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Executive Summary
Joko Jokowi Widodo has emerged victorious in
Indonesias closely fought presidential election. On
July 22, the General Elections Commission (KPU)
officially declared the Jokowi-Jusuf Kalla ticket the
winner of the July 9 election, following a nearly twoweek process of tallying more than 130 million votes
from across the archipelago. Jokowi will be sworn in
as Indonesias seventh president and the second
president elected by full and direct democracy no
later than October 20.
Indonesia
is the fourth largest
country in the world by
population.
is the worlds largest
Muslim-majority
democracy.
is the 10th largest
economy in the world
based on PPP.
has a rapidly growing
middle and consumer
class, currently
numbering some 45
million.
A Jokowi Presidency
A Fragile Mandate
Joko Widodo
2
A Jokowi Presidency
Move the conversation beyond the election. Jokowis rival candidate Prabowo
Subianto theatrically withdrew from the election results just hours before the official
announcement, citing systematic unfairness by the KPU and other injustices. He has
pledged to appeal the results to the Constitutional Court, which will have one month
to issue a decision on the appeal. To ensure that his image is not tarnished by
protracted legal battles, Jokowi will need to deftly position himself as Indonesias
undisputed next leader without antagonizing diehard Prabowo supporters. He can do
this by continuing neutral remarks that support unity as well as acquiring supports
from the oppositions side.
Build a strong coalition. There are already signs that Prabowos election-run merah-putih (red-white)
coalition is beginning to unravel. Golkar, a party that has never served in the opposition, has already called
for an extraordinary [party] congress that may see it elect a new leader who favors joining the Jokowi
coalition. Meanwhile, an official from the outgoing ruling party signaled that his Democratic Party may be
open to negotiations with the Jokowi coalition.
3
A Jokowi Presidency
Indonesias Social
Challenges
o
Navigating the political minefield of the next three months until the inauguration of the new president will require a
strong balancing act from Jokowi on multiple fronts: between himself and the Prabowo camp, within his own party,
and among his coalition partners. His actions and choices will need to reaffirm his image as a reformer, while
simultaneously garnering political support from the old guard that still dominates Indonesias politics. The success or
failure of the Jokowis administration over the next five years will be largely determined by the political decisions
made in the next three months.
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A Jokowi Presidency
cuts in fuel subsidies. On the global stage, he will contend with a rising China to the north, a continuing influx of
asylum seekers, and rising pressure to protect Indonesias overseas workers.
During this three-month window, Jokowi will need to skillfully divide his resources and political capital between
addressing basic issues and investing in broader, aspirational initiatives that could cement his popularity among the
electorate. The priorities of the Jokowi-JK administration during the first 100 days will likely be:
Bolstering economic growth. The previous government has already reduced the 2014 growth forecast
from 6 percent to 5.5 percent. With the World Bank predicting that Indonesia will need to grow by over 9
percent to avoid the middle income trap, Jokowi will make bolstering growth through both fiscal and
monetary tools his top priority.
Improving infrastructure. A second issue, very much related to the first, is that infrastructure, a growth
driver, has been lagging behind the countrys overall economic growth. Bottlenecks, high transportation
expenses, and the cost of logistics have created economic inefficiencies and contributed to massive social
frustration. Adherence to the Master Plan for Acceleration and Expansion of Indonesia's Economic
Development (MP3EI), which was compiled in 2011 as well as the Master Plan on ASEAN Connectivity,
means focusing on acceleration of economic development through infrastructure investment. The Jokowi-JK
administration will make getting Indonesia back on track with its infrastructure goals a top priority.
Cutting subsidies. A pressing issue that is weighing down the government is the existence of subsidies,
which is nearly 400 trillion IDR, or one third of the 2014 national budget. The enormously popular fuel
subsidy, which makes up a large proportion of the program, was actually increased by the outgoing
government. Jokowi-JK has promised to resolve the issue by replacing oil power with more gas, coal and
geothermal power. They stated they will remove up to 90 percent of diesel-fired power plants within three
years, which would save seven billion USD in energy costs annually.
Addressing social issues with signature initiatives. In addition to addressing these immediate problems,
Jokowi will likely see the first three months as an opportunity to push through signature initiatives that will
bolster his popularity. During the campaign, Jokowi promised two welfare programs for the people: a 'Kartu
Indonesia Pintar' (Indonesian Smart Card) for poor children to be able to attend school and a 'Kartu
Indonesia Sehat' (Indonesian Health Card) for poor people to get access to free health services. One or both
of these programs will likely be rolled out within the first 100 days.
