INDONESIA’S 2018-2019 ELECTIONS: THE POTENTIAL FOR POLITICAL DISRUPTION
Indonesia is in political season this year and next year (2018-2019). The season kicks off with the June 2018 regional elections (171 cities, regencies, and provinces) with the most notable elections to watch being the gubernatorial elections in populous regions of West Java, Central Java, East Java, and North Sumatra. The regional elections will provide various indications and signs of where the national elections could be trending. As for regional elections, the Jakarta gubernatorial election of 2017 is considered a template of how the 2019 Presidential elections could be framed. The 2018 regional elections will be a testing ground for this template.
Indonesia’s incumbent President Joko Widodo. Photo by Øystein Solvang/ NHD
Indonesia 2019: Should We Really Care Who Wins?
There is a critical mass of serious investors, businesspeople, diplomats and geo-political analysts who make a pretty strong case that regardless of who wins the 2019 Indonesian Presidential election the fundamental results will be similar. The connected and influential faces may change but the basic forward trajectory of Indonesia will remain the same.
Joko Widodo (“Jokowi”), Prabowo Subianto, Susilo Bambang Yudhoyono (“SBY”), Megawati Soekarno Putri – the names may change, and they are certainly not the same persona or ideology, but they all steer toward a stable, centrist, market friendly leadership determined to steer Indonesia toward mainstream economic, political and religious behavior.
Why should we care who wins?
Because Indonesia more than any other nation, society, economy or culture in Southeast Asia will be an undeniable dominant force for the economic, political, cultural and communications future of our part of the world.
The 2019 Indonesian election/leadership process, and its result, will offer compelling insights, guidelines and pathways into future Indonesian business, finance, culture and politics. Those who are guided by those insights will inevitably have the best opportunity to share in an extraordinary Indonesian future.
Essential Factors of Predicting Electoral Success: Past, Present, and Future
PAST: In the not too recent past predicting electoral success was a “by the numbers” exercise of comparing traditional success factors and institutions of influence:
Money
Party Organization
Sectoral Power and Authority
Personal Popularity
There certainly were differences from nation to nation. Take for example political parties: in the Philippines, political parties had become rather irrelevant influencers of voters and existed largely to offer an institutional vehicle for personalities, money and power to compete in elections, and for the winner to legislatively govern and divide the patronage of governance. Many of the same elected officials moved seamlessly back and forth between parties at political convenience.
Contrast that with Indonesia, where political parties have long term and continuing core membership. While the size of their electoral success varies candidate to candidate and election to election, the parties have continuity.
Political scientists and other academics made a career out of creating algorithms and historical based predictive models based on these factors in an attempt to predict and quantify electoral outcome. But that was the past…
PRESENT: The 2014 Indonesian Presidential election is perhaps the best case study in Southeast Asia for predictive analysis of national electoral leadership in the democratic cultures of our part of the world. In fact, Indonesia 2014 and 2019 may very well be the perfect case studies for anywhere in the world.
Indonesia 2014 divided relative strengths in Money, Political Party Organization, Sectoral Power and Authority, and Personal Popularity among several candidates.
But it was new and compelling sets of factors such as Communications Technology, and a culture of informational and influential connectivity operating outside of the authority and control of traditional electoral players, that may have been the determining influence in the election result. Social media and digital communications advancements not only enabled the rise of now President Jo rise of now President Jokowi, but also enabled Prabowo Subianto to put across powerful messages and ultimately make a very strong showing in what had been expected to be a Jokowi landslide.
FUTURE: But to assume that Social Media and Direct Digital Communications are the only or even dominant mediums in a predictive analysis of the Indonesian electoral landscape would be wrong.
President Jokowi has evolved from the Social Media phenomenon of the bicycle riding, heavy metal fan of modest economic roots to a very savvy traditional political leader who is moving to recreate his 2014 partisan electoral model.
His most likely leading competitor Prabowo Subianto, in addition to strong partisan, sectoral and financial support, is surely devoting much of his preparation to a social media and direct digital communications campaign that will serve to disseminate even more effectively the compelling content that he used so powerfully at the end of the 2014 campaign.
It will be the candidate that finds the “sweet spot” of balance between these factors that will succeed in 2019. This is also rooted in traditional Indonesian culture; Wayang Kulit, a style of Indonesian shadow puppetry that symbolizes the battle to balance good and bad in the universe, may very well define predictive analysis of Indonesia’s 2019 Presidential election.
