Indonesian president Susilo Bambang Yudhoyono, who will end his second and final five-year term in October 2014, announced to meet both presidential candidates (Prabowo Subianto and Joko Widodo) in the country’s State Palace on Sunday (20/07). In this meeting, president Yudhoyono will emphasize the importance of a peaceful and orderly transition to the next government. Currently, it remains unknown who of the two candidates won the presidential election (held on 9 July 2014). Due to the tight race, chances of social unrest increase.
On 22 July 2014, the General Elections Commission (KPU) will announce the official result of the presidential race. The reliable quick count results that have proven track records all indicated a win for Widodo (who is popularly known as Jokowi) by a margin of about five percentage points. However, as Indonesian politics are far from clean regarding corruption, nepotism and money politics, a Subianto win is still a possibility. Whatever, the result of the KPU will be on the 22nd of July, we expect that the losing side will challenge the result in the Constitutional Court of Indonesia due to the narrow gap between both sides. It will take up to late August 2014 before the Constitutional Court will give its final ruling. This would mean a continuation of political uncertainty, implying that positive sentiments that can push the Indonesian rupiah exchange rate and the benchmark stock index (Jakarta Composite Index) to a better level will mostly need to originate from abroad in this period unless the country’s trade balance shows a marked improvement. However, if Jokowi is declared winner by the KPU (provided that no social unrest flares up) then we expect a temporary bullish market as reform-minded and ‘man of the people’ Jokowi is the market favorite. In case of a Subianto win, Indonesia’s financial and stock markets are expected to plunge as the market is not in favour of Subianto.
Who-ever is declared the winner of the presidential election on 22 July, there is a chance of social unrest as supporters of the losing side will be highly disappointed, especially in the case of a narrow gap between Subianto and Jokowi. In particularly in the case of a Subianto win, the Jokowi camp will claim the result is influenced by corruption (as the credible quick counts results which have shown accurate results in previous elections all indicate a Jokowi victory). Jakarta, the capital city of Indonesia, is most vulnerable to such unrest. The Indonesian army (Tentara Nasional Indonesia, or TNI) has already said that it is ready to maintain order in the country.