Jakarta. The business sector expects calm and stability to prevail in the period leading up to next year's presidential and legislative elections, following announcements by the two main candidates of their running mates on Thursday (09/08).
Incumbent President Joko "Jokowi" Widodo has shown an eagerness to lean towards conservative Islam with his pick of Islamic scholar Ma'ruf Amin, the head of Indonesia Ulama Council (MUI).
Jokowi will have a rematch with his rival, Prabowo Subianto, who has picked Jakarta Deputy Governor Sandiaga Uno as his running mate. The private-equity tycoon ran a successful campaign in a religiously charged gubernatorial election in the capital last year against the incumbent, Basuki "Ahok" Tjahaja Purnama – a Christian of Chinese descent.
"This is the president's choice and we need to support him. The choice will be positive for the upcoming term, as Ma'aruf will be able to ensure that the country's political climate remains peaceful. He can calm the ummah. As a cleric, that is his obligation," said Benny Soetrisno, trade chief at the Indonesian Employers Association (Apindo).
The business sector has lauded Jokowi's efforts to remove structural barriers, such as poor infrastructure and notorious red tape, which have long hampered economic progress in the country. But the president, who is widely expected to win a second term next year, has been struggling to accelerate Indonesia's economic growth amid threats of a global trade war and a monetary tightening cycle in the United States, which has seen the rupiah weaken against the dollar.
"From our discussions with corporations and policy makers, it is clear that the currency is seen as a key determinant of 'on-the-ground' confidence and a willingness to invest," Sean Gardiner and Aarti Shah, analysts at multinational investment banking Morgan Stanley, wrote in a report published on Wednesday.
"During periods of currency weakness, monies are left offshore or held in US dollars onshore, which tends to lead to a pause in the investment cycle and vice versa. Furthermore, businesses are broadly reliant on imports for their sales, which affects profitability," they said.
Any signs of political instability would hurt foreign sentiment and encourage investors to flee. And since they hold the lion's share of blue-chip stocks and bonds, that would cause further pressure on the rupiah.
"Market players expect sustainability in the business environment and stability in the financial market to be maintained, given that global investors tend to have a positive perception of the current government," said Josua Pardede, an economist at Bank Permata.
"The choice of Ma'ruf as Jokowi's running mate … indicates that significant changes in economic policies are less likely," Joshua added.
Ma'ruf, 75, is highly respected among traditional Muslims in Indonesia. He is a descendant of Abu Abdul Mu'ti Muhammad Nawawi, a prominent Islamic priest from Banten, who was an imam at the Al-Haram Mosque in Mecca. Ma'ruf graduated from Tebuireng Islamic Boarding School, one of the largest and most respected in the country.
He served as a United Development Party (PPP) lawmaker between 1971 and 1982 and represented the National Awakening Party (PKB) in the national legislature between 1997 and 2004.
However, Human Rights Watch researcher Andreas Harsono told Reuters that Ma'ruf, as head of the MUI, had overseen a rise in religious intolerance across Indonesia, a pluralist country with significant minority communities.
"He issued fatwas condemning religious and gender minorities like the Ahmadiyya and LGBT individuals at a time they were subject to violent assaults," he said. "The creation of so-called religious harmony forums across the country; these forums replaced the principle of religious freedom, stoked division and favored the majority Sunni Muslim community."
Ma'ruf also gave key testimony during Ahok's blasphemy trial last year.
Still, Theo L Sambuaga, deputy chairman of Golkar Party's advisory board, said during his time as a lawmaker, Ma'ruf displayed a strong spirit of nationalism and patriotism and showed a willingness to maintain good relations with various religious leaders and communities.
"Pak Kiai Ma'ruf is always nurturing. Far from the type that consciously exploit religious and ethnic tensions," Theo said.
The local stock market reacted positively to the announcement of vice-presidential candidates. The Jakarta Composite Index gained 0.6 percent on Friday morning, in contrast to other indices in the region, such as Japan's Nikkei, which was down 0.5 percent and Singapore's Strait Times, which dropped by 1.1 percent.
The rupiah also strengthened to its highest level so far this month, trading at 14,422 against the dollar, according to Bank Indonesia data.
"With the presence of Ma'ruf Amin, who is highly respected by the ulema and political figures, Jokowi will find it easier to deal with problems inside and outside the legislature, allowing him to focus on his economic programs during his second term, when many infrastructure projects will start to have an impact on the economy. This will allow the Indonesian economy to show more promise over the next five years and I'm sure investors can see this," said Piter Abdullah, a Jakarta-based economist at the Center of Reforms on Economics (CORE).
Additional reporting by Reuters