Indonesian president-elect's principles could derail his reforms

Indonesian President Joko Widodo waves to supporters.
Ulet Ifansasti | Getty Images
Indonesian President Joko Widodo waves to supporters.

Two weeks before he is due to take office, Indonesia's president-elect is refusing to compromise his principles by building support in parliament in exchange for plum jobs.

Joko Widodo, the popular former governor of the capital, narrowly won a July election with promises to voters jaded by generations of graft that he would bring effective government free of the old horse-trading among the political elite.

But Widodo has the backing of only 37 percent of members of parliament and without more support he faces a hostile opposition dominated by the old elite that could derail his reform program.

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For now, the first businessman to become president of Southeast Asia's biggest economy and his idealistic young supporters seem unperturbed by the prospect of the reforms falling victim to the principles.

"It's not a problem to have a minority. I had a similar experience in Jakarta and it was not a problem to get things done," Widodo told reporters recently, referring to his term as the capital's governor.

"It's the same at the national level," he said.

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Widodo's direct approach and success in cutting red tape appealed to ordinary voters and investors who welcomed his victory by pushing the stock market up to record highs.

But his support could evaporate if the opposition blocks the changes his supporters expect, all because he refuses to engage in "transactional politics" as the old-style of support in exchange for lucrative cabinet posts is called.

"What Widodo wants to say is that the transactions shouldn't be monetary as they usually are in Indonesia," said Achmad Sukarsono of the Habibie Center think-tank.

"But the consequence is that Widodo would have to deal with a lot of rejection if his policies do not meet with interests of the opposition or if they are not packaged as if they are urgent for the public interest."

The former furniture businessman is due to take office on Oct. 20 and an early test will be getting enough political support to cut fuel subsidies.

Energy subsidies eat up 17 percent of the state budget and leave little room to kick-start the economy by developing much-needed infrastructure.

Read MoreFive reasons Indonesia may hike fuel prices

But opposition parties, most in a loose alliance led by the challenger Widodo defeated in the July election, retired general Prabowo Subianto, are ignoring Widodo's efforts to expand his coalition.

"Jokowi-JK have not offered any political incentive," Romahurmurziy, secretary general of the United Development Party, Indonesia's oldest Islamic party, told reporters recently. Jokowi is Widodo's nickname and JK is vice president-elect Jusuf Kalla.

"They cannot pull together a majority coalition like this," he said, adding that the inability to do so could jeopardize the new government's stability.

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Already Widodo is starting to feel the sting of a hostile parliament. Opposition parties last week installed their members in main parliamentary posts including the speaker, meaning they will likely control the legislative agenda.

Worry that an opposition-dominated parliament will hold up reforms is spilling into an investment community already jittery about a large current account deficit and a weak currency.

The Jakarta stock index fell to its lowest in three months last week as foreign investors pulled out funds because of the political uncertainty.

Read MoreWith Jokowi confirmed what's next for Jakarta stocks?

Prabowo's tycoon brother and top aide, Hashim Djojohadikusumo, told Reuters on Tuesday Widodo would have to compromise: "That's maybe something he didn't expect."

But Hasto Kristianto, a member of Widodo's transition team, said Widodo would head a government "that doesn't compromise when faced with corruption".

"The house leadership is indeed something that we recognize as quite important and strategic, but what is happening in parliament will not shake Jokowi-JK's steps to build a clean government," he said.

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Widodo seems to be banking on the hope that no-one would block reforms to improve areas such as education.

"Our new government is optimistic that management of the country will run smoothly," he told reporters.

"The public and investors should not doubt that we guarantee there will be no problem. There won't be anybody who will reject a program that's for the good of the people," he said.

Read MoreDays of 6-7% growth look distant for Indonesia

But he added he had not shut the door on expanding his coalition: "Politics can change at any second."

Whether such optimism is justified remains to be seen. In the end, he will probably have to compromise to accomplish the things he wants to do, analysts say.

"He is a bit overwhelmed by national politics," said Sukarsono. "Nobody expects him to just suddenly work miracles and clean up Indonesian politics ... He just needs to learn the ropes. It's normal."