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23 April 2014 | Vol. 5, № 13.
From the Editor’s Desk
Dear FDI supporters,
Welcome to the Strategic Weekly Analysis.
Future Directions International Senior
Visiting Fellow, Professor Lindsay Falvey,
has very kindly offered a free copy of his
latest book to the first 20 people who
contact him directly at
[email protected]. Titled Beliefs
that Bias Food & Agriculture: Questions I’m
Often Asked, the book answers ten
questions, covering such topics as why
livestock are critical to food security, why
free trade and markets can’t solve food
shortages and why aid shouldn’t insist that
poor countries follow our model.
Turning to this week’s coverage, we begin
with a look at how Pakistan might perceive
a government headed by Narendra Modi,
the man widely tipped to be the next Prime
Minister of India. On the subject of the Lok
Sabha elections that are currently underway
across India, we report on the staggeringly
high numbers of candidates who have
criminal charges pending against them.
In Africa, we evaluate the potential of the
African Solidarity Trust Fund to be a vehicle
for greater regional empowerment and
co-operation. We then look at Kenya, in
light of that country’s likely graduation to
lower middle-income status. We assess
some of the benefits that might bring, along
with some of the potential impediments to
the government’s ambitious plans.
Moving south, our next article takes us to
Madagascar, where efforts to counter a
devastating locust plague in the food-
insecure country have taken a step forward,
with the introduction of a fixed-wing
spraying aircraft.
From South-East Asia, we consider the
failure of the Thai Government’s rice
subsidy scheme, which has seen Thailand
lose its status as the world’s top rice
exporter. This week’s edition concludes with
an analysis of the evolving political and
business environment in Indonesia in the
wake of the recent parliamentary election.
I trust you will enjoy this edition of the
Strategic Weekly Analysis.
Major General John Hartley AO (Retd) Institute Director and CEO
Future Directions International
Page 2 of 14
*****
Narendra Modi as PM: Pakistan’s Perspective on Prospects for
Indo-Pak Relations
Leading Indian Prime Ministerial candidate Narendra Modi is a polarising figure. In
Pakistan he is perceived as anti-Muslim, which could cause Indo-Pak relations to
deteriorate.
Background
As India goes to the polls in April and May 2014, it is perhaps timely to review Narendra
Modi’s likely policies, viewed from the perspective of Pakistan. Modi, the Prime Ministerial
candidate of the Bharatiya Janata Party (BJP), is of keen interest to Pakistan due to his
reputation as a right-wing Hindu hardliner, gained over many years, thanks to his opinions
and a long, controversy-filled tenure as Chief Minister of the state of Gujarat.
Comment
With a history of bellicosity towards both Pakistan and Indian Muslims, Modi was widely
blamed for turning a blind eye to the Hindu-Muslim riots in Gujarat in 2002, which killed
between 900 and 2,000 people. The government and people of Pakistan clearly remember
his alleged involvement in those events and that is bound to have an impact on the future
relationship between India and Pakistan if Modi is elected as the next PM.
The BJP’s manifesto, which was released this month, has not assuaged Pakistan’s concerns.
The 52-page document included a possible revision of India’s “No First Strike” nuclear policy,
which states that India would not be the first to use atomic weapons in any armed conflict.
So far, Pakistan has not shown any major concern about Modi’s popularity. Its National
Security Adviser and Acting Foreign Minister, Sartaj Aziz, this month claimed that his country
will ‘deal with’ the next leader of India, whether it is Modi of the BJP or his Congress Party
rival. Mr Aziz is a member of the ruling Pakistan Muslim League, the Nawaz (PML-N) party.
He noted that in 1999 when a previous BJP leader, Atal Bihari Vajpayee, was Prime Minister,
he actually visited Pakistan to talk peace. Mr Aziz said, ‘I think before an election, politics is
slightly different, more nationalistic and so on, but after elections you handle state affairs.’
While this sums up the basic reality, it also raises the question of whether the hard-line
statements from Modi and the BJP during the election campaign are a true representation of
the party’s future policies towards Pakistan.
India and Pakistan have fought four wars since their separation in 1947, proving that
relatively minor skirmishes between the two nuclear-armed neighbours can escalate with
minor provocation. The BJP manifesto also mentions revoking Jammu and Kashmir’s special
status as an autonomous state. Any attempt to tamper with Kashmir will have an immediate
counter-reaction in Pakistan, which views the territory as its own. If that happens, New
Delhi’s relationship with Islamabad will swiftly deteriorate. As a drawback to Indian
democracy, Modi’s history and reputation in Pakistan will overshadow the very minor level
Page 3 of 14
of positive sentiment that the Pakistani people have gained for India. Modi will find it
extremely difficult to change how he is perceived in Pakistan, where religious history is
seldom taken lightly.
On the positive side, it is important to note that during his tenure as Chief Minister, Modi
was quite successful with his economic policies, which was recognised even in Pakistan. In
2011, the Karachi Chamber of Commerce and Industry, impressed with the development of
Gujarat, invited Modi to visit Pakistan and address prominent business leaders. At the time,
Modi wanted to help Pakistan out of its power crisis, especially in Sindh. While the idea is
possibly highly optimistic, if elected Modi could create better economic opportunities than
his predecessors for Pakistan and further Indo-Pak economic ties.
