Indonesia’s New President: What does the future hold?

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A look at Indonesias newly elected President Joko "Jokowi" Widodo and an analysis of the new political landscape and policy outlook.

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  • Indonesias New President What does the future hold? July 25th 2014
  • 2 Population: 250 million (4th largest population in the world) GDP: $868.3 billion Projected growth: 5.3% (2014), 5.6% (2015) FDI inflow: $23 billion (2013) The biggest economy in Southeast Asia and ASEAN, accounting for 1/3rd of ASEAN GDP Bain & Co. says by 2030 Indonesia will be worlds 9th largest economy Worlds 3rd largest democracy Worlds largest Muslim majority country Archipelago nation of 17,000 islands stretching 5,150 km The most populous island is Java, where 141 million people or around 60% of the population reside and the nations capital, Jakarta, is located Executive Presidential system and constitutional republic Alongside the presidency, considerable powers rest with the national parliament (DPR) and local governments after a process of decentralization starting from 2001 Indonesia at a glance.
  • 3 CONTENTS 1. Indonesias new president and political landscape 2. The presidential inbox: key issues for Jokowis first 100 days 3. An introduction to our corporate & public affairs practice
  • 4 Man of the people wins Indonesias Presidential Election After an extremely close, tense and dramatic election, Joko Widodo, Jakartas current Governor, was declared the winner of Indonesias Presidential election by the Indonesian Election Commission (KPU) on Tuesday evening. Joko Widodo, or Jokowi as he is popularly known in Indonesia, won 53 percent of the vote to his rival presidential candidate Prabowo Subiantos 47 percent. President-elect Widodo, a former furniture businessman from Solo, central Java, has risen through the ranks of Indonesias decentralized local politics from Mayor of Solo, to Governor of Jakarta to now President-elect of the worlds third largest democracy; most populous Muslim country; and largest economy in Southeast Asia. This is a huge achievement for such a young democracy born after the riots and mass protests which unseated Suhartos New Order regime in 1998, after 32 years of authoritarian rule. It is also a sign that democracy is now fully entrenched in the Indonesian psyche and a rejection of the past. Jokowis presidential rival, Prabowo, previously served as a top General to Suharto and was previously married to his daughter Titiek Suharto. This election has broken with past traditions that have favored old political elites and military generals, and suggests that Indonesias local leaders can now rise to the very top. The election has not been without controversy. A few hours before Jokowi was officially declared the election winner, candidate Prabowo gave a televised press conference denouncing the Election Commission and alleging widespread voting electoral fraud. Although not presenting evidence of this on a scale that would likely make a significant impact, Prabowos camp now will launch an appeal to Indonesias Constitutional Court, which will rule on the evidence and make a final verdict - which cannot be overturned - by August 20th. Orthodox opinion is that a ruling that overturns the KPUs decision is unlikely given President-elect Widodos 8 million vote margin, however, this is Indonesia. The old parliament (DPR) staggers on until September 30th and is dominated by Widodos political enemies; they still may plan to cause all manner of issues that could disrupt the current process as it is. President-elect Jokowi is due to be sworn in on October 20th, a few days after Indonesias new legislators take their seats in the Indonesian parliament on October 1st. The new government will then have to work with the new parliament to get legislation through, and this is where the new challenges will truly lie (as if it has been easy by then!) Indonesian parliamentary politics is multi-party and based on loose coalitions and compromise. This is a democratic system that was constructed to provide checks and balances on presidential power and prevent a return to centralized and authoritarian presidential rule. Jokowi will have to work with the new parliament to govern in a truly effective way. Between today and October 20th political alliances will rise and fall and it is yet possible that we may see a completely different parliamentary coalition supporting the new President. On Jokowis desk when he walks into the State Palace will be a number of policy challenges, among them regulatory uncertainty in both the mining and oil and gas sectors, continued widespread corruption, bureaucratic inefficiency and infrastructure bottlenecks, and an economy which has slowed over the last year. Jokowi was also elected on a mandate that he would provide better basic services in education and health for Indonesias poor, and tackle grinding poverty which still affects millions across the archipelago, especially in more rural areas. We expect healthcare to be the centerpiece of his first 100 days, but equally he must also tackle the level of fuel subsidy which is about to break its statutory limits (as a percentage of GDP): technically he can be impeached if this happens, but Jokowi has already pledged to cut the subsidy in his first 100 days in office. It has been a dramatic election season, but the political drama is only just beginning. Stephen Lock CEO Edelman Indonesia & Head of Public Affairs, Southeast Asia
