Investor-friendly Jakarta chief faces ouster over Islam insult

[JAKARTA] After Edward Gustely helped write the feasibility study for Jakarta's first subway in 1995, he watched as it got pushed back again and again by Indonesia's politicians.

Now more than two decades later, the subway's first phase is finally set to open. Mr Gustely says much of the credit belongs to Jakarta Governor Basuki Tjahaja Purnama, nicknamed Ahok, and his predecessor, President Joko Widodo, known as Jokowi.

"And they have done that in a very short amount of time," said Mr Gustely, co-founder of Jakarta-based Penida Capital Advisors, who has served four Indonesia finance ministers. "Ahok is a doer, he's delivered - he's made things happen that over the last 20 years have not happened."

Yet despite a track record of success, including moves to tackle corruption and streamline the bureaucracy, Mr Basuki finds himself behind in most polls heading into Wednesday's Jakarta governor election runoff.

The 50-year-old ethnic Chinese Christian has struggled to overcome allegations that he insulted the Koran, a crime in Muslim-majority Indonesia, giving the edge to former education minister Anies Baswedan, 47.

While Mr Joko has managed to rein in the more extreme religious voices, the distraction risks hindering his ability to achieve 7 per cent gross domestic product growth by the time his term ends in 2019, according to CastleAsia founder James Castle.

GROWTH STRANGLED

"If Indonesia is to grow faster than 5 per cent GDP per annum, the stranglehold of the government corporations on infrastructure projects must be broken," said Mr Castle, a longtime adviser to Indonesian governments who also serves on Coca-Cola Indonesia's advisory board. "The political challenge from right-wing religious groups seems to be making the president much more hesitant to challenge the rent-seeking behaviour of some of his strongest political backers."

The winner will control Indonesia's financial centre, which contributes nearly a fifth of the nation's GDP and the bulk of its finance. With a greater population that is forecast to reach 50 million by 2030, the city also has outsized political influence in Indonesia.

Mr Anies led Mr Basuki by about six percentage points in an early April survey conducted by polling company Media Survei Nasional.

About 7 per cent of voters were undecided, with 15 per cent are undecided and still "expecting 'the gift' from each candidate," Rico Marbun, the company's executive director, said by phone.

"People admitted the good performance of Ahok in Jakarta but he wasn't well accepted socially," he said.

BLASPHEMY TRIAL

A key challenge for whoever wins Wednesday's contest will be to calm the religious tensions that have roiled the campaign.

Conservative Muslim leaders accused Mr Basuki of insulting Islam at a campaign rally last year, when he said that voters were being deceived by people trying to use Koranic verses to say that Muslims are not permitted to support a Christian leader.

The allegations brought hundreds of thousands of protesters to the streets in several mass demonstrations and led to Mr Basuki being tried for blasphemy. He has called the incident a misunderstanding. If found guilty, he faces up to five years in prison and possible disqualification. A verdict is expected the day after the election.

The allegations hurt Mr Basuki's popularity, preventing him from clearing the 50 per cent mark in the first-round vote in February. He has trailed ever since as opposition support has coalesced around Mr Anies.

'A LITTLE ROUGH'

Much of the mobilisation against Mr Basuki was based on prejudice, according to Jamie Davidson, an associate professor at the National University of Singapore. Still, he said, the allegations also served to reinforce perceptions that Mr Basuki is "a little tough, a little rough, and a little disrespectful." "There's a stereotype that Chinese tend to be like this - so a lot of Chinese people are also embarrassed," Prof Davidson said.

Mr Basuki has promised to speed up the roll-out of major infrastructure projects, including the Jakarta ring road. He also wants to increase efforts to make Jakarta's administration more transparent and accountable, as well as build more government-funded low-cost housing and increase subsidies for basic necessities.

Mr Anies says he also also supports Mr Joko's agenda. He has promised to boost economic growth with greater assistance for small to medium enterprises and a larger role for the private sector in infrastructure development.

He wants to expand home ownership, increase access to education and cut red tape to lower Indonesia's ease of doing business ranking from its current 91 ranking to below 40 within five years.

LONG-TERM RISK

While investors have lauded Mr Basuki's administration, they also seem upbeat about Mr Anies.

"We're not expecting the election to have a major impact on the economy, regardless of who wins," Dian Ayu Yustina, economist at PT Bank Danamon Indonesia in Jakarta, said by phone. "What I'm closely watching now is more on the domestic demand side."

For Mr Gustely from Penida Capital, whoever takes power will need to understand that long-term investors will only put money at risk in a country like Indonesia if they have certainty.

"We're in that transition phase of going to try and rework regulations that would allow for that kind of capital to be deployed over long periods of time," Mr Gustely said. "That's the nexus, right now."

BLOOMBERG