REPUBLIKA.CO.ID, By: Wellian Wiranto, Economist of OCBC Singapore

Now formally nominated, Joko Widodo (a.k.a Jokowi) is increasingly seen as the presumptive president. To bolster his chance at meeting the lofty market expectations, he has a few milestones to clear, apart from actually winning the ticket.

To start with, his party needs to win big in the April 9th legislative votes to secure a workable coalition. Thereafter, he needs to have a seasoned deputy who knows how to work the often-wily ways of an unwieldy parliament.

Even then, he has to pander to the up-swell in nationalistic economic sentiment, including internally within PDI-P. However well-meaning he is, the reality is that it is unlikely that Jokowi can tackle tough reforms at the get-go.

SHE SAID 'YES'

In our Feb 24th report, “Besides Jokowi” we pondered why Megawati Soekarnoputri, PDI-P’s leader, had not endorsed Jokowi as a presidential candidate. It appears that the lady was just waiting for the right time. As it turned out, she chose to announce her formal support for Jokowi’s presidency on March 14th, just a day before the election season for the parliamentary elections starts.

Market reacted jubilantly at the news at first, since Jokowi’s nomination resolved one of the key political uncertainties. Still, it soon realized that there are still many other missing parts to keep in mind before Jokowi even has the chance to meet some of the lofty expectations that market increasingly has of his probable presidency.

The first milestone will be whether he can lead his party to dominate the parliamentary race going by opinion polls conducted before the nomination, PDI-P already looked to be the largest winner, potentially securing over 16 percent of votes. However, there is now rising expectation that the party can ride on the coattails of his popularity to capture more votes, especially among the large portion of undecided voters.

To begin with, there has been an up-swell of nationalistic sentiment that he would be forced to pander to at the outset. From the outright ban on the export of some minerals to punitively high taxes on the shipment of others, to the passage of vaguely worded trade law that leaves too much room for interpretation of officials, the current administration is leaving behind a tricky legacy for the upcoming government. To add to that, Jokowi’s own party sees itself as the flag-bearer of autarkic ideals of Sukarno, the country’s founding president who is also the father of Megawati. Indeed, Megawati had been an advocate of resource nationalism, calling for renegotiation of oil and gas contracts to ensure a larger slice for domestic companies vis-à-vis foreign investors, for instance.

Hence, given that Jokowi’s political fortunes would remain dependent on Megawati’s acquiescence for a while more, it is hard to expect him to roll out market-friendly reforms at the get-go. Because of that, even as market will continue to see the potential Jokowi presidency as a plus and sentiment would remain supported up till the conclusion of elections in September, there is a risk of disappointment when he is finally sworn in on October 20th and starts to get down to the business of governing.

This risk can be mitigated if Jokowi can prove his mettle by first helping his party to win a substantial chunk of seats – and thus boost his intra-party standing. By having a deputy from outside his party who can help to secure support from other factions in the parliament, Jokowi can have a shooting chance at pushing at least some economic reform measures through the gate. Overall, reforms might not come at the speed and breadth that the loftier of market expectations are hoping for, but he probably provides the best chance in pursuing them for Indonesia’s long term prospects, at this point.

THE SIGNIFICANT OTHERS

Still, rather than picking Jokowi’s running mate from its own ranks, the PDI-P leadership is likely to use the VP ticket as a lure in coalition talks with other parties. Indeed, to govern effectively as a president, he would need to build a stable coalition base in the parliament to get the support needed for passage of necessary legislations. Even though it may be the largest party in the new parliament, the PDI-P’s share will most likely still fall way short of having an outright majority of over half of the 560 seats.

To that end, from the market perspective, it would do Jokowi well to have a deputy who can work the sometimes convoluted ways of Indonesia’s parliamentary politics. That is one reason why domestic press has been busying itself with speculation that Jusuf Kalla might be picked as Jokowi’s running mate. The 72-year-old businessman commonly known as “JK” was a VP during incumbent President SBY’s first term, and he is known to be a smooth political operator who can find ways to work with the often combative parliament. Importantly, he also reportedly continues to wield significant influence within the Golkar party which is likely to end up as the second largest party after the elections.

The final decision on the line-up will likely only come after the results of the parliamentary elections, but the choice of deputy becomes especially important if we note how, for all his purported popularity, Jokowi remains a relative political novice – who was still selling furniture, rather than hope and visions, just two election cycles ago.

REALITY BITES

While securing a sizable plurality in the legislative votes for his party and finding a suitable running mate who can effectively smooth the relationship with the parliament are important, Jokowi’s chances of pushing through economic reforms are by no means secure yet. To begin with, there has been an up-swell of nationalistic sentiment that he would be forced to pander to at the outset. From the outright ban on the export of some minerals to punitively high taxes on the shipment of others, to the passage of vaguely worded trade law that leaves too much room for interpretation of officials, the current administration is leaving behind a tricky legacy for the upcoming government. To add to that, Jokowi’s own party sees itself as the flag-bearer of autarkic ideals of Sukarno, the country’s founding president who is also the father of Megawati. Indeed, Megawati had been an advocate of resource nationalism, calling for renegotiation of oil and gas contracts to ensure a larger slice for domestic companies vis-à-vis foreign investors, for instance.

Hence, given that Jokowi’s political fortunes would remain dependent on Megawati’s acquiescence for a while more, it is hard to expect him to roll out market-friendly reforms at the get-go. Because of that, even as market will continue to see the potential Jokowi presidency as a plus and sentiment would remain supported up till the conclusion of elections in September, there is a risk of disappointment when he is finally sworn in on October 20th and starts to get down to the business of governing.

This risk can be mitigated if Jokowi can prove his mettle by first helping his party to win a substantial chunk of seats – and thus boost his intra-party standing. By having a deputy from outside his party who can help to secure support from other factions in the parliament, Jokowi can have a shooting chance at pushing at least some economic reform measures through the gate. Overall, reforms might not come at the speed and breadth that the loftier of market expectations are hoping for, but he probably provides the best chance in pursuing them for Indonesia’s long term prospects, at this point.

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