Indonesia successfully conducted the world's biggest one-day election on April 17, 2019. The election involved 193 million people across 17,000 islands casting their votes for President. This election also became the most logistically-complicated single-day election, with 800,000 polling stations and 6 million workers involved. Five types of election ballots were involved. They consisted of the president and vice-president, of members of the 575-seat House of Representatives, of the Regional Representative Council provincial legislators, and of district and city councils.
The primary contest is the presidential election. Even though the final result is expected to be announced by General Election Commission (KPU) between April 25 and May 22, polls from prominent survey institutions put incumbent Joko "Jokowi" Widodo on course to win a second term against Prabowo Subianto.
As the third-largest democratic country in the world, the outcome of the Indonesian election is very important for global economic development. Indonesia has become the largest economy in Southeast Asia and is projected to be a top five economic powerhouse in 2030. Indonesia has become an important trade partner for the USA, China, Europe, and many others. Thus, the election outcomes will have a significant impact on the business climate and the environment for future investment in Indonesia.
If he wins, Jokowi will likely continue his program, which focuses on infrastructure development and foreign investment to reduce poverty in Indonesia. He is well-known as a progressive leader who has been successfully developing social welfare programs such as universal healthcare, subsidized primary education, fair distribution of resources, and bureaucratic and administrative reformation.
Prabowo – backed up by hardline Islamic communities — campaigned on a nationalist narrative that emphasized making the national interest as a priority. He promises to reduce poverty by protecting Indonesia from foreign influences such as foreign debt and foreign workers. His strong criticism of Chinese investment in Indonesia threatens a negative outlook for investors. Prabowo’s campaign of putting Indonesia first has become a concern for the foreign investors.
One day after the election, the Indonesian Jakarta Composite responded positively. It increased over 1.34%[1] on the Thursday immediately after unofficial election results showed that Jokowi is likely to serve a second-term. The Rupiah exchange rate also strengthened over to Rp14.010 per USD after this “Jokowi Effect”. Furthermore, the inflation rate is stable on 2.48% through March 2019 according to Bank of Indonesia. Infrastructure developments such as roads, bridges, trains, communication apparatuses, airports and harbors have increased Indonesia’s ease of doing business ranking to 73 in 2019. This signals that if Jokowi wins, there is reason for future optimism for financial markets and the future of Indonesian business policy. However, experts predict that investors would prefer to “wait and see” for the election result before making critical business decisions.
During his first term, Jokowi failed to live up to key promises. Despite his success in infrastructure development and social welfare spending, Indonesia only achieved economic growth of 5%, lower than the targeted 7 %. Foreign Direct Investment also dropped 8.8 % in 2018. As a result, if Jokowi continues to a second-term, he will be challenged to fulfil his campaign promises and to earn public trust.
Investors’ positive welcome to the quick count result is a sign that Indonesia has a chance to inspire further global trust. If key policies continue, Indonesia can expect to bring more capital inflows and to increase the strength of the rupiah in the future administration.
Regardless of the official result, it is important that the next administration focus on investor concerns such as reformation in labor laws and administrative bureaucracy, intellectual property protection and corruption. The future administration must also improve legislation in business to maintain global trust and ensure a favorable business climate.
