Indonesian voters face two contrasting visions in the April 2019 general election

 

National elections on April 17, 2019 will determine the head of state for a five-year term ending in 2024, with the two candidates on the ballot offering differing views on how to manage the country’s $1trn economy. While holding different policy positions, the contenders in Indonesia’s presidential election are very familiar, with incumbent President Joko Widodo facing off against the man he beat in the 2014 election, retired general and businessman Prabowo Subianto. Widodo has chosen Islamic scholar Ma’ruf Amin as his running mate, while Subianto has teamed up with businessman and former deputy governor of Jakarta Sandiaga Uno for the campaign. Subianto is seen as nationalist in his economic approach, advocating self-sufficiency of food and energy rather than depending on overseas investment and imported food and fuel products.

This position would be at odds to some extent with recent government efforts to encourage foreign direct investment (FDI) and liberalisation of the economy. Despite these efforts, FDI fell from $30.5bn in 2017 to $27.9bn in 2018, though it is forecast that investment flows will increase after the April elections.

Infrastructure

There is a significant difference between the two platforms regarding infrastructure. During President Widodo’s term in office, up to $400bn worth of developments have been proposed, many designed as public-private partnerships. Subianto has been critical of the president’s infrastructure programme, both on the grounds that delivery of many projects is well behind schedule, and that funds could have been better spent improving agricultural output and cutting reliance on food imports. Despite having scaled back some of the planned infrastructure outlays over the past year, with some of this funding being used to hold down energy prices, the Widodo administration maintains such investments are essential to improving the economic competitiveness of the country.

Taxes

Economic growth has been steady over the current presidential term, averaging just over 5% each year since President Widodo came to power in 2014. In a sign that the trend is expected to continue, the Asian Development Bank forecast GDP to expand by 5.3% in 2019, the same rate as 2018. This rate of growth is well above global averages, with at least some of the economic expansion fed by infrastructure investment. Subianto, by contrast, has put forward an alternative policy platform to stimulate the economy, proposing to cut corporate taxes by 5-8 percentage points to boost investment and growth. He has also proposed lowering personal income tax for many Indonesians, while aiming to raise the top rate for the wealthy. In addition, Subianto has said he will increase the wages of civil servants while expanding support for farmers and rural communities to boost agricultural output and roll back rising imports of food and basic commodities.

Fuels & Energy

The candidates share common ground on some key issues. This includes the increased use of biofuel in Indonesia’s energy mix and the reduction of hydrocarbon imports. President Widodo has advocated the development of B100, a fuel made entirely from palm oil, with up to 30% of the annual 46m tonnes of palm production to be directed to the energy market. Subianto too is in favour of greater use of biofuels, with his campaign proposing to plant sugar cane on degraded farmland to provide more feedstock for renewable energy. The two candidates have both favoured greater domestic control of Indonesia’s natural resources, rather than ownership or majority shareholdings by foreign investors.

President Widodo has espoused something of an economic nationalist agenda in the area of natural resources in his first term, which is evident by successful efforts to attain a majority share in the lucrative Grasberg mine for the state-owned mining firm Inalum, as well as mandating that oil producers sell crude to refineries operated by the state-owned company Pertamina, which is assuming bigger stakes in key oil blocks as concessions operated by foreign oil firms expire.

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The Report: Indonesia 2019

Country Profile chapter from The Report: Indonesia 2019

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