Free Loans Trump Noodles in Indonesia Voter Race: Southeast Asia

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Supporters of ex-army general Wiranto, who is running in the next presidential election, shouts slogans during his Hanura party campaign on the 2014 legislative election, in Jakarta on March 28, 2014. Close

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Photographer: Bay Ismoyo/AFP/Getty Images

Supporters of ex-army general Wiranto, who is running in the next presidential election, shouts slogans during his Hanura party campaign on the 2014 legislative election, in Jakarta on March 28, 2014.

Free noodles are no longer enough to curry favor with Indonesian voters. Offers of insurance, loans and medical checkups have emerged in a months-long campaign that is forecast to boost economic growth.

Hanura, a party led by ex-army general Wiranto, is offering 5 million rupiah ($443) loans for groups of small businesses and giving new members one year’s free life insurance, Abdurahman Fauzi, a parliamentary candidate for the party, said in an interview as he campaigned in Jakarta on March 27. Islamic party Partai Keadilan Sejahtera or PKS, part of President Susilo Bambang Yudhoyono’s ruling coalition, is giving free blood tests at rallies, said Slamet Nurdin, a member.

Spending on everything from campaign travel to free drinks and noodles in the elections, which start today with a nationwide parliamentary vote, will help buoy growth in 2014 by about 0.2 percentage points, according to analysts at Standard Chartered Plc and PT Bank Danamon Indonesia. The handouts are being closely watched by the country’s election monitoring agency and Indonesia Corruption Watch, which has criticized the influence of money on politics in the world’s third-biggest democracy.

“With or without direct handouts - which are hard to quantify - the campaign season itself, with its party atmosphere filled with unrealistically lofty promises but also realistically tasty treats and giveaways, does help to cushion the blow of higher interest rates,” said Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp, who is unrelated to the Hanura party leader.

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A campaign banner bearing the portrait of Jakarta Governor Joko Widodo, left, the presidential candidate of the Indonesian Democratic Party of Struggle, is carried on a motorcycle during the first week of the campaign for the legislative election in Surabaya, eastern Java island on March 17, 2014. Close

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Photographer: Juni Kriswanto/AFP/Getty Images

A campaign banner bearing the portrait of Jakarta Governor Joko Widodo, left, the presidential candidate of the Indonesian Democratic Party of Struggle, is carried on a motorcycle during the first week of the campaign for the legislative election in Surabaya, eastern Java island on March 17, 2014.

Political parties need to win at least 20 percent of seats in today’s parliamentary vote to be able to nominate their own candidate for the July 9 presidential election.

Poll Favorite

The Indonesian Democratic Party of Struggle or PDI-P, whose presidential candidate is Jakarta Governor Joko Widodo, led a March survey by Roy Morgan, with 37 percent support. The Golkar party, headed by tycoon Aburizal Bakrie, came second with 17 percent, followed by Gerindra and its ex-army general Prabowo Subianto with 14 percent.

“PDI-P has formed a special team to monitor the poll for any violations,” Hasto Kristianto, the party’s deputy secretary general, told reporters in Jakarta today. “The team has found some violations including ghost voters, children or deceased voters that received invitations to vote.”

Gerindra party officials couldn’t be reached for comment on whether voter incentives are offered. Bambang Soesatyo, a parliamentary member and deputy treasurer of Golkar, said he gives voters souvenirs such as caps and never money directly.

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Ex-army general Prabowo Subianto, presidential candidate for the Gerindra party, front left, parades on horseback as he attends a campaign gathering ahead of the legislative elections in Jakarta on March 23, 2014. Close

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Photographer: Adek Berry/AFP/Getty Images

Ex-army general Prabowo Subianto, presidential candidate for the Gerindra party, front left, parades on horseback as he attends a campaign gathering ahead of the legislative elections in Jakarta on March 23, 2014.

‘Dawn Attack’

Distributing party souvenirs or campaign materials such as t-shirts is fine, so long as they aren’t too expensive, said Nelson Simanjuntak, in charge of legal affairs at the country’s Elections Monitoring Agency. Handing out money isn’t allowed, and the organization is investigating violations, he said.

