Klareco Insights with Wijayanto Samirin
Indonesian politics to remain stable despite upcoming elections
The upcoming presidential elections, due to be held in Indonesia in April 2019, will be robustly contested but the political situation will remain stable. Political dynamics in Indonesia are underpinned by a maturing democracy and political elites who compete but remain cordial with each other on personal terms. Political parties also do not differ drastically from each other in terms of ideology which means parties and the elites are not split by ideological differences. Taking all these factors into account, it is likely that the upcoming elections will remain peaceful.
Economy and employment issues will be the focus of elections campaigns
Indonesia’s economic performance, employment and issues closely related to the livelihood of Indonesians will dominate during the campaign period in the lead-up to elections. Religion is likely to be less of an issue, especially after President Jokowi chose Ma’ruf Amin, the Chairman of Indonesian Ulema Council also known as MUI, to be his Vice-President candidate.
Weakening Rupiah and widening current account deficit are key economic concerns
The exchange rate of Rupiah to US dollars is now on a level that is similar to that of the 1998 financial crisis. However, the factors causing the Rupiah to weaken are very different from those that caused the 1998 financial crisis. Today, Indonesia’s financial institutions are stronger. Despite that, Indonesia suffers from a perception issue as it is often grouped together with countries like Turkey and Argentina as the “Fragile Five”.
The existing current account deficit is partly caused by falling domestic oil production and rising fuel consumption. At present, about 60 percent of oil consumed in Indonesia is imported. Infrastructure projects and e-commerce also contribute to the current account deficit as the former require imported construction materials and the latter facilitate the sales of imported products mainly from China.
President Jokowi and his administration are actively managing the value of Rupiah and current account deficit as these economic issues will have a direct impact on his chances of getting re-elected for another term.
The government is open to engagement but also wants constructive feedback
The current government is open to feedback from the business community. However, businesses should suggest solutions along with their feedback. The timing of engagement with the government is also key. Government officials will be able to take on feedback and incorporate them into decision making if the legislation has not been ratified as law. Once ratified, government officials could still attempt to manage the impact of the law through implementing and ministerial regulations but they will be bounded by the law.
The method of engagement is also crucial. The government and ministries are more comfortable engaging with industry bodies and advisories to discuss industry-wide issues. Companies need to be sensitive to these preferences.
…it is very important for companies to establish their clear positions and to ensure that they attract credible partnerships for success in Indonesia.
Ang Shih-Huei | Co-founder and CEO, Klareco Communications
..I think one very important strategy for the government to maintain stable economic growth and stable Rupiah is to attract more FDI (foreign direct investment)…
Wijayanto Samirin | Special Staff to Vice President, Jusuf Kalla