Incumbent Indonesian President Susilo Bambang Yudhoyono (SBY) announced on Tuesday (30/09) that he prepares a plan to undermine the new bill - accepted by Indonesia’s House of Representatives (DPR) - that blocks direct elections for regional leaders (leaving it to regional legislatures to elect mayors, district heads and governors). Many institutions and people have objected against the new bill as it is regarded a setback for the democratization process in Indonesia. SBY also immediately expressed its concern about the passing of the new bill.

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The most controversial and heatedly debated news story from Indonesia in the past week was parliament’s approval of a new bill that puts an end to direct voting in the regions. This means that it are not the people but instead the regional legislatures that will elect mayors, district heads and governors. Critics say this is a major setback for the democracy process of Indonesia and will make local elections prone to corruption, collusion and nepotism as Indonesia’s legislatures - both at the national and regional level - are believed to be corrupted to a high degree.

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Indonesian stocks and rupiah exchange rate weakened considerably on Friday (26/09) after Indonesian parliament approved a new bill that puts an end to direct local elections. Moreover, market sentiments were negative after stocks on Wall Street plunged on Thursday because of increasing concern about the global economy as well as consumers’ problems with Apple's latest software updates and new product launches (iPhone 6 and iPhone 6 Plus) resulting in a 3.8 percent slide of Apple shares.

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Indonesia’s House of Representatives (DPR) passed a controversial bill in the early morning of Friday (26/09) that is widely criticized by media and analysts. After a walk out of President Susilo Bambang Yudhoyono’s Democratic Party (the largest party in parliament having 148 out of 560 seats) in the plenary session, parliament agreed that direct voting in the regions will be scrapped, thus leaving it to the regional legislatures to elect mayors, district heads and governors. Critics say this bill is a setback for democracy.

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Indonesia’s seventh president Joko Widodo (better known as Jokowi), who will take office in late October 2014 thereby replacing incumbent President Susilo Bambang Yudhoyono (SBY), said that during the next five years the Indonesian government will consist of 34 ministries of which 18 are headed by technocrats and 16 by “professional” party politicians. This structure is basically the same as that of the current SBY-led government. In modern Indonesian history the distinction between technocrats and party politicians has been an important one.

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It took about six hours for Indonesia’s Constitutional Court (Mahkamah Konstitusi) to read out the lengthy 300-page verdict in the case that was filed by defeated presidential candidate Prabowo Subianto, who claimed that the result of Indonesia’s July 2014 presidential election was invalid due to large-scale violations and fraud that allegedly occurred during the voting and counting processes. During the read out it became increasingly clear that the Constitutional Court would reject Subianto’s claims due to a lack of evidence.

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The security status in Jakarta has been raised one day ahead of the ruling of Indonesia’s Constitutional Court (Mahkamah Konstitusi) on Thursday (21/08) as the Jakarta administration anticipates public protests. The Constitutional Court will decide on defeated presidential candidate Prabowo Subianto’s claims that the election result of Indonesia’s July presidential election was influenced by massive fraud and violations (in both the voting and counting process). According to the official result Joko Widodo won with 53.15 percent of the votes.

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Soon-to-be president of Indonesia Joko Widodo (popularly known as Jokowi) stated that he intends to cut the large fuel and electricity subsidies once in office. Indonesia’s Revised State Budget of 2015 (RAPBN 2015) allocates IDR 363.5 trillion (about USD $31.2 billion) to energy subsidies. This figure accounts for about 18 percent of total government spending (IDR 2,019.9 trillion) set for 2015. Although the energy subsidies aim to support the poorer segments of Indonesian society, they cause complex problems in Southeast Asia’s largest economy.  

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On Tuesday evening (22/07), the General Elections Commission (KPU) officially declared Joko Widodo, popularly known as Jokowi, the winner of the 2014 presidential election. Jokowi beat Prabowo Subianto, a controversial former army general, by 53.15 to 46.85 percent. Subianto did not witness the announcement. Several hours earlier, when news started to spread about a Jokowi win, Subianto announced to withdraw from the vote-counting process. He will challenge the result in the country's Constitutional Court (the ruling is expected in late August).