While there are strong indications that a BJP-led government will be less patient with
Pakistan than its predecessor, Prime Minister Vajpayee did initiate peace talks with Pakistan
in 1999. Modi can reasonably be expected to act similarly. The real test for the BJP's
patience, however, will come if there is a terrorist attack in India with links to Pakistan. Modi
has been openly critical of the Congress Government’s supposed soft approach towards
Pakistan when it comes to terrorism. Modi and other BJP leaders will be under heavy
pressure if faced with terrorist provocation.
The current general election, from 7 April to 12 May 2014, is the longest in India’s history.
With results anticipated around 16 May, a few more weeks of strong patriotic statements,
carrying the potential to aggravate sentiments in Pakistan, would not be surprising.
Jahangir Qazilbash Research Assistant Indian Ocean Research Programme
*****
Voting for the Criminal Element in the World’s Largest
Exercise in Democracy
While there is little doubt as to the fairness of the Indian electoral process, it is difficult to
ignore the fact that alleged criminals are being voted into positions of power.
Background
India is currently in the process of conducting the world’s largest election. An estimated (and
staggering) 814 million voters, including approximately 100 million young adults who are
eligible to vote for the first time, will choose the next Government of India. The Election
Commission of India has been at pains to ensure that the election process is both fair and
lawful.
Page 4 of 14
The election will be held in nine phases, extending from 7 April to 12 May, to take into
consideration regional festivals, school holidays, and the harvest and monsoon seasons.
Voters will cast their ballots at 930 thousand polling booths across the country, aided by
close to four million staff. In keeping with the constitution, voters will not have to travel
more than two kilometres to cast their vote. To add to the spirit of democracy, voters will,
for the first time, have the option of ticking “none of the above” if they choose not to vote
for any candidate. This is as much an exercise in sheer logistics as it is in absolute
democracy.
Comment
For all its efficiency and expertise, the Election Commission cannot control one major aspect
of the election process: the nature of the candidates who hope to be elected. The Supreme
Court ruled last year that individuals charged with serious offences are not eligible to stand
for election for six years, even if those charges were being appealed. Despite this ruling, it
appears that virtually every political party has had no hesitation in choosing as their
candidates individuals who, if convicted, face more than five years in jail.
The Association for Democratic Alliance (ADR), an advocacy group, has shown from
information provided by the candidates in mandatory declarations, that 34 per cent of the
BJP’s 202 candidates and 23 per cent of the ruling Congress Party’s 193, have criminal cases
pending against them. The leading parties are not alone, however. A full 16 per cent of the
Aam Aadmi Party (Common Man’s Party or AAP), which rose to prominence on an anti-
corruption plank, faces criminal charges. Also, as the ADR has observed, 93 per cent of the
BJP candidates and 96 per cent of those from the Congress have assets in excess of ten
million rupees (approximately US$165,000), in a country where the majority of the
population subsists on less than US$2 per day.
These figures, moreover, are not limited to any particular region. In the key state of
Karnataka, where the BJP hopes to reverse its losses to the Congress, nine of its 28
candidates (or 32 per cent) face criminal charges. This figure is matched by the Janata Dal
(Secular) (JDS) Party, whose 25 candidates include eight who face criminal charges. The
Congress fares slightly better here; it only has six candidates (21 per cent) who have criminal
charges pending against them. While the BJP candidates are usually charged with rioting and
creating enmity between communities (read Hindu-Muslim), the main charges against
Congress candidates are cheating and land grabs.
Members of the BJP who have cases pending against them include the former Chief Minister
of Karnataka, BS Yeddyurappa, State President Prahlad Joshi and B. Sriramulu. Yeddyurappa
faces nine charges of cheating, falsifying documents, forgery and breach of trust. Joshi is
charged with provoking enmity between communities, based on religion, with the intent to
cause riots and Mr Sriramulu faces eight charges of causing injury using dangerous weapons,
rioting and intimidation.
Not to be outdone, the former Congress Chief Minister, Dharam Singh, is charged with
forgery, cheating and land grabs. Another Congress minister, DK Shivakumar, and his
brother, Suresh, are charged with encroaching on forest land and running a massive (and
Page 5 of 14
illegal) granite quarry. The candidates from Bijapur in the state’s north and Bangalore
Central are both individually charged with wrongful restraint, unlawful assembly,
intimidation and the use of lethal weapons to cause grievous harm.
In the eastern state of Odisha, 39 of the 77 Congress candidates face criminal charges. Also,
the ruling Biju Janata Dal has fielded 34 candidates with a criminal background and the
opposition BJP, 29. One candidate of the newly-formed Aama Odisha Party faces 70 criminal
charges, including theft, intimidation, attempt to murder, attempting to deter a public
servant by causing hurt and damaging public property. Of the 747 candidates, 186 have
either been charged or have criminal charges pending against them. These charges include
crimes against women, rape, kidnapping and murder, according to Ranjan Mohanty, the
State Co-ordinator of Election Watch.
