On 14 February 2024, Indonesia held the world’s largest single-day election with over 200 million voters, predominantly younger Indonesians, casting their ballots to elect a new president, vice president, members of the House of Representatives (DPR), members of the Regional Representative Council (DPD), and members of the Regional House of Representatives (DPRD). Quick counts conducted by a number of survey institutes immediately after the voting generally showed that presidential candidate Mr. Prabowo Subianto and his running mate Mr. Gibran Rakabuming Raka, the eldest son of the incumbent President Joko Widodo (better known as “Jokowi”), garnered the majority of votes to avoid a runoff, and it is predicted that this duo will lead Indonesia for at least the next 5 years. While the official announcement of the election results, which is scheduled for 20 March 2024 at the latest, remains the authority of the General Elections Commission (Komisi Pemilihan Umum – KPU) through the official real count, quick counts have consistently served as and proven to be a fairly reliable indicator of the final election outcome, especially given Mr. Prabowo’s current significant lead by a wide margin.
Below is a general analysis of expectations from political, business, and regulatory perspectives:
- Political
Way before the election began, Mr. Prabowo had repeatedly pledged to continue President Jokowi’s policies if elected to office, emphasizing that the existing programs of the current government would be sustained, refined, and enhanced. That said, the new regime is likely to continue President Jokowi’s existing policies and future plans, including the development of Indonesia’s new capital city, namely the Nusantara Capital City (Ibu Kota Nusantara, IKN) in East Kalimantan province.
Further, we anticipate the future government will not face significant opposition and turmoil since it is backed by eight political parties, four of which have surpassed the parliamentary threshold and now collectively account for more than 40% of the parliament. There is even speculation that other political parties will join the new regime, thus fostering political stability in Indonesia and providing solace to businesses in Indonesia.
From the predicted outcome of the recent presidential election, stability is likely to persist at least for the next 2 years, with Mr. Prabowo continuing on the path charted by President Jokowi. However, given the intricate relationship and dynamics between Mr. Prabowo and his vice president, Mr. Gibran, who happens to be the son of President Jokowi, we cannot rule out the possibility of a shift of direction. Besides, experts have noted a stark contrast in character between Mr. Prabowo and President Jokowi, portraying the former as more vocal compared to President Jokowi’s calm and conciliatory demeanour.
- Business
Before the presidential election, both local and foreign investors eagerly waited on the sidelines for the right signals to deploy their funds, many hoping the next president would uphold the business policies established by the current administration.
Following the release of the initial election results, the Indonesia Stock Exchange Composite Index (Indeks Harga Saham Gabungan – “IHSG”) surged by 1.3 percent, reflecting the market’s approval and optimism, which was also expected by President Jokowi during his address at the 2024 annual Financial Services Industry Meeting on 20 February 2024.
It appears that President Jokowi’s efforts to streamline the investment procedures in Indonesia to draw in more investors are paying off. Under President Jokowi’s administration, Indonesia’s ranking in the World Bank’s Ease of Doing Business index significantly improved, climbing from 109th in 2016 to 73rd in 2020. With Mr. Prabowo’s anticipated one-round victory and his commitment to follow in President Jokowi’s footsteps regarding business and investment policies, many news outlets, as supported by analysts, predict increased foreign inflows, strengthening of the IHSG, and continued positive market reception.
Meanwhile, businesses also expect improvements in Indonesia’s transparency under the new regime. Nonetheless, Indonesia’s Corruption Perceptions Index ranking, conducted by Transparency International, has shown stagnation and even deterioration in the last few years, falling from 85th in 2019 to its current position at 115th out of 180 countries, lagging behind neighboring Singapore, which is ranked 5th. The extent to which the new regime will address transparency issues remains uncertain.
- Regulatory
Similar to the foregoing political and business aspects, Mr. Prabowo has reiterated his commitment to uphold and continue the current programs with only a few expected regulatory changes.
President Jokowi’s administration has enacted several notable omnibus laws, aimed at cutting red tape across diverse sectors, including Law No. 6 of 2023 on the Stipulation of Government Regulation in lieu of Law No. 2 of 2022 concerning Job Creation to become Law, which revises over 70 existing laws to improve the investment climate and job creation; Law No. 17 of 2023 on Health, which replaces over 11 existing laws; Law No. 4 of 2023 on Financial Sector Development and Strengthening, which is an omnibus law in the finance sector replacing/amending 17 laws; and Law No. 1 of 2023 on the Indonesian Criminal Code, replacing the previous criminal code, which dates back to the Dutch colonial era.
Despite the controversies surrounding these laws, we do not anticipate any major amendments to the laws. Instead, we believe that Mr. Prabowo’s upcoming administration will continue to focus on establishing laws aimed at reducing bureaucratic obstacles. Likewise, practitioners seem to anticipate only marginal improvements in anti-corruption endeavours, believing that lawmakers are likely to remain largely unchanged.
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