Widodo’s Party May Seek Nationalist Indonesia Coalition Partner

The party of Indonesian presidential frontrunner Joko Widodo said it is open to a coalition with nationalist groups after unofficial parliamentary-election results indicated it lacks support to nominate the nation’s next leader by itself.

Stocks and the rupiah dropped after Widodo’s Indonesian Democratic Party of Struggle, or PDI-P, took 19.6 percent of the votes in elections yesterday, based on a tally by Lingkaran Survei Indonesia. That is about half the level projected in a March poll. Formal results won’t be declared until May 9.

Because of election laws, Widodo, 52, may need an alliance in order to stand in July’s presidential election, limiting his ability to carry out policy changes in Southeast Asia’s largest economy. PDI-P is waiting for the official figures before forming coalitions, said Effendi Simbolon, a chairman of the party’s central executive council.

“We still hope we can meet the threshold to nominate directly, but if it turns out that we can’t, then we’ll form a coalition with nationalist parties,” Simbolon said on the sidelines of a political talk show in Jakarta today. Asked about the ideal number of parties in a coalition, he said “enough to meet the minimum requirement for us” to nominate a president.

Indonesian stocks had the biggest drop since August and the rupiah slid the most in three weeks as estimates by polling companies showed the PDI-P got less of the vote than investors had anticipated. Markets had rallied on expectations Widodo will win in July and boost investment in an economy that grew at the slowest pace in four years in 2013.

‘Clearly Negative’

The rupiah fell 0.6 percent against the U.S. dollar, its biggest fall since March 20, according to prices from local banks. The benchmark Jakarta Composite stock index fell 3.2 percent at close, the most in seven months. PT Astra International (ASII), the biggest company in the Jakarta gauge by market value, declined 6.2 percent, the biggest drop since Sept. 24.

The election estimates are “clearly negative,” said Allan Conway, head of emerging-market equities at Schroder Investment Management. “In the short term there’s got to be room for disappointment,” Conway said in an interview in London. Schroder is underweight on Indonesia, he said.

Even so, the parliamentary outcome may not adversely affect Widodo’s popularity in the presidential vote, according to Marcus Mietzner, an associate professor at the Australian National University in Canberra.

Golkar, Gerindra

“The dynamics of the presidential race itself remain unchanged,” Mietzner said by e-mail. Exit polls taken during the parliamentary voting “demonstrated that Jokowi would have won the elections with a large margin,” he said, referring to the Jakarta mayor by his nickname.

A Roy Morgan poll in March had Widodo as the preferred presidential choice of 45 percent of voters, 30 percentage points ahead of his closest contender, former general Prabowo Subianto.

Among other parties in the parliamentary elections, Golkar, the party of tycoon Aburizal Bakrie, 67, had 14.6 percent of the vote and Gerindra, whose candidate for president is Prabowo, 62, had 11.9 percent, according to LSI. The Democratic Party of outgoing President Susilo Bambang Yudhoyono stood at 9.7 percent, it said. Yudhoyono, who is unable to stand again after two terms, governs with a coalition of five other parties.

LSI had monitors at polling stations and said 99 percent of the vote had been counted. Other post-election surveys echoed that outcome.

Aligning Parties

Widodo indicated late yesterday that he may have to align with other parties in order to be able to stand for president in the world’s third-largest democracy.

“We don’t want to talk about coalitions, we want to talk about cooperation to resolve the big problems of this big nation,” Widodo said on Metro TV. He was then joined in a panel by former vice-president Jusuf Kalla of Golkar, State-Owned Enterprises Minister Dahlan Iskan, of the Democratic Party, and Jakarta Deputy Governor Basuki Purnama, of Gerindra.

Under Indonesian election rules there are two ways for a party to run a presidential candidate by itself. It needs to capture 25 percent of the popular vote in the parliamentary elections, or it needs to win 20 percent of the 560 parliamentary seats.

The chances for a coalition of the PDI-P and the Democratic Party coalition are slim because of different views, the PDI-P’s Simbolon said. Even though the PDI-P isn’t against foreign investors, “we are not pro-liberal and free market.”

Coalition Scenarios

Gerindra meanwhile is open to joining the Democrats, Gerindra General Chairman Suhardi, who goes by one name, said in Jakarta today, describing Prabowo’s relationship with President Yudhoyono as close.

The Nasdem Party and the National Awakening Party, known as the PKB, are natural allies for PDI-P, according to ANU’s Mietzner.

The result shows an absence of the “Jokowi effect” that may have come because PDI-P didn’t do a good enough job of associating him with the party, said Paul Rowland, a political analyst based in Jakarta who was formerly Indonesia country director for the National Democratic Institute, a non-government advocacy group. “It would be a serious disappointment for them if they fall short of 20 percent of the seats in the house.” Rowland said.

More than 185 million people were eligible to vote yesterday for the 12 parties contesting across the archipelago. It was the fourth election since the downfall of dictator Suharto in 1998.

The parliamentary make-up after the election will “still look rather ‘Balkanized’, increasing the chance that any coalition which comes into power may consist of an unwieldy group of parties, rather than just two or three with reasonably similar political platforms,” Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp., said in an e-mailed comment.

“One reason why the outgoing administration has had a rather lackluster term in office is due to the multi-party ‘Rainbow Coalition’ that it has had to maintain in the parliament, which proved to be a drag on the pace of economic reforms,” Wiranto said.

To contact the reporters on this story: Neil Chatterjee in Jakarta at nchatterjee1@bloomberg.net; Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net Dick Schumacher

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