Indonesia Election: Impact on Sectors & Corporates

Lakshmanan R, CFA, FRM - Head of South & Southeast Asia Corporates
Nicole Chua - Analyst, China Property
Jonathan Tan Jun Jie - Analyst, South & Southeast Asia Corporates

  • Defense Minister Prabowo Subianto looks poised to secure a first-round win in Indonesia’s 2024 Presidential Election held on 14 Feb-2024, and will likely succeed outgoing President Joko Widodo.
  • We expect Mr Subianto to largely uphold policy continuity, particularly in the areas of commodity protectionism, electric vehicle (EV) and downstream investments, infrastructure development, and the construction of the new capital city project in Nusantara.
  • Continued resource nationalism could instill regulatory and operational uncertainties for the Indonesian upstream oil & gas companies (Medco Energi), and coal miners (BUMA, Indika Energi), with these private players being more susceptible to adverse developments.
  • A persisting focus towards developing Indonesia’s EV ecosystem, green transition metals and downstream industries would likely benefit MIND ID (has operations in nickel mining and aluminium production), PT Freeport Indonesia (copper mining) and Indika Energi (has plans to develop an EV ecosystem of up to $8 bn).
  • While the Indonesian property developers are poised to benefit in the longer-term from Indonesia’s new capital city project, high project development capex could weigh on free cash flows and credit metrics; we note Pakuwon Jati is developing a large IDR 5 tn Superblock project in Nusantara, while Lippo Karawaci and Bumi Serpong had announced plans to develop new projects in the area.
  • State-owned power distributor PLN could face longer-term regulatory uncertainties given Mr Subianto’s earlier pledge to “end PLN’s monopoly” and improve competition from renewable power producers, though we believe such regulatory changes would be implemented over a very long period and PLN benefits from an array of mitigants to tighter regulation.
  • We expect the Subianto administration to remain pragmatic in its foreign policy, but we are watchful of potentially looser fiscal discipline.

We analyze the impact of Indonesian Presidential election outcome on the Indonesian economy, select sectors and corporates under our coverage. We expect Subianto’s new administration to largely maintain policy continuity from the previous regime. The fundamental future trends for select sectors and corporates in the wake of the impending government were already factored into our analysis of the respective industries and corporates under our coverage. We note that spreads of the Indonesian corporates under our coverage were largely unchanged from a week ago, suggesting that markets had lately baked in expectations of Mr. Subianto’s win. We maintain our existing recommendations on the individual companies under our coverage.


Overview of Indonesia Presidential Election 2024

Defense Minister Prabowo Subianto looks poised to secure a first-round win in Indonesia’s 2024 Presidential Election that was held on 14 Feb-2024. Early vote counts suggested he secured a leading ~58% of votes, beating former Central Java governor Ganjar Pranowo (~25% of votes) and former Jakarta governor Anies Baswedan (~17% of votes). Mr. Subianto will replace outgoing president Joko Widodo (Jokowi), who has served the maximum permissible 2 terms as President. Official results are expected to be released in March, with the elected President sworn in on 20 Oct-2024. We summarize the three presidential candidates below.

  • Prabowo Subianto: Current Defense Minister, former army general and the founder of the Great Indonesia Movement Party (Gerindra), Prabowo has run for president multiple times, including in 2014 and 2019 against incumbent President Widodo. He has a significant political base and has been a key figure in Indonesian politics for many years. Notably, Subianto’s running mate is Gibran Rakabuming Raka, the eldest son of current President Jokowi.
  • Ganjar Pranowo: Former Governor of Central Java, and candidate from the current governing party Partai Demokrasi Indonesia Perjuangan (PDI-P).
  • Anies Baswedan: Former Governor of Jakarta and notably the most vocal critic of Jokowi’s policies. Baswedan opposes President Widodo’s initiative to move Indonesia’s capital from Jakarta to Nusantara.

Throughout his campaign, Mr. Subianto had pledged to uphold the continuity of President Widodo’s key existing policies. We anticipate policy continuity to largely prevail under Mr. Subianto, thereby allowing for regulatory and financial stability. Particularly, we expect policy continuity to be maintained in the following areas: 1) Commodity protectionism to develop the downstream commodity sector; 2) Prioritizing investment towards developing an EV ecosystem; 3) Prioritizing infrastructure development and the construction of the new capital Nusantara.

We summarize our views on the impact of Mr. Subianto’s impending presidency on the economy and key sectors of Indonesia.

1. Continued Commodity Protectionism

Commodity nationalism was a key facet of President Widodo’s presidency. Over the past few years, we saw Indonesia implement drastic export bans and restrictions on various commodities such as nickel, bauxite, and palm oil. Key reasons behind the export restrictions include to: 1) Develop the nation’s domestic processing industries and move up the value chain from exporting raw materials to producing and exporting value-added refined goods, that will also create jobs and boost the domestic economy; 2) Ensure the availability of key commodities for domestic consumption and to stabilize prices; 3) Ensure the availability of key metals that play a crucial role in green transition.

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