Jokowi Waiting for Indonesia Challenger as Deadline Looms

(Bloomberg) -- Nominations for Indonesian presidential elections close in three days and there’s still no clarity on who will challenge incumbent Joko Widodo.

While Prabowo Subianto -- who lost to Widodo in the last election -- has been endorsed by his own Gerindra party as well as the former ruling Democrat party, the ex-general has yet to confirm if he will run again. Widodo himself has chosen not to reveal his running mate to deny the opposition any advantage in deciding its pairing.

Jokowi Waiting for Indonesia Challenger as Deadline Looms

The uncertainty is adding to the jitters of investors already rattled by a sell off in the nation’s currency, stocks and bonds triggered by rising U.S. interest rates and higher dollar. Though Widodo, known as Jokowi, enjoys a considerable lead in opinion polls, the tide may turn against him should the challengers embrace a polarizing campaign similar to the one that marred the Jakarta governor election last year.

Jokowi Waiting for Indonesia Challenger as Deadline Looms

“President Jokowi’s win in the 2019 race is far from guaranteed,” said Charu Chanana, an economist at Continuum Economics in Singapore. The opposition can target him on two fronts: his failure to achieve the 7 percent growth target and pledge to protect Indonesia’s tradition of pluralism, which may lead to ratcheting-up of religious tensions closer to the elections, she said.

The window for presidential nominations closes on Friday with the official campaign set to kick off in September. Voting is scheduled for April 2019.

Pitching Nominees

Jokowi’s Indonesian Democratic Party of Struggle, or PDI-P, has voiced support for current Vice President Muhammad Jusuf Kalla, whose ability to run again depends on the outcome of a court challenge to rules on term limits. Subianto is yet to signal who he will pair with as the two conservative Islamic parties he’s wooing are pitching for their own nominees.

“I think the announcements will come in the last minute,” said Arya Fernandes, an analyst at Centre for Strategic and International Studies in Jakarta. “There could be surprises, depending on the developments in both the camps and as parties are still negotiating.”

For foreign investors, a raucous election with sectarian tensions will be another reason to dump the nation’s assets. Foreign funds have pulled out almost $3 billion from Indonesia’s stocks and bonds this year with the currency slumping to its lowest since 2015. That’s pushed Jokowi into exploring ways to shore up dollar supplies and blunt opposition charges of economic mismanagement.

Economic Challenges

Indonesia’s economy has expanded at about 5 percent under Jokowi with the unemployment rate falling to a two-decade low. The president has also been praised for a massive infrastructure program and reform agenda that’s helped secure sovereign rating upgrades and much-needed investment.

The economy expanded at 5.3 percent in the second quarter from a year earlier, the fastest pace since 2013, data from the statistics bureau showed Monday. Still, a weakening currency and shrinking forex reserves will pose enough challenge for the next president.

The winner in 2019 will need to focus on policies that can bridge the country’s current-account deficit and accelerate economic growth, according to Aldian Taloputra, Jakarta-based economist at Standard Chartered Plc.

“The policy has to lean more on exports, not only for creating jobs but also attracting dollars, as well,” Taloputra said. “The incoming government will need to look for foreign direct investment that can meet domestic demand and exports.”

Preachers, Generals

Subianto’s party has said it will fight the election on economic issues and wants a budget shake-up including more money for defense spending. The party has also targeted Jokowi for the ballooning government debt and falling rupiah.

Besides Kalla, the names often touted by political analysts and the local media as potential Jokowi running mates include Muhammad Zainul Majdi, a proponent of moderate Islam, Moeldoko, a former military chief and Mohammad Mahfud Mahmodin, a former judge.

For Prabowo, a general in the Indonesian military during authoritarian leader Suharto’s 32-year reign, the alliance with former president Yudhoyono means he may have to concede the vice presidential slot to the new partner. That risks alienating his old allies -- the Prosperous Justice Party and the National Mandate Party.

In the event of Prabowo deciding not to run, he may chose to back Jakarta Governor Anies Baswedan or former military chief Gatot Nurmantyo, according to Jakarta Post. The list of likely running mates for Prabowo include Susilo Bambang Yudhoyono’s son Agus Harimurti Yudhoyono, Prosperous Party’s Islamic preacher Sohibul Iman or Salim Segaf al-Jufri.

©2018 Bloomberg L.P.