At the conclusion of this period, roughly at the start of the new year, Jokowi will turn his attention to a myriad of
secondary issues. He will focus on ensuring Indonesias readiness for the launch of the ASEAN Economic
Community in December 2015. He will ramp up his diplomatic activities both within ASEAN and globally. He will have
a hand in renegotiating a series of major mining contracts. He will broaden social programs, and then, in the blink of
an eye, it will be time for Jokowi to prepare to run for his second term.
A Jokowi Presidency
Protectionist Policies
Campaign rhetoric. The PDI-P was quite vocal at the beginning of 2014 in asserting that Indonesias
economic sovereignty is in danger of being unduly influenced by external actors. Jokowi himself has gone on
record saying that foreign companies wanting to come to the ASEAN region should have to work harder to
demonstrate a clear contribution to the regions economic and social development. Therefore, in addition to
existing regulatory realities, statements by both the future president and future ruling party suggest that
dramatic shifts in the scope of allowed FDI should not be expected. Jokowis statement in particular suggests
that Indonesia may in fact enact policies that require greater value-add from foreign investors going forward.
Amendment to the
Negative Investment List.
The amendment, passed by a
presidential decree, limited FDI
in a variety of important
industries, though some
sectors were further opened to
investment.
If Jokowi is able to secure a majority in the DPR, as well as sufficient political support, foreign companies can expect
there to be measurable progress in the ease of doing business under a Jokowi presidency.
A Jokowi Presidency
Watch the politics closely. Given the make-or-break importance of the transition period in
determining the political strength of the Jokowi administration, multinationals with a business
interest in the country will need to closely track developments over the next three months. In
particular, Jokowis ability to form a coalition that gives him a majority in the DPR will signal
whether his pro-business reforms will succeed in passing. The outcomes of this interim period
will be especially key for MNCs considering major new investments into the country.
2.
Prepare for a new style of governance. Jokowi is known for a way of governing that sets him
apart from the hierarchical, staid style of most politicians. He is seen as approachable by the
business community. He often chooses to forgo bureaucratic formalities in order to solve
problems, and decisions are often made following iterative trust-building sessions. While
Jokowis style will need to change somewhat to accommodate the demands of a national
mandate, MNC executives will nevertheless need to anticipate a new style of government
relations that is more personal and puts greater emphasis on trust.
3.
Consider how your business contributes to Indonesias development. The days of open
FDI are coming to an end. Jokowi has already said that new FDI into Indonesia will need to
demonstrate its contribution to the development of society, which is reinforced by various
legislation passed in 2014. MNCs hoping to enter or expand their business in Indonesia need to
develop strong narratives that demonstrate a clear and authentic value proposition to Indonesia.
4.
Start forming relationships with the key people. The task of preparing a new government
relations strategy should start now. The first step is to develop a stakeholder map that identifies
the individuals both public-facing and behind-the-scenes that will influence your business in
the next term. The map should be a living document that is updated as more information is
announced. Appendix 1 identifies just a few of the top influencers that APCOs Jakarta team
believes should be on every businesss radar at this stage.
5.
Look for authentic door openers. The next six months offer numerous opportunities for
multinationals to approach the government to begin build relationships with the next
administration. Opportunities include:
1. Suggesting language for the next national five-year plan based on global best practices;
2. Providing practical ideas for how the government can meet the proposed targets under
the new Sustainable Development Goals, which will replace the Millennium
Development Goals in 2015;
3. Offering concrete proposals for public-private partnerships that can address a need in
Indonesia.
A Jokowi Presidency
A Jokowi Presidency
government relations
crisis management
regulatory and fiscal reform
corporate responsibility
coalition building
market entry
litigation communication
media relations and monitoring
APCOs strategic approach is based on tailored research and insightful analysis. Our knowledgeable and
experienced professionals in Jakarta have strong sector experience particularly in energy, mining,
pharmaceuticals, food and beverage, banking and financial services, as well as in providing services to
governments and nongovernmental organizations (NGOs). We also work with our colleagues in APCOs
offices globally to meet the needs of our international clients.
For questions or comments on this analysis, or to learn more about APCOs services in Indonesia, please
contact us:
Madeleine Hardjono
senior director, Jakarta
+62 811850911
mhardjono@apcoworldwide.com
Jennifer Hart
deputy managing director, Jakarta
+62 8119885455
jhart@apcoworldwide.com
Quint Simon
consultant, Jakarta
(m) +62 821 90790460
qsimon@apcoworldwide.com
APCO Worldwide, AXA Tower, 45th Floor Kuningan City, Jl. Prof. Dr. Satrio Kav. 18, Jakarta 12940 www.apcoworldwide.com
A Jokowi Presidency