Editor's Note: This assessment is part of a series of analyses supporting Stratfor's upcoming 2019 Second-Quarter Forecast. These assessments are designed to provide more context and in-depth analysis on key developments over the next quarter.
On April 17, 190 million Indonesians will go to the polls for simultaneous presidential, parliamentary, provincial and local elections. The two presidential candidates, Joko "Jokowi" Widodo and retired Lt. Gen. Prabowo Subianto, also squared off in 2014 in an election in which Jokowi captured just over 53 percent of the vote. The 2019 vote will determine whether Jokowi returns for a second and final term through 2024. In parliament, the president's Indonesian Democratic Party of Struggle (PDI-P) itself holds less than 20 percent of the parliament's seats, yet it leads a coalition accounting for nearly 69 percent of lawmakers. The coalition led by Prabowo's Gerindra party, by contrast, controls just a shade above 20 percent of the total. Ultimately, the fate of the election will rest on whether Jokowi succeeds in convincing voters to back his push for greater free trade and infrastructure spending or whether Prabowo sways them on a ticket of toning down these initiatives. If the latter does win, Indonesia will certainly veer from the path Jokowi has forged, but the island country would be unlikely to witness a sea change in economic or foreign policy.
Indonesia's nationwide elections will feature a rerun of the 2014 contest between current President Joko "Jokowi" Widodo and his main rival, Prabowo Subianto. With either winner, Indonesia will maintain its focus on forging an independent foreign policy and bolstering its domestic economic capacity, but a Prabowo victory would entail greater wariness in Jakarta about trade deals and partnerships with China on domestic infrastructure projects.
Jokowi is in a strong position going into the 2019 elections, boasting a larger campaign war chest, better polling numbers and a bigger lead than last time over his main opponent. In particular, he has managed to gain the support of two relatively important parties that backed Prabowo in 2014 — Golkar and the United Development Party (PPP). In spite of the opposition's efforts to cast doubt on Jokowi's Muslim credentials and mobilize hard-line Islamist activists, the president has moved to check this threat by selecting Islamic scholar Ma'ruf Amin, head of the conservative 94 million-member Nahdlatul Ulama Muslim movement, as his vice president. And, to curry favor with Islamists, he has also permitted the release of aging Jemaah Islamiyah leader Abu Bakar Bashir from prison. In spite of Jokowi's olive branch to conservatives, the question of whether he has fulfilled his role as a political leader in the Muslim world continues to crop up in campaigning, as the opposition has noted the contrast between his championing of the Rohingya cause in Myanmar with his relative silence on China's crackdown on Uighur Muslims. Accordingly, the election is far from guaranteed for Jokowi — particularly given the high number of undecided voters and uncertainty about turnout.
Similarities on Foreign Policy
Both Jokowi and Prabowo espouse an inward-looking, nationalist foreign policy that diverged from the incumbent's predecessor, Susilo Bambang Yudhoyono. In his campaign, Prabowo has even adopted a variant of U.S. President Donald Trump's campaign slogan in his speeches, proclaiming "Indonesia first, Make Indonesia Great Again." The two wish to develop a strong domestic economic capacity as a basis to pursue a more independent foreign policy. Moreover, both would focus on Indonesia's status as a maritime linchpin to enforce the country's territorial claims in the South China Sea and maintain a balance between the United States and China.
Divergence on the Economy
Jokowi's strong polling position stems in part from the Indonesian economy's relative stability over the past five years, during which time it has posted an average annual growth rate of 5 percent. The opposition, however, has criticized Jokowi for failing to attain the 7 percent economic growth he was targeting, accruing massive government debt, and presiding over an economy with deepening inequality and rising costs of living. Due to a massive infrastructure, education and health care push, government debt has risen around 48 percent since 2014, jumping from $122 billion to $181 billion; correspondingly, the country's ratio of debt to gross domestic product has leaped from 24.7 to 30 percent. (Despite the rise, Indonesia's government debt still remains low compared to the rest of the Association of Southeast Asian Nations, while foreign lenders hold just 30 percent of this debt.) In response, Prabowo has proposed limits to Indonesia's reliance on external trade in favor of developing greater self-sufficiency in food and fuel, criticizing what he describes as fraudulent record-keeping, combined with a failure to implement local protections, that the government has used to justify more imports. The Gerindra leader has also promised to agitate to rectify Indonesia's $11 billion trade deficit with China, the country's largest trade partner.
