Market wants continuity

Indonesia’s stocks jumped 5.1 percent to a six-month high on Monday and rose another 2 percent on Tuesday. The rupiah also appreciated by almost 2 percent on each of the first two trading days after last Thursday’s peaceful polls which significantly strengthened President Susilo Bambang Yudhoyono’s (SBY) hold on parliament and his chances of winning the July 8 presidential election.

This signals that the market is quite comfortable with the SBY government and wants it to continue governing for another five years until October 2014. The bullish sentiment is a vote of confidence in the current SBY economic team, which is led by Finance Minister Sri Mulyani Indrawati in the fiscal sector, and Bank Indonesia Governor Boediono in the monetary field.

The market seemed impressed by the success of the economic team in gearing up the economy for weathering the adverse impacts of the global financial crisis and sharp downturn, believing that such good fiscal-monetary teamwork is important for managing the economy through the financial turbulence.The vote for SBY is also a strong endorsement of his strong anti-corruption campaign.

The near certainty that the incumbent President will be reelected surely helps to assure the market that the bureaucratic machinery will continue to run smoothly in the current transition period. The preparations for the 2010 state budget proposal, due for deliberation by the new parliament soon after its inauguration in early October, will also run to schedule.

There is a high sense of policy predictability as the business community now rests assured that SBY will take great lessons from his current erratic coalition – moving to strengthen his executive leadership with strong support from the legislative branch. Businesspeople expect SBY to become a stronger leader during this second and final term, and to be more decisive and courageous about introducing painful reform measures desperately needed for strengthening the foundations of the economy. Restoring a virtuous cycle within the economy is especially crucial for strengthening the macroeconomic stability to weather the heightened political emotions that will most probably arise in the upcoming presidential election.

But despite the air of certitude, not all things have been assured yet. The market could still be roiled with a deep sense of apprehension if the one-month process of vote counting until May 9 is marred by massive political protests and myriad lawsuits filed by political parties with the Constitutional Court. The leaders of 13 of the 38 political parties on Tuesday vowed to challenge the results of last week’s polls, through legal action, citing the large number of irregularities in logistical arrangements and the administration of the election which resulted in many eligible voters losing their constitutional rights or spoiling their ballots or simply deciding not to vote.

It is therefore most crucial that the General Elections Commission (KPU), General Elections Supervisory Agency (Bawaslu) and their regional units as well as the Constitutional Court address these election-related issues properly. The credibility with which these issues are addressed and the lessons derived from the legislative polls will determine the political acceptability of results of the upcoming presidential election and consequently the political stability of the state.

Experiences from the general elections in 1999 and 2004 showed that credible election processes helped create a virtuous cycle in the economy.(The Jakarta Post)