July 8, 2009 / 7:30 AM / 10 years ago

ANALYSTS VIEW - Indonesia's Yudhoyono set for a second term

JAKARTA (Reuters) - Indonesian President Susilo Bambang Yudhoyono headed for victory in elections as results poured in on Wednesday, pointing the way to a five-year term of quickening economic reform.

Here are some analysts’ views following the early quick count results.

AUSTRALIAN NATIONAL UNIVERSITY.

“It’s got to be one round, no doubt. In future, I would expect a pretty stable macroeconomic environment similar to what has prevailed over the last five years, especially with Boediono as vice president, provided there is strong support for technocrats in cabinet.

“I would predict moderately low inflation, manageable fiscal deficits. I’d expect a realistic and genuine commitment to a continuation of programmes that support the poor, social safety net programmes like the direct cash transfers, the subsidies for education and health, the regional rural development support programmes.

“There is a question mark over significantly accelerated growth. Both Yudhoyono and Boediono are very careful managers so I expect it will be quite hard to get back to 6 percent growth, partly because it’s dependent on quick decision-making and pushing programmes through quickly, especially on infrastructure, that have proven to be quite difficult.

“The perennial problem has been buying land for infrastructure. Until significant progress can be made on that issue, I think the government will find it difficult to raise growth rates to the level that Vietnam and China and India have achieved in recent years. Partly, decentralisation has made it difficult.”

PURBAYA YUDHI SADEWA, ECONOMIST AT DANAREKSA INSTITUTE

“The secret of Yudhoyono’s success is he managed to ease pressures on rice and food prices in the last year. The number of poor people has declined because the agricultural sector grew by over 4 percent in the last year. That made a lot of people happy. When the oil price bubble burst so did commodity prices.

“He has to be able to maintain food price stability over the next five years if he wants to be considered a good president.

“We expect to see a slowly improving economic growth going forward and it should be sustainable because it’s not starting from scratch.”

ENRICO TANUWIDJAJA, CURRENCY STRATEGIST, OCBC BANK, SINGAPORE

“Dollar/rupiah is likely to remain top-heavy at 10,250, the current 1-month NDF at around 10,330, likely to be quite well supported around the 10,100 level, depending on the stock market reaction, if it’s more positive than expected, downside of 10,000 level could be reached.

“Investors seem to be in a risk-averse mode currently, so, they might be a little bit cautious on the rupiah too, pending any development from Italy’s G8 meeting.”

CALLUM HENDERSON, CHIEF GLOBAL CURRENCY STRATEGIST, STANDARD CHARTERED BANK IN SINGAPORE

“An outright SBY win in the first round should be a positive for local markets as it should mean the continuation of current policies, which have so far been very positive for Indonesia.

“Overall we remain fundamentally bullish on the rupiah and overweight from a portfolio perspective.” (The bank maintains its end-2009 rupiah forecast of 9,500 per dollar.)

DAVID COHEN, ECONOMIST AT ACTION ECONOMICS, SINGAPORE

“I think the reaction could be modest given that it has been widely understood that he is expected to win. We have to see what happens in the U.S. today, if there is another big drop in the market I don’t think Indonesia alone can buck that trend.”

SONG SENG WUN, ECONOMIST AT CIMB, SINGAPORE

“To win it in one round will allow Indonesia to get on with the job, implementing the policy changes that have been set, rather than getting distracted by having to go for the second round. Over the medium term, despite what will happen in the first one or two days after the market opens, the impact will be positive for the equities market.”

KEVIN O’ROURKE, POLITICAL RISK ANALYST AND AUTHOR OF REFORMASI WEEKLY

“I think it’s clear now that Yudhoyono has won in one round. A win by Yudhoyono would promise potential for continued improvements in governance and social spending programmes.”

KEVIN EVANS, JAKARTA-BASED ELECTION EXPERT, PEMILU ASIA

“I am calling it for Yudhoyono in one round. Despite a flat campaign, he has demonstrated that if you have a good track record, people will vote for you. If he gets good people in the cabinet and Golkar out, his legacy will be getting rid of Golkar.

“What Yudhoyono has shown is an admirable capacity over the last five years not to intervene, to let good people do their jobs. That’s one of the important battles won. That’s a big step in the right direction.

“As for infrastructure, that also comes back to corruption and ensuring tenders go through properly. He may be able to put in place some key characters who won’t be influenced by outside pressures. So the process of reform might pick up pace.”

ALEKSIUS JEMADU, ACTING DEAN OF POLITICAL SCIENCE, PELITA HARAPAN UNIVERSITY

“The first priority for Yudhoyono will be to continue what he has done in the economic sector.

“He will try to do more to attract investment but at the same time he will be more serious about eradicating corruption. He will prioritise good governance and economic growth.

“He will reform the bureaucracy to make it easier for investors to come here. He will make sure some of the red tape and the bureaucratic obstacles will be removed.”

GREG FEALY, EXPERT ON INDONESIAN POLITICS AND ISLAM, AUSTRALIAN NATIONAL UNIVERSITY

“This is a very strong endorsement for Yudhoyono and will give him greater confidence and boldness to put together his new cabinet and determine policy. He would be favouring more technocrats over politicians.

“I think Golkar will now be doing some soul-searching and I would not be at all surprised if they tried to get back into the ruling coalition with Yudhoyono. For PDI-P, this will be the end of Megawati’s career.”

WIMAR WITOELAR, TV POLITICAL COMMENTATOR

“Yudhoyono will have to realise that this majority was given to him by people who want to see a better grip on reform.

“First and foremost is corruption and legal reform. The parliament is full of conflicts of interests and I think the people who supported him will be pressuring him to do something about that.”

Reporting by Sunanda Creagh in Jakarta, and Kevin Yao and Harry Suhartono in Singapore; Editing by Sara Webb

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