Indonesia’s Candidates: July’s election could be a lost opportunity for Southeast Asia’s largest economy.

Indonesia’s Candidates

July’s election could be a lost opportunity for Southeast Asia’s largest economy.

Updated June 12, 2014 10:25 p.m. ET

At first glance, Indonesia’s July 9 presidential election offers voters a clear choice. The two candidates, Joko Widodo and Prabowo Subianto, promise very different governing styles—populist humility from one, military-style efficiency from the other.

Yet when it comes to economic affairs, they both emphasize protectionism and central planning. That means this election could be a lost opportunity for Southeast Asia’s largest economy to turn away from economic nationalism.

Mr. Widodo —known by his nickname Jokowi—became Jakarta governor just two years ago, but he has earned acclaim for improving government services and accountability. Mr. Subianto is a military man who rose to prominence in the 1990s as then-President Suharto’s son-in-law and special-forces commander. Since Suharto’s 1998 fall, Mr. Subianto has been a businessman and vice-presidential candidate.

Mr. Subianto promises to “face off” against foreign investors and chose as his running mate Hatta Rajasa. As economics minister from 2010 until this year, Mr. Rajasa engineered Jakarta’s turn away from economic reform in the second term of outgoing President Susilo Bambang Yudhoyono. He supported limits on foreign ownership of mines and banks, bans on rattan exports and quotas on imports of beef, fruit and vegetables.

Mr. Rajasa also cancelled privatizations, helped slam apparel and textile firms with Asia’s steepest minimum-wage hikes, and pushed a “master plan” for infrastructure that failed to tackle corruption. All in the name of economic justice for the common man, of course.

This record may have doomed the Subianto-Rajasa ticket—growth in 2013 was the slowest in four years, at 5.8%. But instead of offering an alternative, Mr. Widodo has chosen to double down on his opponents’ failed approach.

“Liberal economic policies that emphasize the market have left Indonesia dependent on foreign investment, while our natural resources have been drained away by multinational companies and their Indonesian compradors,” Mr. Widodo wrote last month. Echoing Mr. Subianto, he backs further restrictions on foreign bank states and “food self-sufficiency.”

Both candidates also want to shake down the mining industry. Since January, Jakarta has banned exports of unprocessed minerals and taxed exports of semi-processed concentrates. The goal is to force firms to refine minerals inside Indonesia, thereby “adding value” domestically.

But it is uneconomical to refine most minerals domestically because of the archipelago’s poor infrastructure. So Jakarta’s current approach—backed by both candidates—is likely to force mines out of business. For foreign mining companies, the new taxes violate government contracts meant to lock in stable regulations.

At least voters will have a clearer choice on another key issue facing Indonesia: rising sectarianism. Mr. Subianto has distinguished himself by courting the Islamic Defenders Front, or FPI, a vigilante group known for violent attacks on nightclubs and minorities, including Christians, Shiite Muslims and Ahmadi Muslims. “All mass organizations must be embraced, including the FPI,” he said last month, days before a church in Yogyakarta was attacked by knife-wielding thugs.

Mr. Subianto condemned the Yogyakarta attack and similar violence, but has accepted the FPI’s endorsement. Though the group opposes democracy on principle, it has demanded that Indonesia’s next president disband the Ahmadi sect, support Shariah-inspired laws, “re-evaluate” the U.S.-trained counterterror squad formed after the al Qaeda-linked Bali bombing in 2002, and generally “free Indonesia from the imported mind-set of imperialism and liberalism.” Said FPI’s grand imam: “We’re not asking for ministerial posts or anything like that. What we want is for [Mr. Subianto] to give something to Islam.”

Indonesia already gives radical Islamists lax police, permissive courts and political protection. The ministers of religious and social affairs both attended FPI’s anniversary celebration last year. In 2008 a federal decree banned Ahmadis from proselytizing, while a measure ostensibly aimed at pornography chilled a wide range of religious and political expression. After publishing a platform promising to enforce “the purity of religious teaching,” Mr. Subianto seems unlikely to reinvigorate Indonesia’s flagging commitment to pluralism.

By contrast, Mr. Widodo has stressed tolerance on the stump and worked closely with Christians in the past, including his Jakarta deputy governor, an outspoken critic of the FPI. The candidate is so reticent about religion that he has had to remind voters that, contrary to rumor, he is and has always been a Muslim.

The latest polls show Mr. Widodo holding a single-digit lead, down from some 20 points two months ago, with up to 20% still undecided. Indonesians deserve a better economic debate than they’ll hear in the coming weeks, but on July 9 they will at least have the chance to deliver a message about religious freedom in the world’s most populous Muslim-majority state.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: