Indonesian parties eye post-election coalitions

Indonesia’s political parties are in coalitions talks ahead of a presidential election in July after President Susilo Bambang Yudhoyono’s Democrat Party won the most votes, around a fifth, in an April 9 parliamentary poll.

Former President Megawati Sukarnoputri’s PDI-P and Vice President Jusuf Kalla’s Golkar Party each won about 14% of the votes, early results and quick count results showed.

Indonesian stocks, bonds and the rupiah currency rallied on news of the Democrats’ win, as investors bet that Yudhoyono, a reform-minded former general, will now be re-elected in July and continue market-friendly policies in Southeast Asia’s biggest economy. Investors are watching what sort of coalition he forms because that will affect the pace of reform.

Here are some possible coalition scenarios, in order of the most likely based on the results so far.

Democrats form alliance with Golkar, Islamic parties
Expect business as usual, with fairly market-friendly policies but slow progress with institutional reform.

If Yudhoyono picks Golkar as his main ally, he may either choose Kalla as his vice president again, or could opt for another Golkar politician such as its former chair0person Akbar Tandjung or the Sultan of Yogyakarta, Sri Sultan Hamengkubuwono X Golkar was the long-time political vehicle for Suharto, the country’s late autocratic ruler.

An alliance with Golkar would make it difficult to overhaul the bloated civil service—a Golkar stronghold—or the judiciary and police, areas that have been singled out as needing reform if Indonesia is to attract more investment.

Of those three candidates, the sultan is the most popular and has a reputation for being against corruption.

Democrats ally with PKS
The Islamist Prosperous Justice Party (PKS), like Yudhoyono’s Democrats, have a tough anti-graft stance and have emphasised the need to clean up the bureaucracy. This would allow Yudhoyono a freer hand to fight graft and overhaul the civil service.

Yudhoyono could then either pick his respected Finance Minister, Sri Mulyani Indrawati, a reform-obsessed technocrat, as vice president, or go for former PKS president Hidayat Nurwahid as his running mate.

But a PKS alliance could also lead to more sharia-style laws or policies, such as a controversial anti-pornography law passed last year, further alienating secular supporters and religious minorities.

A Golkar PDI-P alliance
A potentially powerful bloc, representing about 30% of the votes, that could field a presidential candidate against Yudhoyono in July—although with both Megawati and Kalla eyeing the presidency, agreeing on a candidate could prove tricky.

Neither PDI-P nor Golkar has much appetite for reform or attacking vested interests, so if this combination won, expect a negative reaction from the markets and investors.
Even as an opposition bloc it could hinder reform efforts.

A PDI-P Gerindra, Wiranto alliance
Megawati could team up with ex-general Prabowo Subianto’s Gerindra Party, and with former general Wiranto’s Hanura Party, as both of them share some of her nationalist views such as favouring domestic over foreign investment.

Prabowo, who was married to one of Suharto’s daughters, has presidential ambitions of his own, raising the question of who would take the top post and who would be deputy.

He and Wiranto, former enemies, have publicly made up in the interests of a possible political alliance. Both have a poor human rights track record and were close to Suharto, while Megawati lack reforms credentials.

This combination would also be unpopular with markets.

Gerindra forms alliance with small parties
This coalition appears a long shot, but Prabowo has invested time and money in raising his profile and cultivating good relations with a range of parties. He is well-funded, thanks to his tycoon brother, Hashim Djojohadikusumo, and would represent a step back to the Suharto era.

Soetrisno Muchtar, chairperson of the National Mandate Party, held talks last week with Prabowo on an alliance to field a “newcomer”.—Reuters

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