Infrastructure, consumer and tech industries expected to benefit in a Jokowi victory: Fitch Solutions

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FEBRUARY 07, 2019 - 5:27 PM

With the Indonesian general elections slated for April 2019, Fitch Solutions analysts are expecting President Joko Widodo, also known as Jokowi, to succeed in his re-election bid.

If the scenario plays out, the infrastructure, consumer and technology industries are expected to benefit, while the agri-business, mining and oil & gas sectors are likely to see a mixed impact, according to a report by Fitch Solutions.

Fitch Solutions analysts said that they are “broadly positive” of the continuity of key technology policies and the growth prospects of the IT, consumer electronics and telecoms sectors under Jokowi’s second term. This comes as Jokowi has been receptive to the idea of leveraging technology to boost the economy and introducing stimulus packages and funding for tech projects and network infrastructure, said the report.

For instance, Jokowi launched Indonesia’s Industry 4.0 initiative in April 2018 to move the economy up the value chain. More details on this front are believed to be made after the upcoming presidential elections.

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But if there is a change in mandate and Prabowo Subianto – a second-time challenger – wins, it would likely put a stop to Jokowi’s Industry 4.0 initiative as his priorities are skewed toward heavy industries such as the automotive and extractive sectors, said Fitch Solutions analysts.

“Prabowo is also known to have a more nationalistic agenda and could backtrack on investment reforms, potentially returning the telecoms and IT sectors to the negative investment list in order to limit foreign ownership,” said the analysts.

The report also said that the consumer sector outlook will “remain bright” with the re-election of Jokowi as he has moved away from his focus on infrastructure in favour of more populist measures in the lead-up to the election. With initiatives in place such as plans to increase the basic salaries and pensions of civil servants and retirees, consumer confidence in Indonesia has gone up, with retail sales picking up as well.

A Jokowi victory in the upcoming Indonesian elections will also have a positive impact on the infrastructure sector over the longer term, according to Fitch Solutions. This is despite a short-term hit as more populist measures are undertaken as part of election preparations.

Analysts believe that the growth of the sector will pick up post elections as Jokowi pivots back to his infrastructure strategy, focusing on executing plans such as the five-year infrastructure plan and the 35,000MW electricity procurement plan. “We are most positive on the rail and power sector in the event of a Jokowi victory,” they added.

The pharmaceuticals industry is expected to gain from a Jokowi victory as a continuation of supportive policies under Jokowi's mandate over the last five years. However, the appointment of Ma'ruf Amin, a prominent Muslim cleric, as Jokowi's running mate and his push to impose mandatory certification on all halal products in 2019, poses risks to multinational drugmakers and their portfolio of non-halal products, noted the analysts.

The report also flagged that with Jokowi's re-election, there is “little scope for major changes” in Indonesia’s oil & gas sector and mining sector over the coming years, and the former is expected to remain heavily state-driven while being shaped by growing elements of resource nationalism.