The presidential elections were held in Indonesia on April the 17th. The elections were one of the largest one-day elections in the world, where more than 192 million people were eligible to cast their vote in ca. 800,000 voting venues.
Although the official results will be available in mid-May, the so called quick count reveals that the current president, Joko Widodo, has won the election by a margin of some 6 – 9% against his rival Suabianto Prabowo. The constitution limits a president’s reign to two five year terms, meaning that Jokowi will not be eligible to run in the 2024 elections.
Jokowi’s re-election has a very positive effect on the country’s economy and development for the following reasons:
The political uncertainty that started with the 2017 Jakarta gubernatorial elections, is now coming to its end. This will unleash many domestic, as well as international investment projects which have been on hold.
Investments to improve the country’s infrastructure will continued during the next five years – at an accelerating pace. As this will cut the logistics costs, more FDI funds are expected to flow into the country.
Jokowi’s re-election secures that the implementation of important economic reforms will continue – also the non-populistic ones. For example, Indonesia’s fairly rigid employment laws will be modified in order to create a more level playing field in competition with countries such as Vietnam or the Philippines.
The post-election outlook on the Indonesian capital market is bright in our opinion. Now that the political uncertainty has largely disappeared, we believe the small and midcap companies are very likely to gain wind beneath their wings, keeping in mind they have underperformed the JCI index by more than 50% in the last three years.
Finally, considering that Indonesia’s economic cycle turned upwards after a prolonged sluggish period during 2018, we are very inclined to believe that the growth will gain speed and strength going forward.
For more information about Indonesian economic cycle, please see pages 3 – 5 of our February 2019 report.