What does Indonesia Presidential Election Imply for Future Policy

The 2024 Indonesia presidential election was a highly contested race between several prominent candidates. Prabowo Subianto, the former defense minister of President Joko Widodo, claimed victory in a tightly contested presidential race.

He had previously lost in two prior attempts to win the presidency. Prabowo Subianto’s victory in the presidential race this time was partly due to his rebranding making him look like a grandfather figure and less like a general. At the same time he projected a tough law and order theme based on his military background. Prabowo also gained votes from the religious voters.

Since President Joko Widodo could not run due to a two term limit, his implicit support of Prabowo along with choosing Gibran Rakabuming, who is Joko’s son, as the vice-president pushed Prabowo over the top in the election. Widodo was a very popular presendent who pushed for pluralistic democracy, effective governance and economic development (big projects). Thus Widodo threw his weight behind Prabowo since he sees the continuation of the big projects – moving the capital etc.

Thus, the election is seen by some as the former President Joko Widodo playing king maker. For the market and investment opportunities, the question if Prabowo will keep fiscal discipline and a key will be to watch who is appointed to key ministries. Also, power politics could see Prabowo trying to sideline the influence of Widodo over time.

However, the key for the market participants is continuation of economic development and fiscal discipline. Any sign that could change should be watched closely by the markets.

What are the geopolitical implications?

Prabowo Subianto’s victory in the 2024 Indonesia presidential election has several potential implications for the country. The result of the presidential election may shape Indonesia’s foreign policy priorities and diplomatic engagements. Prabowo Subianto’s presidency could lead to a reassessment of alliances, economic partnerships, and geopolitical strategies to align with his administration’s vision and priorities.

Geopolitically Indonesia has maintained non-alignment, thus Prabowo is seen as continuing this policy. This has meant playing a delicate balance between the US and China. On the aid and economic front, Indonesia has been open to Chinese development funds. On the other hand, due to the South China Sea disputes and Chinese transgeressions in Indonesian territorial waters, closer defense and security with the US has been a consistent policy.

Prabowo is a nationist and is likely to take a more assertive role against Chinese maritime disputes. He has praised the trilaterial relationship between the US, UK and Australia called AUKUS that includes the US nuclear submarine deal for Australia, He sees Indonesia playing a larger role on the world stage. Thus, unlike Widodo, he will be more hands-on in terms of foreign policy.

In addition, he would likely increase defense cooperation with Japan in terms of military aid. In Southeast Asian, the Japanese have taken a pro-active approach with both the Phillipines and Vietnam.

Facts about Indonesia and ETF Performance

Indonesia is a huge country that is about three times the size of the US state of Texas. It consists of numerous islands that stretch across the Pacific. Population is around 280 million and the GDP is around 1.3 Trillion Dollars. The iShares MSCI Indonesia has been pretty volatile as can be seen below:

EIDO iShares MSCI Indonesia