Indonesia Minister Rajasa Quits to Take on Widodo Coalition

Hatta Rajasa, Indonesia’s coordinating minister for the economy, resigned to form a coalition with presidential candidate Prabowo Subianto to take on frontrunner Joko Widodo in July elections.

Rajasa, chairman of the National Mandate Party, or PAN, said today there is an alliance between the Islamic party and ex-general Prabowo’s Gerindra for the July 9 election. The Indonesian Democratic Party of Struggle, or PDI-P, today formalized its three-party coalition and its candidate Widodo said he may announce his running mate on May 16.

Widodo may tap former vice-president Jusuf Kalla, paving the way for PDI-P and Kalla’s Golkar party to also cooperate in a more effective government, according to Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp. The rupiah rose the most since March on expectations the main candidates will announce their running mates, reducing political uncertainty in Southeast Asia’s largest economy.

“I am ready to be a vice presidential candidate,” Rajasa told reporters in Jakarta today, after getting the approval of President Susilo Bambang Yudhoyono yesterday.

PDI-P, which has been in opposition for 10 years, won the most seats in April 9 parliamentary elections, getting 109 spots compared to 91 for Golkar, the General Elections Commission chairman Husni Kamil Manik said today. PDI-P’s alliance consists of the National Democratic Party and the National Awakening Party, giving it over a third of votes. A tie-up with Golkar, which was not at PDI-P’s coalition announcement, would have given it nearly 50 percent.

Rupiah Rise

The rupiah increased 0.8 percent to 11,449 per dollar as of 3:26 p.m. in Jakarta, the strongest level since April 21, prices from local banks show. The market is looking for certainty and with two strong pairings emerging there may only be one round of presidential elections, said Dian Ayu Yustina, an economist in Jakarta at PT Bank Danamon Indonesia.

Widodo’s main competitor Prabowo has put together a coalition with Islamic parties representing nearly a third of votes, based on the parliamentary election results. The parliament can propose and pass laws, amend bills and block presidential nominations for roles such as the central bank governor.

A Widodo-Kalla pairing would get the support of 44.2 percent of respondents to a survey by Indikator Politik Indonesia, conducted before the announcement. The survey, which polled 1,220 people from April 22 to 26 with a margin of error of plus or minus 2.9 percent, found 29 percent would choose the team of Prabowo and Rajasa.

Close Race

Even so, “Jokowi’s being out-campaigned at the moment by Prabowo, just as he was during the parliamentary elections,” said Greg Fealy, an associate professor of politics at Canberra’s Australian National University. “Unless Jokowi and his team get their act together soon, this could work out to be a very close presidential election,” he said by e-mail.

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.

Golkar’s chairman and presidential candidate is tycoon Aburizal Bakrie, although it lacks enough votes to nominate him without a coalition. Yudhoyono’s Democratic Party has so far not pledged any allegiances.

Legislative Priorities

“Golkar’s support also indicates that its leader, Aburizal Bakrie, has effectively surrendered his presidential ambitions and that the PDI-P leadership may be preparing the grounds to nominate Jusuf Kalla,” said Wiranto.

Teaming up with Golkar may help Widodo pass legislation if he wins office. He has called in recent weeks for a boost to agricultural output and a gradual cut in fuel subsidies. Lowering subsidies could free funds for the roads, ports and power networks needed to spur investment and create jobs in the world’s fourth-most-populous nation, with economic growth the weakest since 2009.

A Widodo presidency would focus on infrastructure, reforming bureaucracy and encouraging energy investment, to be funded by reduced fuel subsidies and higher tax revenue, Jakarta-based analysts Sarina Lesmina and Jayden Vantarakis at CLSA Asia-Pacific Markets wrote in a research note yesterday after an investor meeting with the governor. He will stick to a 2009 mining law that forms the basis for the country’s Jan. 12 ban on mineral ore exports, they said.

Toll road builder PT Jasa Marga, cement company PT Indocement Tunggal Prakarsa, and state-controlled PT Perusahaan Gas Negara will be among the key beneficiaries if Widodo becomes president, the note said. Regulations that clearly send the message that Indonesia is open for business would be among his 100-day priorities, Widodo said without elaborating, according to the report.

Yudhoyono and Kalla’s government raised subsidized fuel prices in 2008, the first increase in three years. Indonesia has subsidized fuel prices since the 1950s and past price rises led to protests that helped oust dictator Suharto in 1998.

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