The Politics of Personality
    Category: Column By : Todd Lauchlan Read : 967 Date : Tuesday, August 19, 2014 - 07:04:03

    As I write, Indonesians are electing their next president. Like elections everywhere, Indonesia’s one has had plenty of drama—a cast of distinct characters, but who each offer a fairly similar view of the future. The question of who will take office in October, former military commander Prabowo Subianto or Jakarta governor Joko Widodo, is about much more than a story of democracy and world relations.

    Beyond politics, Indonesia’s elections are really a story of growth. And the future of Indonesia’s economy and its infrastructure can be a very positive one. While in property has been cooling off, it’s expected that once Indonesia has a new president, activity will revive.

    The economy cyclically slowed last year following three strong years. The rupiah depreciated last year about 25%, forcing interest rates to rise 1.75% stabilizing the currency but slowing the economy.  Add to that the election uncertainty, it’s unsurprising the property market slowed.

    So what is the election’s likely effect on property? The two candidates have big plans for infrastructure and investment. And I think once there’s a new president in place, investors will commit funds. Overall, it’s a positive picture.

    The real difference in the candidates is in their backgrounds. The 53-year old Joko Widodo is perceived as focused and, importantly, untarnished, bringing in a clean slate to office from his solid tenure as Jakarta’s mayor. In contrast, ex-Suharto general Prabowo Subianto is nearly a decade older at 62 and with a more controversial past.

    It’s fair to say, perhaps, that from an international investment view Widodo is seen as a better prospect with his popular support and reformist, business friendly approach. However, I would suggest that the long-term story will be similar with either candidate. They both have their pros and cons. The focus, really, is on a clean transfer of power, leading to a nation-building focus, which will benefit property.

    Importantly, both candidates are focused on infrastructure spending. The question for whoever becomes president is not going to be ‘Should we…?’ but rather, ‘How do we…?’ Neither is going to argue that Indonesia doesn’t need more infrastructure or more jobs. And certainly, no government is likely to argue that Indonesia doesn’t need more investment.

    On the streets, people may reject foreign investment, but the decision-makers know the country will continue to benefit from foreign exposure. The new government will have a mandate to deliver, and Indonesia can’t grow and develop without foreign involvement.

    And the long-term large-scale investment is what is needed—factories and manufacturing facilities, investments in the real economy from domestic and international investors alike. This investments means more jobs, growth and confidence in the economy. For property, the whole market will benefit from housing, offices, warehouses to hotels. Increased wealth, a rising middle class and a growing population drive all sorts of real estate.

    An interesting real-estate policy from Jokowi is a pledge to open the high-end apartment market to foreigners.  If this policy gets implemented it will drive up prices in this sector of the property market, particularly in Jakarta and Bali. If Jokowi is elected, he will have to gather support to get the law actually changed, otherwise. Here’s hoping for a clean transfer of power, so the new regime can continue to drive development.



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