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Prabowo Taps Golkar for Indonesia Coalition Before July Vote

May 20 (Bloomberg) -- Indonesian presidential candidate Prabowo Subianto formed a coalition with the country’s second-biggest party, complicating the task for frontrunner Joko Widodo if he wins the July election.

Prabowo announced the deal for Golkar to join an alliance with his Gerindra party hours after Widodo tapped former vice president Jusuf Kalla as his running mate for the presidential ballot on July 9. The agreement confounded expectations Golkar would tie up with Widodo’s Indonesian Democratic Party of Struggle, or PDI-P. Stocks and the rupiah declined.

Widodo, 52, has been finalizing his coalition for the ballot to lead Southeast Asia’s largest economy, getting the support of three other parties. In naming former Golkar chairman Kalla as his running mate, Widodo gains an experienced hand who can help him steer economic changes through parliament if he wins in July. Still, the Gerindra-Golkar tie up could leave that coalition with about 292 seats, a majority of the 560-member parliament.

“The market wants to first digest the development of Golkar siding with Gerindra,” said Jeffrosenberg Tan, who helps manage $437 million in funds for Sinarmas Asset Management. Widodo “will still need support from the parliament,” he said. “The concern is that the government won’t be that strong, and may have difficulties passing laws.”

The Jakarta Composite Index fell 2.4 percent, the biggest decline in more than a month. The rupiah dropped 0.6 percent to 11,490 per dollar, according to prices from local banks.

‘Own Choice’

A Widodo government “will face a strong opposition at the parliament,” said Yose Rizal, founder of politicawave.com, which tracks political discourse on the Internet. “Gerindra doesn’t get Golkar entirely because JK, who’s one of Golkar’s senior figures and with his own supporter base, is siding with Jokowi,” he said, referring to Kalla by his initials and Widodo by his nickname.

It’s up to Golkar members if they support PDI-P or the broader party in its alliance with Prabowo, according to Kalla.

“Golkar members have their own choice,” he told reporters today in Jakarta. “If you’re a Golkar person who would you rather choose? Your former chairman or” other parties?

President Susilo Bambang Yudhoyono’s Democratic Party, which won 61 seats in parliament, won’t “formally join” either coalition, Syarifuddin Hasan, the party’s executive chairman, told reporters in Jakarta today.

Listening to People

The Widodo-Kalla pairing is expected to get the support of 44 percent of voters, based on a survey by Indikator Politik Indonesia conducted before the announcement.

People said that Widodo has limited experience and “needs a partner who has a more detailed understanding of the political situation and conditions,” Tjahjo Kumolo, secretary general of Widodo’s PDI-P party said in an interview in Jakarta. “When we decided Jokowi and Jusuf Kalla for the next president and vice president, it not only comes from the four parties, but we’re listening to what the people want.”

The rupiah has been the best performer this year among 11 major Asian currencies tracked by Bloomberg, amid expectations Widodo will accelerate infrastructure construction and curb fuel subsidies.

“The two of us will bring a movement of change to this country we love,” Widodo said in Jakarta yesterday as he announced Kalla as his vice presidential candidate. He said the decision was made after consulting the alliance partners of PDI-P, as well as PDI-P chairwoman Megawati Soekarnoputri.

Red Cross

Kalla, 72, a businessman and chairman of the Indonesian Red Cross Society, was vice president during the first term of President Yudhoyono. Together they lifted subsidized fuel prices in 2008, the first increase in three years. Widodo will aim to gradually reduce fuel subsidies, which act as a drag on the state budget, over four years, he said in an interview on May 3.

“Jokowi-JK is the right combination,” Djayadi Hanan, a political analyst from the University of Paramadina in Jakarta, said by phone. “JK can complement Jokowi’s weaknesses in terms of economic and international policies, and government experience.”

PDI-P, which has been in opposition for 10 years, won the most seats in the April parliamentary vote, getting 109 spots against 91 for Golkar. PDI-P’s alliance consists of the National Democratic Party, the National Awakening Party and Hanura.

Finding ‘Chemistry’

Golkar did not win enough votes or seats in the parliamentary ballot to nominate chairman Aburizal Bakrie as a presidential candidate. The party has found “chemistry” with Gerindra and will join its coalition, Nurul Arifin, deputy secretary general at Golkar, said yesterday.

Prabowo’s running mate will be Hatta Rajasa, who resigned last week from the government as coordinating minister for the economy to focus on the presidential election. Prabowo’s coalition includes some Islamic parties as well as Golkar.

The Indikator Politik Indonesia survey, which polled 1,220 people from April 22 to 26 with a margin of error of plus or minus 2.9 percentage points, found 29 percent would choose a team of Prabowo and Rajasa.

Presidential candidates need at least 50 percent of the vote in the world’s third-largest democracy, with at least 20 percent of votes in each province in more than half of the country’s provinces. If they fall short they will face a second round election in September.

To contact the reporters on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Novrida Manurung in Jakarta at nmanurung@bloomberg.net

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

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