law, which packages a number of legal revisions into a single vote. But deliberations have been stalled by opposition from labor unions, which see parts of the bill as threatening their livelihoods.

Widodo vowed to push ahead with his reform agenda, but stressed it was for the good of the people. "Regulatory reforms must be carried out. Regulations that are overlapping, complicated ... must be ended," he said.

"The crisis has given us momentum to catch up, to make a major transformation by implementing grand strategies," Widodo added. "Let us resolve the fundamental problems that we are facing. We must make a big leap for significant progress. We must make the most of this crisis."

In a separate speech later on Friday, Widodo proposed to parliament a 2,747.5 trillion rupiah ($185 billion) budget for 2021, a marginal rise from this year, as the government continues spending to recover from the COVID-induced economic downturn. This includes 356.5 trillion rupiah for "national economic recovery," including spending for the procurement of vaccines and social protection for the needy.

Despite Widodo's pledge to develop human capital as one of his priority programs in his second term, spending on education was budgeted at 549.5 trillion rupiah, an increase of just 0.3% compared to the outlook for this year. Still, if realized, education spending will be the highest in the past five years.

The budget plan also shows that the president continues to push ahead with his signature infrastructure plans, after a slowdown this year due to the pandemic. The government expects spending on things like roads and bridges to fall 28.7% this year, the first drop since Widodo took office in 2014. For 2021, the government has budgeted 414 trillion rupiah, a jump of nearly 50% from 2020 and more in line with its previous spending patterns.

State income is projected to rise 4.5% from this year to 1,776.4 trillion rupiah, narrowing Indonesia's budget deficit-to-GDP ratio to 5.5% from 6.34% this year.

Indonesia dropped its 3% budget deficit cap in March this year for three years as it ramped up coronavirus-related spending.

The budget plan assumes a significant rebound in the economy, with a 4.5% to 5.5% growth projected for next year.

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