Indonesia’s 193 million-strong electorate will head to 800,000 polling stations dotted across the archipelago state on 17 April to simultaneously elect a president, the national parliament and regional legislatures. Given this impending democratic jamboree, we've teamed up with our sister company Wood Mackenzie to identify 5 things that our clients need to know about the Indonesian general elections in 2019.
1. Jokowi 2.0 is the most likely outcome from presidential race
- President Jokowi is highly likely to secure re-election for a second five-year term with a clear-cut margin of victory.
- A win for his opponent Prabowo Subianto is within the realms of possibility but would constitute an almighty upset.
2. Don’t be surprised if the results are contested (unsuccessfully)
- Every direct Indonesian election for the presidency has resulted in a legal challenge, so it would be surprising if the losing candidate didn’t cry foul and petition the Constitutional Court.
- All of these previous challenges were rejected because of a lack of evidence. There is little to suggest that a challenge this time around would be any more successful. But the judiciary remains susceptible to outside interference, adding a dash of uncertainty to proceedings.
- The prospect of protesters taking to the streets to oppose the results can’t be entirely ruled out, given recent mass demonstrations in the capital Jakarta. However, a heavy security force deployment suggests that any such protests will remain peaceful.
3. Horse-trading between the executive and legislature will continue
- During the Indonesian general election, 16 political parties are competing for the 575 seats up for grabs in the House of Representatives, the most important chamber in the bicameral parliament.
- A stricter minimum vote threshold is likely to see the number of parties represented in the legislature decline, while Jokowi’s PDI-P and Prabowo’s Gerindra look set to do well on the coat-tails of nominating presidential tickets.
- Whatever the parliamentary arithmetic, a 'consensus-based approach' to policymaking characterised by backroom deals and political horse-trading will remain the norm.
4. No signs of a reversal in current statist approach to energy sector
- ‘Energy sovereignty’ will remain the government’s rallying cry and curbing costly oil imports a policy priority, suggesting that restrictions on crude exports will remain in place.
- The Indonesian election will do nothing to reverse a statist trend in the upstream oil & gas sector - Pertamina will remain in pole position to take over expiring PSCs.
- Recent efforts to improve the investment environment may be too little, too late, as many large operators have already exited or scaled back their ambitions in Indonesia. Slow progress in projects of national strategic importance – such as the Rokan PSC transfer and the Abadi LNG development – also provide mixed signals for investors.
- The perennial debate on a revised Oil and Gas Law provides further uncertainty, but there are no signs that ending years of legal uncertainty will be a priority for the next administration.
- Thermal coal will remain a mainstay in Indonesia’s energy mix, despite support for growing the contribution of renewables.
5. Mining and metals sector will be characterised by resource nationalism
- The incoming administration will hold steady on plans to implement a full ban on the export of unprocessed minerals, which is scheduled to come into effect in January 2022. Any decision to push back the deadline again will likely be taken at the eleventh hour.
- The government will continue to show Indonesia Asahan Aluminium (Inalum) preferential treatment, as part of its bid to turn the state-owned mining ‘champion’ into a global player.
- Forced divestment requirements for foreign miners are extremely unlikely to be rolled back, which will continue to deter greenfield investment. All eyes will be on how Freeport McMoRan gets on operating the Grasberg copper mine now that it only holds a minority stake.
- Elements within the House of Representatives will seek to revise the Mineral and Coal Mining Law 2009, but these attempts won’t be supported by the executive.
Quick count polls will be published soon after voting closes, but the official results of the Indonesian general election in 2019 won’t be released by the election commission until May. However these elections play out, don’t expect much policymaking between now and inauguration season in October 2019, as politicians of all stripes jostle for the spoils.
Given this inevitable uptick in politicking, we unsurprisingly expect the stability of executive authority to deteriorate over the next six months (see chart below); however, the impact on the business environment will likely be marginal.
Verisk Maplecroft's Government Stability Index Projection combines analyst forecasts with statistical modelling to generate a probabilistic forecast of our Government Stability Index scores for the periods six months and two years ahead. The Government Stability Index assesses the stability of executive authority and the potential for an illegitimate transfer of power, such as a coup. Source: Verisk Maplecroft, 2019-Q1
This Insight was co-authored with Andrew Harwood - Research Director, Asia Pacific Upstream Oil & Gas, Wood Mackenzie