Why a Jokowi win may build foundation for brighter Indonesia future

April 18, 2019

JAKARTA - In a research note on the outcome of Indonesia's general election the French banking group, Natixis, said it believes the re-election of Jokowi would allow him to finish what he started -  increasing infrastructure supply - with 245 on-going and planned national projects to build roads, railways, seaports and refineries which amount to 31% of GDP or US$304 billion. "And if he is able to do so, Indonesia will go beyond the 5% growth range," the note says.

"On March 19, Indonesia came closest to its future with Jokowi beaming as he rode the state-of-the-art Japanese funded subway line in Jakarta - a feat that has eluded all of his predecessors," it says.

"This is an image that Jokowi wants to sear into the minds of voters in his re-election bid - that he is the President that will hurl Indonesians into 2024 in style, one with new roads, railways, seaports, refineries to meet the rising demand for infrastructure.

"While Jokowi has underperformed in terms of economic promises - GDP has trended on average only 5% versus the promised 7% since 2014 - the imagery of Jokowi as a pragmatic and competent President likely resonated and will propel him forward.

"To be sure, his Government has ensured that the two benchmarks for Indonesian management were met with high marks - low inflation and a stable rupiah.

"And (Indonesia) was willing to sacrifice growth, hiking rates by 175 basis points, imposing import curbs and (giving) some fiscal space by raising costs of subsidies to ensure that price pressures fell below the central bank target range.

"The rupiah, too has stabilised, despite some periods of shocks, thanks to the central bank's vigilance."

The Natixis research note says that Indonesia already has a ballooning working age population, which, coupled with the increasing urban population, is expected to increase to 70% of the total by 2050, with 88 more million people moving to the cities.

"Meaning, demand isn't a challenge but rather adequate supply.

"If the investment part of the equation picks up, then Indonesia will likely reap its demographic dividends to reduce domestic bottlenecks such as congested roads and inadequate supply of electricity, and improve connectivity to the rest of the world via air transport to promote tourism and maritime investment for better trade logistics." www.natixis.com (ATI).