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INDONESIA POLLS: Real test lies in who can grow the economy

Publication Date : 10-07-2014


Business analysts have started anticipating what the outcome of the knife-edge Indonesian presidential election might mean for the economy of the world's fourth most populous nation.

They say Jakarta governor Joko "Jokowi" Widodo, who appears to have a slight lead over former general Prabowo Subianto in very early unofficial results, could bring significant change to the nation.

But they add that the real test for either Joko or Prabowo would be whether they have the political will to tackle thorny issues such as fuel subsidies, which cost Indonesia more than US$20 billion a year.

Ong Han Ling, a consultant with an Indonesian oil and gas firm, told The Straits Times yesterday he is "hoping for change" through Joko.

 "He is different from the other candidates. He is coming from a non-politician point of view. He didn't want to promise anybody anything that he may not be able to deliver. This will cost him a lot of votes."

Joko, who built a reputation as a reformer focusing on issues such as health care and transport, has said he will improve regulations to attract investment and cut red tape.

For his part, Prabowo wants to raise more money from capital markets and taxes to spur economic growth.

Investors would probably prefer a Jokowi win, Miles Remington, head of equities for Indonesia at BNP Paribas SA, said. "He's seen as someone who would bring something new to the table."

Even so, whoever wins will "face the same problems. The economy needs to turn around".

A report from Barclays said Prabowo has "strong backing" from the business community and media magnates such as Aburizal Bakrie.

But his links with the old guard and business elite may prove a turn-off for voters seeking change, Barclays said.

As the early results trickled in, trading in futures contracts for the Indonesian rupiah extended gains and dollar bonds advanced yesterday.

According to Bloomberg, rupiah one-month non-deliverable forwards extended gains, jumping 1.6 per cent to 11,565 per US dollar as at mid-afternoon yesterday in Singapore, the strongest level since February.

"We expect the market to undergo a mini-rally should Jokowi win the presidency and conversely, the market could lose ground if he does not," Barclays said.

"But any initial election reactions could be short-lived as investors' attention would soon shift to how the new leader intends to address fundamental economic issues."

"Investors may need to see concrete results quickly from the new president before adding more exposure to the country."

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