  • 5 The Indonesian Election Commission (KPU) declared on July 22nd that Joko Jokowi Widodo, of the Indonesian Democratic Party of Struggle (PDI-P) has won Indonesias 2014 presidential election, but some uncertainty still remains as the rival candidate, Prabowo Subianto of the Great Indonesia Movement Party (Gerindra) has now filled for an appeal at Indonesias Constitutional Court. The Indonesian Constitutional Court is controversial and lacks public trust since the recent life imprisonment of the head of the former Constitutional Court for corruption in rulings over election disputes. The Courts final verdict could well resemble a replay of the US presidential election in 2000 where the Supreme Court ruled on the next president. The Constitutional Courts verdict must be given by August 22nd before the inauguration of the new president on October 20th. Political uncertainty & the Constitutional Court
  • Resolving the Uncertainty: The Timeline August 20th: Date by which Constitutional Court must rule on Prabowos lodged appeal October 1st: The new Indonesian parliament (DPR) assembles October: Likely announcement of key ministries just prior to accession of the new president to office, with some horse-trading for final ministerial and vice-ministerial posts completed as DPR ruling coalitions shift and finalize. (There is an outside chance President-elect Widodo will have a minority coalition in the DPR) October 20th: Joint session of both parts of parliament confirm the President of the Republic of Indonesia October 20th President-elect Widodos first five year term begins
  • Joko Widodo: Indonesias 7th President Joko Widodo has been a true outlier of the Indonesian political scene. From humble beginnings as a successful furniture retailer, Jokowi, as he is popularly known, was the highly successful Mayor of the relatively small city of Solo (since 2005) where he transformed a city racked by crime and a reputation as a terrorist hotspot into a regional center for arts and culture, which has started to attract international tourism. His campaign against corruption earned him the description of being the most honest politician in Indonesia. Joko Widodos victory over Jakartas incumbent governor Fauzi Bowo in 2012 was largely due to his track record as mayor of his home town and his reputation for honesty and humility. This reputation has carried him through to the state palace in a country where politicians are often distant from the people in their daily dealings and frequently corrupt. During his time in Jakarta, his hands on, street politics style of governing has won him plaudits and great affection. Jokowi is famous for spot checks and frequent daily ground visits to communities, government institutions and projects. This style has also been crudely replicated by other national level politicians, keen to obtain a more populist image. During his time governing Jakarta, his introduction of health cards (where the poor can receive free access to basic healthcare) has been his most lasting legacy. He has also made inroads in shaking up bureaucracy and improving Jakartas woeful public transport system, with the introduction of upgraded and a greater number of Trans-Jakarta buses, and the start of an ambitious MRT system. Although in power for a short time, his national popularity has remained strong and resilient, despite a dent in his poll ratings during a highly competitive and controversial election race. He managed to endure attacks on his character and smear campaigns, and prove himself capable in presidential debates, eventually winning the election with 53 percent of the vote, despite a highly organized and well-funded Prabowo campaign. The nation now expects change and for him to bring his can do attitude and municipal management to the national level. He is likely to make social issues such as healthcare, education and combating poverty the major focus of his administration. Fighting corruption and reforming bureaucracy will also be on the agenda; Indonesians will expect to see progress on this front, after a previous governing administration that was embroiled in multiple corruption scandals.
