Note issued: December 23th, 2020

Early Warning Briefing

Economic, Banking & Industry Research of BCA Group - DKP

Cabinet Reshuffle: Consolidating and Accelerating

Executive Summary:
 The first reshuffle of the Onward Indonesia Cabinet appears, first and foremost, to be an effort to expedite
and improve the efficiency of the government’s response to the Covid-19 pandemic, particularly the
vaccination and social assistance programs.
 It also serves to facilitate the other key near-term agenda of the Jokowi administration, which is to write minis-
terial regulations to implement the Omnibus Law on Job Creation.
 Two of the ministerial appointments also serve to further buttress the governing coalition, which already has
strong political capital heading into the “recovery and rebuilding” year of 2021.

 On December 22nd, President Joko Widodo (Jokowi)
announced a cabinet reshuffle, the first since his On-
ward Indonesia Cabinet was inaugurated in October
last year. The reshuffle involved six cabinet seats, two
of which (Marine & Fisheries, Social Affairs) having
been filled on interim bases after the respective
ministers resigned amid suspected involvement in
corruption scandals.
 Much of the media coverage on the reshuffle focuses
on the selection of Sandiaga Uno, a successful busi-
nessman and Jokowi’s vice-presidential opponent in
the 2019 Election. With the top half of that ticket,
Prabowo Subianto, already in tow, the cabinet can be
said to resemble Lincoln’s famous “team of rivals” –
which is a testament to Jokowi’s coalition-building
ability. Meanwhile, the choice of Yaqut Cholil Qoumas
as Minister of Religious Affairs also serves to strength-
en the support from Nahdlatul Ulama (NU), the largest
Islamic NGO in Indonesia.
 Despite these moves, however, political consolidation
is probably not the primary goal of this reshuffle –
unlike arguably the two big reshuffles (2015 and 2016)
during Jokowi’s first term. The President’s coalition is
already secure, and – despite its big-tent nature – has
been able to harness its political capital to score
important reforms, most notably the Omnibus Law on
Job Creation. The pandemic, in all likelihood, does not
diminish this political capital as it helps temper public
expectations in the short-term, but it does create
tremendous economic and public health challenges
for the remaining four years of the administration.
 It is with these challenges in mind that the reshuffle
should instead be viewed. Two of the new ministers
(Budi Gunadi Sadikin – Health, Tri Rismaharini (Risma)
– Social Affairs) will be at the forefront of the govern-
ment’s efforts to fight Covid-19 and its socioeconomic
impact. The choice of Budi, an accomplished corporate
executive rather than a medical professional, might
seem odd to many Indonesians, but is perfectly
reasonable given that the the procurement and distri-
bution of Covid-19 vaccines will be the main agenda in
2021. The challenges here will largely be about logis-
tics, budgeting, risk management, and building public
trust, while the technical issues will be handled by the
Vice-Minister, Dante Saksono (a medical professional).
 The enormity of the non-technical issues in the Min-
istry of Health might be the reason behind the slug-
gish pace of healthcare budget utilization, as compar-
ed to several other components of the fiscal stimulus
(Chart 1). In contrast, social assistance saw full uti-
lization, but was apparently plagued by corruption
which results in sub-optimal welfare outcome. A new
system of social assistance – centralized, computer-
ized, and in cash (rather than in kind) – under the
supervision of Risma may prove to be an improvement
over 2020, but care should be taken so that its cash-
based nature does not lead to inflation – or instead to
slower velocity of money if it ends up not being spent.
 Finally, the re-appointment of Muhammad Lutfi as
Minister of Trade (he held the position in 2014) could
be seen as a move to expedite the implementation of
the Omnibus Law in policies pertaining to trade. The
first half of 2021 is expected to be a busy time for
economic ministries, as they will have to write new
regulations, taking care of course that the regulations
agrees with the Law both in letters and in spirit –
which is to improve ease of doing business and labor
market flexibility. While the impact on investment and
productivity would not be felt overnight, we expect it
to be one of the most important determinants of the
country’s potential output after the pandemic recovery
– which in turn will set the backdrop for the 2024
Elections.

PT Bank Central Asia Tbk 20th Grand Indonesia, BCA Tower Jl. M.H Thamrin No. 1 Jakarta, Indonesia Ph : (62-21) 2358-8000
 EARLY WARNING BRIEFING

New Ministers in the Onward Indonesia Cabinet

MINISTERS 4. Trade Muhammad Luthfi (non-party)
1. Health – Budi Gunadi Sadikin (non-party) • DOB : Aug 16, 1969
• DOB : July 8, 1964 • Minister of Trade (2014)
• CEO of Bank Mandiri (2013–2016) • Indonesian Ambassador to Japan (2010-2013)
• CEO of PT Inalum • Indonesian Ambassador to USA (2020)
• Vice Minister for SOEs 5. Social Affairs Tri Rismaharini (PDI-P)
• Head of Covid-19 Recovery Task Force (2020) • DOB : Nov 20, 1961
2. Tourism and Creative Economy Sandiaga Uno • Mayor of Surabaya (2010-2015 & 2015-2020)
(Gerindra) 6. Marine and Fisheries Sakti Wahyu Trenggono (non-
• DOB : June 28, 1969 party, ex-PAN)
• Vice Governor of DKI Jakarta (2017) • DOB : Nov 3, 1962
• Vice Presidential Candidate(2019) • Vice Minister of Defense (2019)
3. Religious Affairs Yaqut Cholil Qoumas (PKB)
• DOB : Jan 4, 1975
• Chairman of GP Ansor (2011-2016)
• Member of Parliament (2014-2019 & 2019-2024)

Chart 1. Social assistance and SME support budgets have been well-
utilized in 2020, but health and agency spending will be at the forefront
in 2021

*)Around of Rp 36.44 Tn from 2020 Source: Ministry of Finance

will be carried over for vaccine program in
2021

2
 EARLY WARNING BRIEFING

Economic, Banking & Industry Research Team

PT Bank Central Asia Tbk

Economic, Banking & Industry Research of BCA Group - DKP
20th Grand Indonesia, Menara BCA
Jl. M.H Thamrin No. 1, Jakarta 10310, Indonesia
Ph : (62-21) 2358-8000 Fax : (62-21) 2358-8343

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