Jokowi Candidate for Indonesian Presidency; Markets React Positively
After months of uncertainty and speculation, Governor of Jakarta Joko Widodo (popularly known as Jokowi) has finally declared to run for the Indonesian presidency in the presidential election scheduled for 9 July 2014. Jokowi is backed by the Indonesian Democratic Party of Struggle (PDI-P), one of the largest political parties in Indonesia, led by chairwoman Megawati Sukarnoputri. On Friday (14/03), Megawati released a statement in which she announced to fully support Jokowi in the upcoming elections.
Most surveys in the past year indicate that Jokowi is the preferred choice of the Indonesian people. He owes his huge popularity to his pro-people attitude and down-to-earth style of leadership. Jokowi, together with Deputy Governor Basuki Tjahaja Purnama (an ethnic Chinese Christian popularly known as Ahok), brought a new style of governing to Indonesia. Their election in 2012 (chosen by the citizens of Jakarta) to govern Indonesia's capital city was a spectacular one as they broke through a number of traditional barriers. Not money-politics or nepotism were the decisive factors in the election. Not even the fact that Ahok is a Christian could prevent their election (in conservative Muslim circles it is forbidden for a Muslim community to be governed by a non-Muslim ruler), although it did evoke resistance. The pair brought a new sense of hope to the people of both Jakarta and Indonesia, who have grown increasingly tired of the traditional corruptive nature of Indonesian leaders.
Both Indonesia's stock market and rupiah exchange rate responded positively to the news that Jokowi is in the race for Indonesia's presidency. The benchmark stock index (known as IHSG or Jakarta Composite Index) was in the red for most of the day until the announcement was made public. The index quickly rebounded and ended 3.23 percent higher on Friday (14/03) from the previous trading day. Apart from the improving economic fundamentals (the easing current account deficit and inflation pace), Jokowi triggers renewed confidence of local investors and foreign hedge funds. It may push the index above the psychological 5,000 boundary in 2014 and the Indonesian rupiah exchange rate could appreciate to IDR 11,000 per US dollar. Jokowi was responsible for making Indonesia's stock index the only stock index in Southeast Asia that posted a gain on today's trading day. Other indices are still sluggish due to the recent weak economic data from China (slowing exports and GDP growth).
A couple of factors are at play regarding Jokowi's candidacy. First of all, he is considered market friendly by the business community. His leadership in Solo and Jakarta was (and is) characterized by professionalism, consistency as well as a pro-people attitude. Secondly, due to his popularity few people doubt that he will win the race and this provides much more certainty for the investor community. As investors are very keen on certainty, the candidacy of Jokowi is expected to result in accelerated foreign and domestic direct investments as well as increased capital inflows in the months ahead. Thirdly, the business community believes that Jokowi is more committed to improving Indonesia's infrastructure (lack of quality and quantity of the country's infrastructure has been a major bottleneck resulting in high logistics costs and a general weaker investment climate). As Governor of Jakarta, Jokowi pushed for several large and much-needed infrastructure projects which had been idle for years (such as the Jakarta MRT or the giant sea wall). Lastly - and not unimportantly - Jokowi enjoys a clean record of corruption.
Similarly to the stock index, the Indonesian rupiah exchange rate started to appreciate after news of Jokowi's presidential bid spread. The currency appreciated 0.26 percent to IDR 11,356 per US dollar on Friday (14/03).| Source: Bank Indonesia
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