Business observers cautiously laud peaceful election

Dadan Wijaksana, Jakarta

The economy should benefit from the peaceful presidential election on Monday, as it will increase investor's confidence in the country, experts say.

However, they quickly added that it would not immediately translate into a higher direct-investment flow as most investors would maintain a wait-and-see attitude -- possibly holding back until after the anticipated runoff on September 20.

"Despite the peaceful elections -- which was a good thing -- I do not think that rising investor confidence will be formulated into new investments here," Sofjan Wanandi, chairman of the National Economic Recovery Committee (KPEN), told The Jakarta Post.

"They will wait until September," added Sofjan, who is also a businessman.

"They -- local businessmen here -- want a change. We want a leader who is committed and serious about improving the country's investment climate," Sofjan said.

Boosting investment is crucial for Southeast Asia's largest economy to accelerate economic growth to pre-crisis levels of 6 percent to 7 percent, in order to provide jobs for the country's 40 million unemployed. The US$205 billion economy has been growing at only around 4 percent per year over the past few years, mainly on strong domestic consumption.

Since the financial crisis in the late 1990s, investment -- particularly foreign direct investment -- has been weak due to, among other factors, political and legal uncertainties.

The country held its first direct presidential election on Monday. Earlier concerns of possible violence and other major snags were not proved valid. A runoff is anticipated as no ticket is likely to gain more than 50 percent of the votes.

Citibank economist Anton Gunawan said that the stock market and the currency market would feel an immediate, positive impact -- although it would be limited, as a runoff was more than likely.

He explained that the financial market provided a fairly accurate indication of investor sentiment.

"But, that short-term impact will have few implications for the overall economy. A more definite impact will come from investment," he said.

The presidential election capped a remarkably peaceful, month-long campaign period that emulated the trouble-free legislative election earlier in April.

The financial market reacted positively last week to expectations of a peaceful election. The rupiah, which had been faltering weeks before, started to regain ground against the dollar to end the week at Rp 9,150, close to 3 percent higher than the previous week.

Bullish sentiment, stemming from an upbeat political picture at home, also hit the stock market, with the index rising by more than 3 percent during the week. It ended the week at 745.03 points.