PRESIDENTIAL ELECTION AND INDONESIAS ECONOMIC OUTLOOK

(Kamis, 15 Juli 2004) - Kontribusi dari Soedradjad

At this juncture, shortly after the historic day that Indonesians cast their votes in the first ever direct presidential election in nearly 60 years after its independence, the political landscape of Indonesia looks brighter and clearer. The election has been conducted smoothly, without significant problems or disturbances. It is a success of its own considering what have been involved in the election, whereby 130 million people cast their votes in 570.000 polling stations scattered around in thousands of islands. But, more so is its meaning for the democratic process in Indonesia that was only started six years ago after 32 years of authoritarian rule under Suharto. President Carter, arguably the most prominent among hundreds of observers from all over the world to monitor the election process confirmed this judgment in his statement that in 50 past elections all over the world that were monitored by the Carter Center he put Indonesia’s at a very high level. The success of the election exercise has disproved unfavorable predictions and arguments by many concerning the path of democracy in Indonesia. It is clearer in the sense that now it is almost certain that there will be a second round of presidential election. From the ballot count so far it looks that none of the candidates succeeds in gathering enough votes to win outright in the first round. In other words, voters will have to go back to the voting booths to decide on the ultimate winner from the two pairs of candidates most winning in a run-off election to be held in September 20. With the assumption that indeed there is a second round, which pairs of candidates would likely be in the running? And what seems to be the market expectation? What kind of economic policy would the elected president with the new government likely to pursue? And what would the economic outlook be like after the election?

THE SECOND ROUND The official announcement of the election result is scheduled on July 26, three weeks after the election. According to the Election Committee who conducts the official tally, with more than 92 million votes counted on July 12, the results were as followed; Susilo-Kalla 33.45%, Mega-Muzadi 26.25%, Wiranto-Wahid 22.15%, Amien-Siswono 15.06% and HamzahAgum 3.09%. Several pollsters have been conducting their calculation and making their own predictions on the final result based on varieties of quick count techniques. From these predictions the relative positions of the distribution of votes look very similar to the above results. Most observers agree that Susilo-Kalla, will most likely be in the second round, while Hamzah-Agum, who is at the bottom of the list will be out from the race. In fat, the Hamzah-Agum already made a statement conceding its defeat. Meanwhile, Amien-Siswono who performed much better than previously predicted, partly due to their command of the issues debated during the campaign and their combined with their skills in using the television as the best means available to communicating with the voters, and a late endorsement by one of the big winners in the April election, the Social Justice Party, still demonstrate their adamant to concede. However, with 15 % of votes received and fourth place in vote gathering until now, most observers exclude the pair from the second round. This left us with either Mega-Muzadi or Wiranto-Wahid to face the leading candidates in the run-off. Actually it is not clear yet as to who will survive to be eligible for participation in the second round. The camp of Golkar candidates still believe that the end result would follow what happened in the April vote counting, based on the supposedly very strong political machinery and campaign funds, the Wiranto-Wahid would catch up and ultimately surpass Mega- Muzadi to be able to compete in the second round. But, the Mega-Muzadi camp, who were boosted by a much better performance than pollsters’ and experts’ predictions are confident that their candidates will maintain the lead to come out as the winner between the two. In the meantime it has been reported that the candidates and the leaders of their respective parties have been busy making deals and soliciting possible coalitions to face the second round. I am afraid the leaderships of political parties in Indonesia still have difficulty in learning their lesson to read properly what are in the voters’ minds. In general they are assuming that the members would follow the parties’ leaders, including joining any coalitions of the leaders’ choosing. Actually it is not difficult to see that in general members of most political parties’ in Indonesia do not have strong discipline such that there are many crossings of party lines by members in casting their votes. This must be true otherwise how we would explain the lead of Susilo-Kalla or the trailing of Wiranto-Wahid. However, even if parties’ disciplines are strong for members to follow party lines as espoused by party leaders, which parties’ leaders should they follow considering there have been splitting among themselves to form different coalitions? Golkar votes must be spit in several directions in the presidential election as well as in the parliamentary election. And so must be PKB, PDI-P and other parties. How should their members cast their votes to follow parties’ discipline? Party discipline in most political parties in Indonesia is weak such that members’ votes could easily go to different
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directions, whether lured by popularity of candidates, money politics or other reasons, except for the die-hards or party stalwarts. I think this streak has been somehow confirmed in the media reports during the election. One should not also overlook the fact that many voters just enjoying their new status that now they could actually cast their votes directly to elect their president and vice president. Voters just enjoy the feeling of being counted in the political process. And in the parliamentary election this had been effective, at least negatively in the form of voters voting out PDI-P to loose in the election. With that notes let us assume that the Susilo-Kalla will be in the second round. And since nothing is certain yet the second pair of candidates could either be Megawati-Muzadi or Wiranto-Wahid.