February 2018 – The Partisan Battleground is Forming:
This analysis is the first of a series of deep analytic dives into the 2019 Indonesian elections. In addition to the overview just presented, very recent partisan political events compelled us to add a very specific analysis of the partisan political battleground as it stands today. As we move closer to 2019 we will take deeper dives into the factors of new communications technology, social media and direct digital communications, campaign finance and compelling messaging. - Editor’s Note
Megawati Officially Announces Jokowi as PDI-P’s Presidential Choice for 2019
In what must be considered the biggest salvo as yet of the partisan politics running up to 2019, former President Megawati Soekarno Putri announced Jokowi as the candidate of her PDI-P party, which currently holds the largest number of seats in Parliament. With PDIP’s support, Jokowi has received the backing of 6 out of the 7 parties within the 2014 coalition.
The announcement, although not surprising, was both defining and curious in its brevity and lack of context and specifics. This has raised questions among observers both in and outside of PDI-P that PDI-P might be proposing a vice presidential candidate for Jo PDI-P that PDI-P might be proposing a vice presidential candidate for Jokowi to accept. Could it be a bargaining tactic towards Jokowi in order for him to accept the vice-presidential candidate? The talk among politicians is that Megawati would prefer Jokowi to accept her daughter, Puan Maharani, or Budi Gunawan (a close associate) as a vice presidential candidate. Puan Maharani is currently a coordinating Minister in Jokowi’s cabinet and Budi Gunawan is a former police general and Megawati’s former adjutant, who is currently the head of Indonesia’s Intelligence Agency. Jokowi at this moment has been non-committal.
However, other coalition parties are also vying for their leaders to be the vice-presidential candidate and their support for Jokowi will ultimately hinge on his choice of running mate. One of PDI-P’s strong allies in the coalition is Partai Kebangkitan Bangsa or PKB, which has 9.19 percent of seats in parliament and has the backing of Nadhlatul Ulama (NU) Moderate Muslim group with more than 60 million members in Indonesia. The Chairman of PKB, Mr. Muhaimin Iskandar has declared himself as a vice presidential candidate. Similarly, Hanura Party wants its leader, retired general Wiranto, as the vice president. Wiranto was appointed by Jokowi into his cabinet as the Coordinating Minister for Political, Legal and Security A cabinet as the Coordinating Minister for Political, Legal and Security Affairs in 2016.
Jusuf Kalla, the current vice president who is from Golkar party, is not expected to run alongside Jokowi again. However, his intentions in the 2019 campaign are still unclear and may create another axis should he offer himself as a candidate.
Gerindra Party’s presidential nominee for the 2019 election, former Army general Prabowo Subianto. Photo by Prabowo’s online team
Prabowo vs. Jokowi
Gerindra Party has announced its chairman Prabowo Subianto to be its presidential candidate and it is most likely to be supported by PKS Party (Gerindra 2014 election ally) and PAN Party (Partai Amanat Nasional) to nominate Prabowo.
The coalition between Gerindra Party, PKS, and PAN would be enough to fulfill the 20 percent parliamentary threshold requirement to nominate a presidential candidate.
If a rematch between Jokowi and Prabowo was to happen in the 2019 elections, the real number to gauge would be the 2014 election outcome. The question would be, “How much support and number of votes would Jokowi have gained or lost in the last five years of his presidency?”
Indication is that his support base is soft especially at the grassroots level such as (fishermen, taxi drivers etc.). The softness in his support is due to policies of his government that have not been seen as having done enough for the lower income group to prosper. This is due to heavy concentration of the national budget on infrastructure which will only see the impact felt in the long term.
If Joko Widodo cannot maintain his support base of the 2014 election, then a rematch with Prabowo in 2019 could be a tight and close race. Jokowi also needs to do more to strengthen his support among Islamic parties and Islamic voters. Jokowi was unable to influence the Jakarta gubernatorial election and needs to face up to reality that religious issues and the rise of increasing conservatism will be used by his opponents against him.
SBY is Back
A possible coalition to emerge is the SBY axis. SBY is the abbreviation for former president Susilo Bambang Yudhoyono who was Indonesia’s President for 10 years between 2004 and 2014. He is considered a smart political operator, a student of former President Suharto, especially in political and social engineering. He was a military General in charge of social and political affairs for the Indonesian military under President Suharto. He eventually became President twice beating Megawati, the incumbent President in 2004, and winning re-election in 2009.
Many believe that SBY’s political maneuvers in last year’s Jakarta election cost the popular incumbent Basuki Purnomo (also known as “Ahok”) the gubernatorial election, which led to his defeat. SBY’s party, the Democrat Party, nominated SBY’s son Agus Harimurti Yudhoyono (AHY) for Governor of Jakarta last year. Although AHY came in third in a three-way race with Anies Baswedan, the other candidate nominated by Gerindra who eventually won the gubernatorial election, AHY’s nomination severely damaged Ahok’s campaign which led to his loss.
The Jakarta gubernatorial election of 2017 is considered by many to be the template for the 2019 presidential election. The lesson learnt from the Jakarta gubernatorial election is that the emergence of a third presidential candidate could be the cause of a popular incumbent to lose his seat. The Jakarta gubernatorial election was considered very populist and religion became an issue.
