March 15 (Bloomberg) -- The governor of Indonesia’s capital won a mandate from his party to run for president, spurring the nation’s stocks and currency as investors applauded the prospect of a Joko Widodo administration.
Widodo, 52, has made infrastructure development and streamlining tax collection centerpieces of his governance, boosting his support in the business community. The Indonesian Democratic Party of Struggle, or PDI-P, the main opposition party, said yesterday it will support him, ending months of speculation over whether the opinion-poll favorite will stand.
“I received a mandate by the chairwoman of the Indonesian Democratic Party of Struggle, Megawati Soekarnoputri, to be the presidential candidate,” Widodo told reporters in brief comments broadcast on Metro TV. He then kissed the Indonesian flag and walked off without taking questions, according to the footage shown on Metro.
Even before his candidacy was announced, Widodo, nicknamed Jokowi, topped a January poll by the Indonesian Survey Circle, ahead of the Golkar party’s Aburizal Bakrie and Gerindra’s Prabowo Subianto. The world’s fourth-most populous nation is scheduled to hold parliamentary elections in April and a presidential vote in July.
“He has to be the number-one favorite,” said Keith Loveard, head of political risk analysis at Jakarta-based security company Concord Consulting. “It’s unlikely any candidate could get anywhere near him.”
The Jakarta Composite Index rose 3.2 percent yesterday, the biggest one-day rally in almost six months, and entered a bull market.
“Investors are flowing into Indonesian equities on the announcement and they are buying liquid stocks with large capitalization like banks,” said Alvin Pattisahusiwa, chief investment officer at PT Manulife Aset Manajemen Indonesia.
Puan Maharani, the daughter of Megawati and the head of the party’s central executive board, announced Widodo’s candidacy yesterday in a televised broadcast in Jakarta. Widodo had said Megawati, a former president, would decide on his candidacy and avoided speaking of national ambitions.
“The biggest challenge for Jokowi is that he’s not his party’s chairman,” Airlangga Hartarto, a member of Golkar’s central executive council, said in an interview yesterday. “If he becomes president he will need to go back to Ibu Megawati to get support, it could be tricky. That’s the hard part. He has to have a vice president who can liaise with other parties to get support.”
Widodo said in a Jan. 21 interview that he plans to boost the capital’s budget by about 75 percent for this year by moving tax collection online to tackle widespread evasion. He may seek to replicate his tax policy across Indonesia, where the ratio of tax to gross domestic product was 11.8 percent in 2011, compared with 17.6 percent for Thailand, according to World Bank data.
“What people are seeing in Jokowi is someone who works, someone who does field visits, hits the ground, tries to remove bureaucratic barriers and reform the government,” said Yose Rizal, founder of politicawave.com, which tracks political discourse on the Internet.
The PDI-P is seeking a boost for its prospects in the April parliamentary polls with the Jokowi news, according to Paul Rowland, an independent consultant and political analyst based in Jakarta who was formerly Indonesia country director for the National Democratic Institute.
“There were legislative candidates who had already put photos of Jokowi on their campaign posters,” he said. “If we believe the polls you’ve now got a front-running presidential candidate in the race and a front-running political party in the race.”
The Jakarta Composite Index’s surge extended an advance from an Aug. 27 low to 23 percent. That’s above the 20 percent level that marks the common definition of a bull market.
Indonesian shares have rallied this year as a pick-up in Southeast Asia’s largest economy, improving corporate earnings growth and the prospect of increased spending before the elections lure international investors. Foreign funds poured $659 million into the country’s stocks yesterday, taking total 2014 inflows to $1.7 billion, data compiled by Bloomberg show.
“This is certainly the most market-friendly scenario in the run-up to the election,” said Mark Capstick, a London-based portfolio manager at BNP Paribas Investment Partners.
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