  • A look at the new ruling party: the PDI-P The PDI-P, one of the most successful parties in the Indonesian democratic era, is closely linked to the political life of its chairperson Megawati Sukarnoputri, the daughter of the countrys independence leader and first president Sukarno. Her first election to chair the Indonesian Democratic Party in 1993 led to a split and the affix Perjuangan = struggle. Aeran Ismail Director, Corporate and Public Affairs Megawati Sukarnoputri was vice president of the republic from 1999 to 2001 and (after president Abdurrahman Wahid had to step down) president from 2001 to 2004. The party has a functioning infrastructure with branches all over the country but with strongholds and higher election results in Java and Bali. After 10 years in opposition, Megawatis PDI-P is now in power with Joko Widodo as the President of Indonesia. Megawati will still wield considerable influence behind the scenes and will remain as a key political power broker. She also may act as a gatekeeper to Indonesias new president. A key issue when Jokowi takes office will be how independently he can act and if Megawati is really willing to take a back seat.
  • 9 An overview of Indonesias new political landscape In terms of the outlook of a Jokowi government and the likely implications for business, some nationalist and protectionist policies will remain in place, but many analysts predict that Jokowi will continue to govern in a moderate and open style. Jokowi, while still being nationalistic by western standards, is viewed as more open in his economic approach. It is telling, for example, that the Indonesian stock market shot up when the majority of quick count polls after the July 9th election stated that Jokowi had won and again with the declaration of his victory by the Electoral Commission (KPU) on July 22nd. Beyond this, Indonesias political landscape is further complicated by a geography that spans over 17,000 islands and decentralized democracy across 34 provinces and 510 districts, with district and provincial leaders elected directly at the local level and entrusted with the power and responsibility to provide the majority of services to their electorates. They also have a number of local legal powers which can complicate the regulatory process. Many businesses entering Indonesia for the first time find it hard to navigate Indonesias complex system of decentralised governance and confusing, and often contradictory, regulations. Building alliances and engaging with relevant stakeholders in the new government will be vital for business success.
  • 10 The new Indonesian parliament (DPR) Of the total 560 seats in the House of Representatives, PDI-P secured 109 seats. PDI-P are backed by Hanura, NasDem and PKB, while for the time being the opposition are made up of Golkar, Gerindra, PPP, PKS, PAN and Demokrat. Indonesias next government will not be dominated by a strong majority, instead it will be a government of multiple coalitions once more. This means that a Jokowi administration, will be much more constrained in pushing new policies and reforms through the DPR and getting stuff done. He will have to compromise and make deals with other parties. The new parliament will be challenging for the new administration to work with. This also makes radical or large-scale reforms much more unlikely. Opposition parties to the biggest party, PDI-P, also recently passed a revision to the law on legislative assemblies (UU MD3) which means that the PDI-P (although the largest of the parliamentary parties) will not automatically obtain the powerful and important speaker post, as has been the norm in previous governments. This just goes to show the fractious future that the new parliament will face. This said, we have seen signs that current coalitions are likely to realign and evolve once Jokowi takes the reigns of power. The expectations that a Jokowi government can push through new reforms and shake-up Indonesias political process maybe optimistic. Politics and policy making will very much be the art of the possible. Source: Jakarta Globe
  • Limit foreign banks share in Indonesia and instead promote the principle of reciprocity Special banks for farmers and SMEs JOKOWIS CAMPAIGN PROMISES Economic Reforms Construct sea toll roads Irrigation dams Promote industrial development for plantation owners and midsize businesses Infrastructure Reevaluate FTAs Manage food imports A revision of oil and gas laws Restrict outsourcing in state-owned enterprises Streamline business licenses Mining operations to benefit local communitiesPolicy Distribution of agricultural lands (9 million hectares) for 4.5 million families Development and improvement of irrigation on 3 million hectares of rice fields Construction of 25 dams and 1 million hectares of new agricultural land outside of Java Provide clean water to farmers homes with s...

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