Investors prioritize policy continuity in Indonesia - AVCJ Forum

“The key thing about Jokowi, if he wins, is policy continuity,” Edwin Fua, a partner at Navis Capital Partners, told the AVCJ Indonesia Forum. “This contrasts what we see happening in Malaysia. It’s not that people are negative about the new government, but if you talk about continuity of policy, some projects are under review, others are only just being restarted. It’s a year that is lost and a year lost for private equity is not good.”

Both sides – Jokowi and Prabowo Subianto – are regarded as generally pro-business, which is often the case in elections across Southeast Asia. Wai Leng Leong, a managing director with Caisse de dépôt et placement du Québec (CDPQ), noted that her firm’s internal analysis of the candidates found they are “not fundamentally different in terms of the outcome.”

However, Jokowi is credited with opening more sectors to participation by foreign investors during his first term, while taking a strong stance on anti-corruption. There are concerns this could be undone if the religiously charged nature of the election campaign feeds into government policy. Resource nationalism emerged as an issue in one of the televised presidential debates with Subianto saying Indonesia should “stand on its own feet” and stop foreigners taking its resources.

“We do long-term project-like infrastructure investments with physical assets that remain in Indonesia, you cannot move them,” Leong said. “We work to a 20-30-year timeframe and so the question of nationalism and to what extent and how it will impact business in that timeframe is important. If foreign direct investment is not welcome or any investor that is not Islamic is not welcome, that’s something we do not want to see.”

She added that extremist policies are unlikely because of a “drive towards moderate Islam” in Indonesia, but politics can be problematic for investors. While private equity players can deliberately target less regulated spaces – Sujey Subramanian, a managing director with PAG Asia Capital, noted that his firm “tends to shy away from things with political sensitivities” – infrastructure specialists often do not have this luxury.

Bruce Crane, a managing director for Ontario Municipal Employees Retirement System (OMERS) who covers Asia infrastructure, stressed that politics should be kept out of privatizations. “If investors like ourselves think processes are being run to appease local politicians or the heads of SOEs [state-owned enterprises], where protections get thrown out of the window, that is a problem,” he said, adding that strong cross-party support for these processes is always preferable.

Indonesia’s general elections represent the largest single-day ballot undertaken anywhere in the world. In addition to the presidential contest, more than 240,000 candidates competed for over 20,000 seats on the People’s Representative Council (DPR), People’s Consultative Assembly (MPR), and local councils.

Arnold Castillon, Indonesia country head at Tael Partners, claimed the relatively smooth process was evidence that the country’s political structures function properly. He was also encouraged by the higher than expected turnout and the general observation of a three-day silent period ahead of the polling day, during which campaigning is prohibited.

“It is a sign of political maturity,” Castillon said. “This gives business people more confidence in terms of the political administration and it filters through in terms of the economy.”

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• Topics
• Southeast Asia
• Regulation
• Investments
• Indonesia
• AVCJ Events
• Navis Management
• Ontario Municipal Employees Retirement Scheme
• Caisse de depot et placement du Quebec (CDPQ)