(Bloomberg) -- Elites are in foul odor in democracies big and small. That's good news for Indonesian President Joko Widodo as election season revs up in the world's third-largest democracy. Four years in office have done little to dent his popularity, with most polls showing Jokowi — as he is popularly known — strengthening his position.
He came into public life first by building a furniture business, then rose to become Jakarta provincial governor. His opponent in his first presidential contest, Prabowo Subianto, wants a rematch in next year's election. A former top army officer and onetime son-in-law of the late dictator Suharto, Prabowo appeals to law-and-order nostalgia types.
And so the campaigning has unofficially begun.
Looming over it all are the economy's unsure footing and a religious shift. The rupiah is looking shaky and, accordingly, the run of interest-rate cuts that buoyed the economy is almost certainly over. Political Islam has the potential to either buttress democracy and protect it from populism, or undercut it.
Any one of a list of superlatives beyond the size of its democracy would warrant close attention to Indonesia: Southeast Asia's largest economy, the world's largest Muslim country. The country's significance goes beyond that; for centuries it has been the hinge of maritime and trade routes connecting China, India, the Middle East and Europe. It has at various points been a Western ally and a Western antagonist.
Indonesians began voting directly for president only in 2004, though the democratic awakening began in the upheaval of the Asian financial crisis in the 1990s. An earlier, more dramatic shift that brought Suharto to power was the subject of the Christopher Koch novel "The Year of Living Dangerously" and the 1982 movie of the same name.
Manu Bhaskaran has spent more than three decades dealing with political, economic and financial leaders in Asia. Based in Singapore, he's the top Asia economic hand at Centennial Group, a Washington-based strategic advice firm. He recently visited Indonesia, and we discussed the political season via email. Here is a lightly edited transcript:
Daniel Moss: Before the presidential election next April, we have provincial elections in a few months. How important are they as bellwethers and why?
Manu Bhaskaran: They are quite important. First, provincial and other local elections help throw up new leaders who could go onto the national stage later.
Second, the tactics used and their success or failure would give a sense of how the national elections in 2019 will be conducted. In particular, would the uglier forms of ethnic or religious appeals work? If they did, the 2019 elections could be rough.
Third, how the main parties do in terms of gaining votes and their capacity to mobilize voters, as well as how clever they are at building alliances and coalitions, would also help us understand how well the main political parties are doing.
DM: What is at stake for Asia and the U.S. in the presidential election?
MB: If Jokowi wins a clear mandate, there is a good chance of further reforms that will help accelerate Indonesian growth to 7 percent or above. An acceleration of growth in the fourth-most-populous country in the world would be good for everyone.
A successful election — peaceful, no effective ugly appeals to religion — would entrench Indonesia's democracy and ensure its stability. Again, good for everyone.
DM: What role will political Islam have in the presidential contest?
MB: Appeals to religion are being made, and some have been blatant and potentially undermining of Indonesia's moderate and tolerant culture. After the unpleasantness of the last Jakarta gubernatorial election, some groups have been emboldened to stoke religious emotions and push an exclusivist line such as telling voters they should vote only for a Muslim, etc. If these succeed, then divisiveness would grow.
However, note that Indonesia is a very diverse country and that there are many forms of political Islam. Groups like Nahdlatul Ulama and Muhammadiyah are generally moderate and still have a massive following. There are other groups that proudly wear the "liberal Islam" badge. Indonesians, in the main, are proud of their own brand of Islam and are not in a hurry to abandon that to embrace harder-line versions from the Middle East.
President Jokowi himself has quietly stuck to his secular and moderate approach. While he has to guard his flank against mischievous allegations, he has shown a strong commitment to moderation and inclusiveness.
DM: Jokowi ran as an outsider in 2014. It's hard to repeat that claim when you have been president for five years. What is his core base of support now?
MB: Jokowi was an outsider in the sense that he didn't come from an elite political or religious family, nor was he a former army general as were all Indonesia's previous presidents. That hasn't changed; he still appeals to the common man as someone very much like them, from a simple background.
Moreover, well into the fourth year of his term, he has maintained a reputation for honesty, hard work and commitment to the average person. He may not have delivered everything voters wanted, but he has done his job effectively enough to convince voters that his heart is in the right place. Few other members of the political elite have these characteristics.
DM: Let's talk about his likely opponent, Prabowo, a former top general. Is Prabowo more or less formidable a second time?
MB: Prabowo appeals to those who like a muscular, tough guy. He has name recognition and a political party with a nationwide organizational network. However, he is older now and there have been persistent rumors of health issues. There is also some talk that he doesn't have the same funding capacity as he had in 2014.
Jokowi has also been able to weave together a coalition of the main political parties to support him. So Jokowi will be a stronger opponent for Prabowo than in 2014. As long as the economy continues to improve and Jokowi is able to fend off mischievous tactics by opponents such as raw appeals to religion, it's Jokowi's election to lose.
DM: In most elections, wherever they are held, the economy is the top issue. Is this the case in Indonesia?
MB: The economy is key. I would say, specifically, livelihood issues such as cost of living, availability of good jobs and a general sense that the country is on the right track. These are what matters to voters. Jokowi's health-care initiatives have been very popular. That has provided a sense of improved security for poorer Indonesians and made him popular.
DM: In terms of government policy, what role does political Islam have?
MB: Not much. As far as economic policies are concerned, the obstacles to reform have been more to do with nationalism and the power of vested interests than Islamic issues.
DM: Has populism, or nationalism, played a role in his administration?
MB: No Indonesian leader can afford to give up nationalism. Jokowi has been a nationalist, but also a pragmatist. He has been prepared to do the right things such as cutting fuel subsidies and he has cut fiscal spending to keep the deficit within an acceptable range. His appeals to "populism" involved initiatives such as health care, which have been reasonably structured.
DM: China and the role of Chinese investment has been a hot-button issue in Indonesia for decades. How has Jokowi handled relations with China?
MB: Jokowi has been careful and balanced. He has welcomed Chinese help in transportation such as the Jakarta-Bandung high-speed rail. But he has also been cautious. For instance, he has tried to balance China with Japan in accepting help with infrastructure. He has also drawn lines very clearly with the Chinese where territorial disputes are concerned.
DM: Are there any storm clouds on the horizon that could swing this election?
MB: The religious factor is still very much a risk. Global financial markets are more turbulent, and the rupiah has weakened a tad of late. So far, Bank Indonesia has handled the currency volatility quite well. And the government's fiscal management has been impressive — so while this financial issue is a risk, it probably can be contained.
©2018 Bloomberg L.P.