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With only one more day to go before the General Elections Commission (KPU) will release the official result of the July 2014 presidential election, it seems almost certain that it will take a Constitutional Court ruling for the final judgement. Over the weekend, data from KPU indicates that Joko Widodo has won the election by a margin of about five percentage points. However, his rival Prabowo Subianto has already stated that he will challenge the result as he claims that there are indications of fraud at several polling stations.

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It was a very exciting afternoon and evening on Friday (09 August 2018), especially for those who follow contemporary Indonesian politics as well as those who love sinetron (Indonesian soap operas) since there occurred plenty of drama. At the end of the day it became clear that two pairs (consisting of a presidential and vice-presidential candidate) will compete in the 2019 presidential election: (1) Joko Widodo and Ma'ruf Amin versus (2) Prabowo Subianto and Sandiaga Uno.

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There are doubts whether Indonesia's gross domestic product (GDP) growth can reach 5.2 percent year-on-year (y/y) in full-year 2018 as Indonesia is experiencing a couple of major challenges. Challenges include the global trade war, the fragile rupiah, Bank Indonesia's higher benchmark interest rate, the current account deficit, and political tensions ahead of the 2019 legislative and presidential elections. Currently, Indonesia Investments' forecast for Indonesia's economic growth is set at 5.2 percent (y/y) in 2018.

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Chief executive officers (CEOs) in Indonesia have become slightly less optimistic about the Indonesian economy and politics. This makes sense considering the presence of simmering global trade tensions, sharp rupiah depreciation against the US dollar, and Bank Indonesia's recent series of interest rate hikes.

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The local elections that are held tomorrow (Wednesday 27 June 2018) are regarded a run-up to Indonesia's 2019 legislative and presidential elections. Tomorrow's results are a barometer to measure the political mood in the country with regard to next year's elections. After all, residents in the nation's four most populous provinces - West Java, East Java, Central Java, and North Sumatra - will visit the ballot boxes to vote for new governors. In total, 17 governors, 39 mayors and 115 regents will be elected across Indonesia on Wednesday.

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This week two domestic events need to be carefully watched by those who invest in Indonesian assets: (1) the local elections that are scheduled for Wednesday 27 June, and (2) Bank Indonesia's monthly policy meeting that is scheduled for 27-18 June. Lets take a closer look at these events.

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The issue of foreign workers has been the topic of much debate in Indonesian media in recent weeks. Ahead of the 2019 legislative and presidential elections political opponents of Indonesian President Joko Widodo are seemingly using this topic to gain popularity and to incite criticism on the government, or even to incite anxiety in society. Lets take a closer look at what it is about and whether criticism or anxiety is grounded or that we are simply dealing with another hoax.

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Indonesia's 2019 presidential election is likely to become another battle between incumbent President Joko Widodo (Jokowi) and Gerindra party Chairman Prabowo Subianto. Both men had already been engaged in a fierce contest in 2014, one that was only narrowly won by Jokowi. On Wednesday evening (11/04) Subianto formally accepted the mandate of the Gerindra party to compete as presidential candidate in the 2019 presidential election (scheduled for 17 April 2019).

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Consumer goods companies listed on the Indonesia Stock Exchange are expected to experience two good years in 2018 and 2019 due to the presence of the "political years" (regional elections in 2018 followed by legislative and presidential elections in 2019). Traditionally, consumption rises amid these "parties of democracy" and therefore those consumer goods companies with strong brands are expected to see rising sales in this period.

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It was a solid year for the Indonesian economy. The macroeconomic fundamentals of the nation have strengthened due to the hard work of the Indonesian government under the leadership of President Joko Widodo. However, there is no room for complacency as there remain major bottlenecks, while legislative and presidential elections - in which voters can approve or disapprove Widodo's performance - are scheduled for 2019.

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Investors will need to keep an eye on Indonesia's political years of 2018 (regional elections) and 2019 (legislative elections) as the outcomes can have a big impact on the investment climate and business climate of Indonesia. Most eyes will be on the legislative and presidential elections of 2019.

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