ECONOMIC OUTLOOK It is difficult to get a clear understanding of the economic policy of the presidential candidates, since what came out during the campaign were either targets that were not accompanied by careful discussions on how to achieve them or promises that good as campaign politics, but based on unrealistic assumptions. For examples, the candidates never provided any explanation on how to achieve annual economic growth targets of 6 to 7%, how to provide jobs to reduce more than 30 million people unemployed or more than two million annual addition of work force, or how to increase budget for education 20% of the total. The amended constitution mentioned about the budget on education, while all the other targets were just mentioned by candidates during the campaign rallies. Of course, it is even more difficult to see the economic policy of the president elect since the potential winner on the second round is still everybody’s guess. On the other hand, from surveys on voters’ priorities conducted by different institutions with respect to national issues and problems that voters wish for the national leaders to address, it has been very clear that economic issues and problems have been listed highest. Voters are concern in particulars with high prices of goods and services of the basic needs, including health services and education, high level of unemployment and poverty, aside from strong concern about corruptions and the misery that had caused the suffering of people, stability and security. Meanwhile, the immediate market reaction on the election and the voting results so far has been generally positive. The Rupiah was under pressures on the eve of the election, due to market move to buy dollars to address the increase in uncertainties associated by the campaign period and the election process, in addition to concern regarding the implications on the US Fed decision to finally raise the interest rate and the possibility of hard landing of China’s economy. But, the smoothness of the election process and the outlook of the final result so far have brought back the market confidence, which ultimately caused the currency appreciation. The Jakarta stock exchange index also returned back to its pre crisis level after took a beating on the eve of the election. Those who wish for the most popular Susilo-Kalla to win in the first round must be disappointed that despite their leading position they could only gather 33% of the votes. However, the hope for seeing him leading Indonesia can still much alive. In general the economic reaction to the democratic process has been very positive. The surprising strong performance of the Democratic Party together with the Social Justice Party in the parliamentary election and the continuing strong showing of Susilo-Kalla in the presidential election must somehow be associated with voters’ perception that this is the best available team to address the problems and challenges that are high in their minds. The business community has generally been comfortable with the Susilo-Kalla combination. Professor Sadli in his column in Business News on July 5 mentioned that if they win the election the chance is greater for the economic prospect to be good because there will be a euphoria as endorsement by the US, Japan, the World Bank and others that has been given to this pair will provide conducive environment for the elected president and the new government to start with the business without delay. The market will not respond negatively also if Mega-Muzadi team wins the election, since the market has some knowledge about them from the current administration. Thus, the market may even give this team a chance to show that they may deliver, at least during a brief honeymoon period. A bigger uncertainty in the market perception seems to arise if the winner were the Wiranto-Wahid team. Of course in all these cases the market would study carefully the composition of the cabinet, especially the economic portfolios, the Attorney General as well as the Minister for Justice. Even though judging from the economic platforms and campaign statements by candidates none could be called as anti market outright, but apparently the market players have their own perceptions on which team considered to likely be more business friendly than others in the economic policy that the candidates would pursue once in office. All candidates also made strong statements to address firmly the corruption problem. However, it is difficult to assess whether voters actually have confidence in any of the candidates in dealing with this issue well. It is disheartening to observe that corruption in Indonesia has been very rampant. I could even say that corruption has been rampant indiscriminately involving officials in different layers of government that cross over different professionals, age groups, ethnicities, religious backgrounds, etc. Subject to how we define corruption it had also been done in the private sector, in the NGOs and others. Even those perceived to be clean and not corrupt, sometime this perception came out only
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because they have not been exposed to positions or situations that give chances for them to be corrupt. In other words, we still have to wait whether the new administration would indeed deliver as promised to actually deal with the corruption problem and that they at the minimal are not corrupt. To be realistic any expectation for the new government to start delivering has to wait until the election process completes and after the new government starts to function. One thing for sure here is that the new cabinet could only be formed sometime in late October 2004. Thus, the earliest time for the coming of a new economic policy, if any to addressing economic problems and challenges is the beginning of 2005. In the meantime the current path of the Indonesian economy will continue to rely basically on the domestic consumption as the engine of growth with weak export performance and very limited real investments, domestic as well as foreign. The strong consumption expenditures that partly supported by the elections will continue until the election date on September 20.

CONCLUDING NOTE Some Indonesian experts like Sidney Jones in her recent columns (Times Magazine and AWSJ) had reminded us about huge challenges awaiting for the still not clear ultimate winner of the presidential election; both economics as well as other. There are so many that seem to be an impossible things to do for whoever would be the president. Aside from the magnitude of the challenges the elected president has to work in constraining environments. The elected president will indeed received a full mandate from the people due to the direct election. However, the president has to work with a government, which must be a coalition of personnel representing parties supporting the candidates in winning the election. In addition, for the new government to be effective in managing its program, the government still has to get support from a strong but fragmented parliament. The president elect should not just decisive, but good in building consensus as well. The voters have been strong in conveying their message through voting out those perceived as not performing well or not keeping their promise. They have also been clear in voicing their concern on different issues and problems confronting Indonesia. In the recent elections in Malaysia, the Philippines and India as reported in the media there have been some clear signals from those winning the elections that the newly elected leaders show their willingness to address the issues that were high in the minds of their voters, at least signals on this direction were made as initial steps. Different steps have been taken or initiated by PM Abdullah Badawi to addressing the problems of corruption, security and economic management through meritocracy by putting them high in the government agenda. President Gloria Arroyo explicitly mentioned of setting up programs to address poverty problems in her inaugural speech. And very recently the Indian Minister of Finance Chindambaram submitted a budget to the Parliament that clearly reflected what was promised by the new government of PM Manmohan Singh to further liberalizing the economy with a human face. The next test for the Indonesian process of democracy would be whether the elected president and the government that he or she leads could come up with the right move to demonstrate their commitment to address the pressing issues perceived by their voters the way the elected leaders in the neighboring countries have done recently. Indonesian voters have shown more intelligent than many, including Indonesian political elites as shown in the results of the elections. I am sure they are also intelligent enough not to expect miracle to happen. But, they have every right to see some lights, no matter how small they are. It is still a big question mark whether the political elites and the elected president and vise president in particulars have learned their lessons.

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