Business leaders hoping for greater reforms to bolster Southeast Asia’s largest economy have welcomed the news that Joko “Jokowi” Widodo and Jusuf Kalla have officially been named Indonesia’s next president and vice president for the 2014-2019 term.
The General Elections Commission (KPU) made the announcement on Tuesday evening in an event attended by Jokowi and Kalla, after supporters of rival Prabowo Subianto walked out of the plenary session tallying the nation wide poll results.
Representatives of foreign businesses in Indonesia are optimistic about Indonesia’s future and the transition period for the new government, relishing the opportunity to work with the president-elect, Jokowi, very soon.
Yoshida Susumu, the secretary-general of the Jakarta Japan Club (JJC), which represents 558 Japanese firms in Greater Jakarta, welcomed the election result, and expected that the new administration would enhance the certainty, transparency and stability of laws and regulations to improve the overall business climate.
Apart from this, Indonesia needed to highlight human-resource development through capacity building. “It is trained and educated human resources that will enhance this country’s capability in the long run,” he said.
Indonesia’s economy, the 10th largest in the world based on purchasing power parity (PPP), has shown staggering growth of 4 to 6.5 percent in the past decade under the leadership of President Susilo Bambang Yudhoyono, seemingly resistant to global economic shocks.
However, about half of the country’s population of more than 240 million still live on less than US$2 a day, presenting the most fundamental challenge for the nation’s leaders.
“These elections represent one of the largest voter turnouts anywhere in the world, and are a testament to Indonesia’s vibrant democracy,” said Andrew White, the managing director of the American Chamber of Commerce (AmCham) in Indonesia. “As investors, we look forward to helping the new administration build a more prosperous Indonesia.”
“Long-term investors I spoke with today and this evening are optimistic that the situation [Prabowo’s refusal to concede defeat] will be resolved peacefully and the transition will go smoothly,” White added.
European Business Chamber of Commerce in Indonesia (EuroCham) vice chairman Tiku Menon expected the new government to stick to transparency, uniformity, the rule of law and fair trade as its guiding principles to grow the economy.
To become a significant power in the Southeast Asian and international arenas, Indonesia would need to foster a stable foreign capital inflow and investment climate, he suggested.
“Our expectation has always been to work with the incumbent government to increase trade and industry between the EU and Indonesia,” Tiku said. “We look forward to a closer, mutually beneficial relationship with the incoming government.”
The local stock market, however, did not seem to align with sentiment among businesses in the real sector. Although this may have been due to profit-taking reasons as the benchmark Jakarta Composite Index (JCI) has gained more than 4 percent this month and almost 20 percent so far this year — one of the best-performing indices in the region.
“After the decision of who will be the new president has been announced, I am sure the market will react positively, investment will flow again smoothly,” said Suryo Bambang Sulisto, chairman of the Indonesian Chamber of Commerce and Industry (Kadin).
At the end of the day, businesses only want stability, according to Suryo, adding that whoever takes the helm of the country will be fine for businesspeople as long as the new leader cooperates with the business sector.
The positive tone from businesspeople in the real sector indicated that the long-term outlook for the country was much more stable in spite of the ups and downs that might lie ahead.
Prior to the final tally being announced, the day’s trading on the Indonesia Stock Exchange (IDX) was much more volatile than normal, and the JCI ended in the red.
The stock market had closed before the KPU’s official announcement that declared victory for the Jokowi-Kalla ticket on Tuesday evening.
Prabowo’s decision to quit the presidential race, announced in the afternoon at around 2 p.m., made investors jittery with the JCI plunging as much as 2.2 percent, before closing the day 0.9 percent lower at 5,083.
“The market panicked in response to Prabowo’s move, although eventually some realized his withdrawal might actually make vote recapitulation easier,” said Satrio Utomo, a Jakarta-based equity analyst with Universal Broker Indonesia.
The sell-off in stocks was a technical correction caused by profit taking, although it was certainly exacerbated by Prabowo’s surprising decision to walk out of the presidential race, Satrio claimed.
Prabowo’s public statements alleging the election process was undemocratic and marred by fraud had spooked the markets, said Saktiandi Supaat, a Singapore-based currency analyst with Maybank.
While the best outcome for the rupiah is a Jokowi win accompanied by Prabowo’s concession, the 62-year-old’s refusal to concede defeat might extend political uncertainty in the market for at least another month, with further weakening of the rupiah to 12,000 per dollar still possible, Saktiandi forecast.
“The market volatility comes from uncertainty about the transition process,” Mirza S. Baig, the head of Asian foreign exchange strategy with BNP Paribas, said on Tuesday. “Hopefully we can lay those concerns to rest, and look forward to what promises to be an exciting future for Indonesia.”
On Tuesday, the rupiah dropped 0.3 percent to touch 11,605 per US dollar, reversing earlier gains after it had strengthened to as high as 11,505 in the morning, Bloomberg data showed. (JP)