Incentives are commonly offered and have expanded this year, said Ade Irawan, 37, head of Indonesia Corruption Watch, a Jakarta-based non-governmental organization. Handouts will peak today in a “dawn attack,” he said.

Indonesia Corruption Watch’s election observers, who are monitoring attempted vote buying across the archipelago, have seen offers of plant seeds to farmers, insurance for motorbike taxis, prize draws offering freezers if the candidate wins, and even a Muslim Haj trip to Saudi Arabia, said Irawan, who joined the organization as a volunteer in 2001 and previously headed its investigations and political corruption units.

Loans, Insurance

A 2013 survey of voter attitudes by Jakarta-based social research company Polling Center and San Francisco-based The Asia Foundation found 34 percent said they had experienced vote buying, and 38 percent said they would accept money or gifts from candidates in return for their vote.

Hanura’s offers of interest-free loans and insurance were not money politics or breaking anti-corruption rules, said Sarifuddin Sudding, a member of the party, who pointed out that people had to repay the loans. The 5 million rupiah is given to groups of 10 people, who get 500,000 rupiah each, equivalent to about one week’s wages for a unionized Jakarta factory worker.

The free life insurance is for anyone becoming a member of Hanura who can sign up by showing their identification card at the party’s office for the one-year cover from PT MNC Life Assurance, Fauzi said. MNC Life’s policy for Hanura members will pay 1 million rupiah for death due to illness and 9 million rupiah for death from an accident, President Director Patricia Rolla said by phone on April 3. Hanura will pay the premiums for the policies, she said.

Hanura’s vice-presidential candidate is Hary Tanoesoedibjo, the CEO of MNC Group. Tanoesoedibjo didn’t respond to requests for comment by Bloomberg in two calls and two messages to his mobile phone.

Expensive Campaigns

PKS is giving blood tests to people who attend its rallies, member Nurdin said. There is “nothing wrong” with these because the party uses doctors who are PKS members or their family and are not being paid by the party, he said.

The presidential elections will be the third time Indonesians have directly voted for a leader. Parliamentary election voter turnout fell in 2009 to around 71 percent, from 84 percent in 2004 and 93 percent in 1999, according to the International Institute for Democracy and Electoral Assistance’s website.

It’s expensive to campaign across the nation’s thousands of islands, said Paul Rowland, a Jakarta-based political analyst and former Indonesia country director for advocacy group the National Democratic Institute. With little government or grass roots funding, it’s often left to wealthy candidates or their benefactors to pay for campaigns.

Growth Boost

Growth may be 5.7 percent for the full year, compared with 5.5 percent if there were no elections, said Anton Gunawan, chief economist of Bank Danamon and the country’s top economic forecaster according to a Bloomberg Rankings analysis.

“Election spending will help to boost purchasing power,” said Harry Su, head of research at Jakarta-based PT Bahana Securities. He recommends investors buy stocks set to benefit from campaign-related spending, such as PT Unilever Indonesia, maker of Lipton Ice Tea, and pharmaceutical company PT Kalbe Farma, which has a range of energy drinks.

The country’s biggest mutual fund managers by assets, PT Schroder Investment Management Indonesia and PT Manulife Aset Manajemen Indonesia, say consumer companies will be beneficiaries of the campaign. The Jakarta stock exchange’s Consumer Goods Index has rallied more than 11 percent this year.

Pragmatic Voters

Golkar’s Soesatyo said the biggest cost of his campaign was witnesses to rally support and ensure no electoral fraud.

“People tend to be pragmatic,” Soesatyo said in an interview at the parliament in Jakarta. “They choose a party or candidates on the basis that they only respect those who can give them something, so indeed democracy is expensive.”

Each parliamentary candidate will probably need between 5 billion and 30 billion rupiah in total campaign funds, said Corruption Watch’s Irawan.

“Political party and campaign finance is, in my view, the greatest weakness in Indonesia’s democracy,” said analyst Rowland.

To contact the reporters on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net; Neil Chatterjee in Jakarta at nchatterjee1@bloomberg.net

To contact the editors responsible for this story: Lars Klemming at lklemming@bloomberg.net; Stephanie Phang at sphang@bloomberg.net Malcolm Scott

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