Businesses, markets perk up with Jokowi win

Businesses, markets perk up with Jokowi win

The business and financial community cheered, and the rupiah hit a two-month high, after Mr Joko Widodo was declared Indonesia's next president.

The optimistic mood over the outlook for this sprawling nation of about 240 million people is being driven by two factors.

First, the announcement by the Election Commission on Tuesday ends major uncertainty over Indonesia's political future, notwithstanding grumbling by opponent Prabowo Subianto. Analysts believe Mr Joko's winning margin is strong enough to withstand challenges from Mr Prabowo, who has said he might contest the result.

Second, Mr Joko, or Jokowi, is largely seen as a business-friendly leader who has vowed to introduce economic reforms.

"He has been one of the more visionary and successful governors that Indonesia has had. He has a strong track record of executing positive changes as the governor of Jakarta," said Mr Kurt Wee, president of Singapore's Association of Small and Medium Enterprises. Mr Joko is regarded as a politician who is not shackled by strong ties to Indonesia's traditional power base so businesses hope he can usher in a fairer and more transparent regime, he said.

"Of course, Indonesia's power structures will not change overnight but I think this is a move in the right direction that businesses will welcome," he said.

Singapore Chinese Chamber of Commerce and Industry (SCCCI) president Thomas Chua was also upbeat. "The SCCCI views the Indonesian market with great importance and we hope to see even greater two-way trade and investments between Singapore and Indonesia going forward," he added.

The road ahead will not be easy, said Bank of America Merrill Lynch economist Chua Hak Bin. He said: "The new president and his administration inherit an economy with pressing issues including an inflated fuel subsidy bill, a structural current account deficit, poor infrastructure and a huge but largely uneducated labour force."

But relief might come in the form of more foreign direct investment, he said, adding: "Jokowi is more open to foreign investments and recently spoke about allowing foreign ownership of apartments in the capital, main cities and Bali island, which would provide a boost to the property market and expand the tax revenue base."

The cheer was apparent in financial markets. Indonesia's rupiah surged over 1 per cent to 11,500 rupiah against the US dollar.

"If we get a bit of momentum behind the Jokowi presidency... and we start seeing a clear plan for reforms, we can definitely see the rupiah start to push towards the 11,000 barrier again," Mr Michael Every, Rabobank's head of financial markets research for Asia-Pacific, told Bloomberg.

The Jakarta stock market had a lift. Shares gained as much as 1.1 per cent before closing 0.23 per cent up. A CIMB Research report yesterday said the win clears uncertainty, paving the way for a sustained market rally. "There may be some lingering concerns as the losing camp is expected to appeal... But we believe the court would uphold the election result in a ruling expected by Aug 20."

This article was first published on July 24, 2014.
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