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Jakarta's divisive election: The key takeaway

  • Ahok's defeat may slow infrastructure projects in Jakarta
  • New governor may be less aggressive in tackling corruption and bureaucracy

Structural reforms in Indonesia's capital city, one of the world's most populous, could slow following the results of a religiously-charged gubernatorial election.

Unofficial results on Wednesday showed former education minister Anies Baswedan of the opposition Great Indonesia Movement Party, or Gerindra, eclipsing incumbent Basuki Tjahaja Purnama, commonly known as Ahok, to be Jakarta's next governor in a tight race that has sparked concerns about religious pluralism in the world's largest Muslim-majority nation.

A more pressing concern for foreign investors, however, is the potential hit to measures introduced under Ahok's term that have helped underline Indonesia's status as an emerging market darling.

Infrastructure

One key fear is Ahok's defeat may slow upgrades to Jakarta's public works — a key element of President Joko Widodo's policy agenda and an issue close to residents' hearts.

Choked roads, electricity shortages and a lack of piped water are among the many public qualms facing Indonesians. And if Southeast Asia's largest economy wishes to maintain economic growth, eradicate poverty and respond to climate change, it needs to invest as much as $1.2 trillion in infrastructure by 2030, a recent Asian Development Bank report warned.

During his term, Ahok championed the president's views and won acclaim by focusing on ways to combat urban congestion, such as the construction of subway lines and the restriction of motorcycles in certain areas.

But Baswedan, whose campaign largely focused on poverty reduction, private sector involvement and job creation, has placed less emphasis on infrastructure development, explained Eurasia analysts in a Thursday note.

"Many of the city's major infrastructure projects could be affected if the new governor provides less competent political oversight and remains less eager to help Jokowi on his key economic priority."

Supporters of new Jakarta Governor Anies Baswedan supporters celebrate his electoral victory by marching and lighting firecrackers in the Indonesian capital city on April 19, 2017.
Donal Husni / NurPhoto / Getty Images
Supporters of new Jakarta Governor Anies Baswedan supporters celebrate his electoral victory by marching and lighting firecrackers in the Indonesian capital city on April 19, 2017.

The support of Jakarta's governor is seen as essential for Widodo, nicknamed Jokowi, to pass landmark projects in the capital.

Baswedan isn't expected to halt or reverse existing programs, but the pipeline of future activities could slow, Eurasia added.

Bureaucracy

Ahok, known for his straight-talking style that often didn't sit well with political elites, was also active in shaking up Jakarta's bureaucracy — a move welcomed by businesses.

"The approach that Ahok used in his government style, which led to many breakthroughs and got action done, won't continue," warned Kevin Evans, Indonesia director at the Australia-Indonesia Center.

Extraordinary energy is required to push past the various special interests and blockages in Indonesia's political system, and the city won't continue to see that kind of energy under the new leader, said Evans, who called Baswedan "a man of consensus."

Ahok's gubernatorial loss was widely attributed to blasphemy charges that overshadowed other policy issues on the campaign trail. Backed by Jokowi's ruling Democratic Party of Struggle (PDI-P), the Chinese-Christian politician is due to appear in court Wednesday and could face a prison sentence for allegedly insulting the Koran.

"Baswedan will be less aggressive than Ahok in tackling corruption and which made the latter popular with residents," Eurasia warned. "That will weaken the positive example the capital city has been setting for the rest of the country in recent years."

'Stay calm'

Some analysts warned not to read too much into Wednesday's results.

Incoming Jakarta governor Anies Baswedan
ADEK BERRY / AFP / Getty Images
Incoming Jakarta governor Anies Baswedan

Goldman Sachs, for one, doesn't believe Ahok's defeat will weaken Indonesia's reform momentum. Close to 50 percent of the seats in the national parliament are currently occupied by Jokowi's coalition, so the president still has enough support to pass sensitive reforms, the investment bank explained in a note.

Others said it was simply too early to jump to conclusions.

Baswedan is only due to take over in October, so if it's still business as usual by then, investors will continue to like Indonesia for its strong consumer story, according to Song Seng Wun, economist at CIMB Private Banking.

The campaign trail was rocked by aggressive anti-Ahok protests organized by hard-line Muslim groups, but no more street demonstrations are expected going forward.

"With the election behind, I feel these emotions will ebb. I'd be surprised if this was driven to a point of endless controversy," observed Cameron Hume, former U.S. Ambassador to Indonesia.