An SBY axis would need several parties to align with the Democrat party which has 10.19 percent seats in parliament. SBY himself has been elected president twice and cannot run for president (term limits). However, many believe he will nominate his son AHY for president or vice-president. Recent surveys have placed AHY as among the top 3 favored vice presidential candidates.
What Does the Political Uncertainty Mean for Foreign Companies Operating in Indonesia?
As Indonesia enters election season in the run-up to the presidential race in April 2019, the political landscape is likely to be increasingly uncertain, dynamic and fluid.
Although Jokowi has the upper hand as the incumbent, various possibilities and probabilities can happen that could change the election outcome, due to historical political rivalries, a fragmented political landscape and new communications technologies and direct digital communications.
Political party alignments in parliament and their respective presidential and vice-presidential candidacy could trigger a third or fourth coalition, with their own candidate for the presidential election in 2019. What is for sure is that the actual candidacy is likely to be decided in the last minute with nominations due in September 2018.
The only certainty is the uncertainty of the electorate’s choice and preference at the time of election day in April 2019. The Indonesian presidential election is up for grabs and it could be anyone’s game.
Given the fluid nature of the political landscape in Indonesia over the medium term, it is important for foreign companies with interests in Indonesia to understand how the election could impact on policy formulation and implementation, and possibly even business operations.
Other Critical Factors:
Regional vs. National Politics
Politics at the regional level could yield a very different outcome in the regional election scheduled for mid-2018 compared to the legislative and presidential elections. This is due to the decentralization of government and different political dynamics and personalities from region to region.
As such, new governors and office bearers elected at the regional level will mean that companies with operations outside of Jakarta must ensure that they are well-placed to adjust to potential changes in power. They need to have in place strategic stakeholder outreach and government relations programs that are comprehensive, sustainable and relevant over the longer term.
Increasing Nationalism
Election season in Indonesia means heightened focus and politicizing of economic nationalism issues by the various political parties to gain voter support. There is general and broad-based consensus among Indonesians that the country’s economic system has been too open and liberal as a consequence of the Asian Financial Crisis.
Foreign ownership and dominance in “strategic” sectors are often used by politicians to stir an emotional cord among Indonesians to take back control of their country’s assets.
Sectors that are impacted by rising nationalism (and backlash against foreign investors) include the financial services sector, and resource-rich sectors such as agriculture, mining, oil and gas etc. An example of a drastic policy shift as a result of sustained backlash against foreign dominance is evident in the mining sector, with the banning of raw mineral exports.
The reality is, however, that Indonesia still needs foreign investment and hence this needs to be balanced against nationalistic rhetoric. The World Bank said that Indonesia still needs about US$500 billion over the next five years to bridge its infrastructure gap. While President Jokowi’s focus has been on infrastructure spending, the country’s GDP growth of around 5 percent has fallen short of his 7 percent target.
Nationalistic sentiment in Indonesia can affect foreign-owned businesses in two ways:
Negative regulatory stance towards foreign presence in certain business areas
Negative public reaction towards foreign companies, and when targeted could lead to demonstrations, boycott of foreign companies/brands
Stalling of Policy Decisions
In the run-up to the elections, the current government will be mindful not to implement policies that are seen to be either in favor of foreign companies, or detrimental to local businesses and the population.
Politicians will not want to risk backlash or to provide ammunition to their opponents and would rather wait until they receive voter mandate before proceeding with sensitive policy decisions.
Interim Conclusions for Foreign Companies and Investors in Indonesia:
The upcoming election season presents increased uncertainty and political/regulatory risks to foreign companies operating in Indonesia. However, these risks can be mitigated by:
Continuous engagement with key stakeholders (media, political & regulatory) in order to communicate the company’s commitment to Indonesia via its investments, job creation, knowledge transfer etc.
Ensure local branding of business operations in Indonesia to mitigate social backlash in the event of severe anti-foreign exogenous shocks. Maintaining a lower “foreign-owned” public profile will also have a similar effect.
This is certainly a lot of partisan political maneuvering and analysis to digest at the beginning of what will be a long but fast moving run up to the 2019 elections. We will be regularly looking at breaking events and strategic dynamics as the campaign unfolds. We appreciate your time and attention and please feel free to offer suggestions, alternative or supporting commentary.
DISCLAIMER: The information contained herein is strictly for informational purposes. Optima Strategies Limited and any of its principals or employees are not responsible for its completeness or accuracy. This information is offered as a free service and all receiving parties are advised to confirm any and all information. This document is the proprietary intellectual property of Optima Strategies Limited and should not be copied, circulated to other parties or otherwise used without written permission.
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