Possible investment outcomes from Indonesia's polls
JAKARTA (Reuters) - Indonesia holds parliamentary elections on April 9. The outcome will determine who runs in the more important presidential poll on July 8 and influence how Southeast Asia's biggest economy performs in the next five years.
President Susilo Bambang Yudhoyono's Democrat Party is in the lead in the opinion polls, but it may still need the support of other parties in parliament. Yudhoyono himself is well ahead of his main rival, Megawati Sukarnoputri, for the presidency.
These elections come at a critical time. Bank Indonesia has forecast GDP growth of 3-4 percent in 2009, slowing from last year's 6.1 percent expansion and below the 6 percent needed to create jobs as more people enter the workforce.
To counter the impact of the global economic crisis, which has hit the rupiah currency and stock market .JKSE, the government launched a 73.3 trillion rupiah ($6.5 billion) fiscal stimulus plan, partly funded by global and domestic bonds.
Here are some potential investment implications as a result of possible election outcomes, placed in order of the most likely to least likely based on polls.
DEMOCRATS LEAD BROAD ALLIANCE, YUDHOYONO RE-ELECTED
Expect business as usual, with relatively slow progress in terms of key reforms.
Yudhoyono is a consensus-seeker. During his first term, when his Democrat Party won 7.5 percent of the votes and had a small number of seats in parliament, he had to rely on other political parties for support and appointed a rainbow cabinet of diverse political interests.
That often hampered his reforms, with his main partner, the Golkar Party, resisting efforts to shake up the overstaffed and inefficient civil service.
If Yudhoyono relies on Golkar again, he may find it hard to overhaul the bureaucracy and push ahead with big infrastructure projects. Improving infrastructure such as roads, ports and power plants is key for cutting business costs and lifting efficiency. But if Yudhoyono relies on an alliance of Islamist parties, they are likely to push for more nationalist policies, including fixed prices, subsidies and limits on foreign investment.
This is the scenario the markets appear to be pricing in for now, so there would be little impact on the rupiah, bonds, and stocks if this turns out to be the outcome.
DEMOCRATS WIN BIGGEST NUMBER OF SEATS, YUDHOYONO RE-ELECTED
A strong showing by the Democrats in parliamentary polls, and a Yudhoyono victory in July would allow the president to take a far more decisive line than in his first term, relying perhaps on just one or two coalition partners.
Investors want decisive government, and a clear win by Yudhoyono and the Democrats would give him a mandate to make more sweeping changes in the civil service, judiciary, military, and police, and to pursue his fight against corruption.
The issue here is whom Yudhoyono picks as his vice president and whom he chooses for the key ministerial posts of finance, economics, energy and mines and state-owned enterprises.
If Yudhoyono's Democrats do well in the parliamentary polls and he doesn't need to rely on the support of other parties, he could pick Finance Minister Sri Mulyani Indrawati, a reformer popular with investors, to be his vice president.
President Susilo Bambang Yudhoyono's Democrat Party is in the lead in the opinion polls, but it may still need the support of other parties in parliament. Yudhoyono himself is well ahead of his main rival, Megawati Sukarnoputri, for the presidency.
These elections come at a critical time. Bank Indonesia has forecast GDP growth of 3-4 percent in 2009, slowing from last year's 6.1 percent expansion and below the 6 percent needed to create jobs as more people enter the workforce.
To counter the impact of the global economic crisis, which has hit the rupiah currency and stock market .JKSE, the government launched a 73.3 trillion rupiah ($6.5 billion) fiscal stimulus plan, partly funded by global and domestic bonds.
Here are some potential investment implications as a result of possible election outcomes, placed in order of the most likely to least likely based on polls.
DEMOCRATS LEAD BROAD ALLIANCE, YUDHOYONO RE-ELECTED
Expect business as usual, with relatively slow progress in terms of key reforms.
Yudhoyono is a consensus-seeker. During his first term, when his Democrat Party won 7.5 percent of the votes and had a small number of seats in parliament, he had to rely on other political parties for support and appointed a rainbow cabinet of diverse political interests.
That often hampered his reforms, with his main partner, the Golkar Party, resisting efforts to shake up the overstaffed and inefficient civil service.
If Yudhoyono relies on Golkar again, he may find it hard to overhaul the bureaucracy and push ahead with big infrastructure projects. Improving infrastructure such as roads, ports and power plants is key for cutting business costs and lifting efficiency. But if Yudhoyono relies on an alliance of Islamist parties, they are likely to push for more nationalist policies, including fixed prices, subsidies and limits on foreign investment.
This is the scenario the markets appear to be pricing in for now, so there would be little impact on the rupiah, bonds, and stocks if this turns out to be the outcome.
DEMOCRATS WIN BIGGEST NUMBER OF SEATS, YUDHOYONO RE-ELECTED
A strong showing by the Democrats in parliamentary polls, and a Yudhoyono victory in July would allow the president to take a far more decisive line than in his first term, relying perhaps on just one or two coalition partners.
Investors want decisive government, and a clear win by Yudhoyono and the Democrats would give him a mandate to make more sweeping changes in the civil service, judiciary, military, and police, and to pursue his fight against corruption.
The issue here is whom Yudhoyono picks as his vice president and whom he chooses for the key ministerial posts of finance, economics, energy and mines and state-owned enterprises.
If Yudhoyono's Democrats do well in the parliamentary polls and he doesn't need to rely on the support of other parties, he could pick Finance Minister Sri Mulyani Indrawati, a reformer popular with investors, to be his vice president.