Jokowi, by contrast, has focused on forging more free trade agreements — in part due to the slowing Chinese economy and the knock-on effects of the U.S.-China trade war. In early March, Indonesia signed the Indonesia-Australia Comprehensive Economic Partnership Agreement after nearly a decade of negotiations. At present, Jokowi's government is negotiating trade agreements with the European Union, Iran and Turkey, in addition to pushing for a breakthrough on the Regional Comprehensive Economic Partnership, which would create deeper linkages with China, India and 14 other economies. Needless to say, Gerindra's skepticism about trade deals could complicate the ratification of the Australian agreement, and other talks as well, if it performs well in simultaneous parliamentary elections.
Jokowi Goes Big on Infrastructure
Jokowi's tenure began with the launch of a $355 billion infrastructure push centered on roads, railways, ports and power plants, both in a bid to capitalize on Indonesia's geographic position at key maritime chokepoints and to fuel economic growth and regional development. As part of this drive, however, state-owned enterprises have assumed the lead, taking on massive debts in the process. Unsurprisingly given its close involvement with numerous infrastructure projects overseas, Beijing has been a key partner for Jakarta in developing Indonesia's infrastructure projects. Indonesia is also a key strategic target for China's massive Belt and Road Initiative, the Maritime Silk Road component of which was announced by Chinese President Xi Jinping during a visit to the archipelago in 2013. Still, progress has been slow on the $4.5 billion Jakarta-Bandung high-speed rail project — the centerpiece of China's infrastructure drive in the country. At present, just 10 percent of the link is complete, while the project has also become a lightning rod for criticism from opponents of Chinese investment in the country, given that Beijing is fronting 75 percent of the funding for the railway.
Even if Prabowo wins the vote and fulfills his infrastructure promises, Indonesia is unlikely to diversify away from China.
Jokowi, however, appears set to double down on Chinese projects. In April 2018, Indonesian and Chinese companies signed $23 billion in BRI contracts for power plants and steel smelters, while the two governments also signed a memorandum of understanding on the development of the Tanah Kuning Mangkupadi Industrial Park. And in December 2018, Indonesia offered up a list of $50 billion to $60 billion in potential infrastructure projects to China including hydropower, port, power plant and industrial complexes in Kalimantan, North Sumatra, North Sulawesi and Bali. The next round of talks is due in April, following the election.
The president's main challenger has cited the high costs and dubious value of the Jakarta-Bandung railway and pledged to re-examine Chinese-led infrastructure projects in Indonesia, mirroring how Malaysia has suspended $22 billion in BRI projects. The presidential candidate has also criticized many of Jokowi's infrastructure projects as loss-makers and is instead promising to focus more on small-scale local infrastructure projects so as to reduce the government's debt burden. But even if Prabowo wins the vote and fulfills his infrastructure promises, Indonesia is unlikely to diversify away from China and close its infrastructure gap. After all, the Asian Development Bank estimates that Indonesia will need to spend $70 billion per year on infrastructure through 2020, even though it currently has a shortfall of $47 billion per year based on current levels of investment. In part to head off critics of cooperation with China, Jokowi's government has reportedly pushed for greater employment of Indonesians in the new projects, a business-to-business approach without government involvement, environmentally friendly policies and beneficial tech transfers to Jakarta.
Indonesians will have an opportunity to pass judgment on Jokowi's time in office next month. The popular incumbent remains the odds-on favorite to win, but the country of 264 million is unlikely to change radically even if the president's main challenger, Prabowo, emerges victorious. The latter has made much noise about his Indonesia-first policy, as well as his skepticism about Beijing's many investment projects in the country, but his prospects of holding back the Chinese tide — even if he truly wished to — remain slight.