Across India, 83 per cent of the 287 Congress candidates, 74 per cent of the BJP’s 279 and 44
per cent of the AAP’s 291 candidates declared assets that, together with those of candidates
from other parties, averaged close to US$750,000.1
It is difficult to see how the endemic corruption that pervades Indian society can ever be
curtailed, if the vampires are elected to manage the blood bank.
Lindsay Hughes Research Analyst Indian Ocean Research Programme [email protected]
*****
African Fund to Boost Solidarity alongside Food Security and
Development
The African Solidarity Trust Fund, while still in its fledgling stages, presents an opportunity
for regional empowerment and co-operation.
Background
The African Union has declared 2014 as its Year of Agriculture and Food Security, identifying
African-led policy coherence as a key priority. In March this year, the UN Food and
Agriculture Organization (FAO) signed agreements with six African nations to improve food
security across the continent. Funding is coming from an inaugural release of monies from
1 Association for Democratic Reform, 19 April 2014, ‘Consolidated Analysis (Phases 1 to 6) of Criminal
and Financial Background Details of Contesting Candidates in Lok Sabha 2014 Elections’. <http://loksabha.adrindia.org/lok-sabha/consolidated-Analysis-Phase-1-to-6-of-Criminal-and-Financial-background-details-contesting-candidates>.
Page 6 of 14
the African Solidarity Trust Fund, a reserve created by African contributors to support
regional development.
Comment
The African Solidarity Trust Fund was initiated in 2012, by the Republic of Congo President,
Denis Sassou Nguesso. The fund is unique in that, aside from administrative assistance from
the FAO, it is facilitated by African countries to support regional food security and
development projects. The fund was launched in 2013, with an initial contribution of US$30
million from Equatorial Guinea; more recent contributions from Angola and a group of civil
organisations from the Republic of Congo, have brought total reserves up to US$40 million.
Six countries have so far been selected by the FAO to receive funding. The Central African
Republic, Ethiopia, Malawi, Niger, Mali and South Sudan each signed agreements during the
FAO Conference for Africa in Tunis this year. They will each receive an initial allocation of
US$2 million. These funds will be used to support existing development projects that
improve livelihood resilience, financial services for agribusiness, agricultural technology and
sustainable farming practices in rural communities.
Co-operation in developing the fund is an indication of a budding collectivism in the African
region. FAO Director General, Jose Graziano da Silva, has praised the effort as showing that,
‘African countries are ready to step up and work with their neighbours to build a sustainable
and food secure region and to have the future they want’. The creation of the African
Solidarity Trust Fund represents a breakdown of the traditional aid model of Northern
resource partners funding Southern beneficiaries. This is enormously empowering for the
African community.
Regional cohesion in Africa is not going to happen overnight. The continent is riddled with
corruption and internal conflict; issues that are likely to block effective progress and the
transparent implementation of trust funds. Nonetheless, the fund is a step in the right
direction for Africa. With only US$40 million currently available in reserves, its real value is
symbolic, as it is too under-resourced to represent any substantive change. The FAO seems
to be taking a conservative approach towards utilising trust monies, with allocations being
used to scale up existing grass-roots projects with a proven degree of success.
The development of the African Solidarity Trust fund is only one step on a long path to
building a food secure Africa, but it is a step in the right direction. Regional collaboration in
designing and implementing the fund, shows a collective will to address cross-border food
security. Successful implementation and management of the fund will boost regional
confidence in tackling difficult issues more collaboratively.
Tess Marslen Research Assistant Global Food and Water Security Research Programme
*****
Page 7 of 14
Kenya to Become a Middle-Income Country
Kenya is expected to achieve lower middle-income status next month, after Nairobi revised
its GDP estimate to US$50 billion, putting it in a better position to attract foreign
investment.
Background
After recently revising its economic figures with the assistance of international donors,
Kenya is expected to achieve the status of a lower middle-income country. The revised
figures take into account its booming banking, telecommunication and entertainment
sectors, which had been excluded from past estimates of Gross Domestic Product. Becoming
a middle-income country should make Kenya more attractive for foreign investors.
Comment
Economic growth in Kenya is currently fostered largely by domestic consumption; private
loans account for more than a third of all loans granted by Kenyan banks, sales of consumer
goods are increasing and mobile phone subscriptions are numerous enough to cover the
entire adult population. This level of consumer spending suggests that Kenya is on its way to
becoming a lower middle-income country and that future economic growth will increasingly
have to come from external sources.
Compared to the other low-income countries in the sub-Saharan region, Kenya is
underperforming economically. The economies of low-income countries, on average, grew
at a rate of 6.5 per cent in 2013. Kenya, on the other hand, had a growth rate of 5.6 per cent.
But, when compared to sub-Saharan Africa’s middle-income countries, whose average rate
of growth was three per cent, Kenya performed well.
Middle-income countries generally attract greater levels of foreign direct investment,
particularly in telecommunications, banks and food companies. Kenya currently receives
assistance from international institutions, such as the IMF and the World Bank, to finance
development projects. By becoming a middle-income country Kenya will become capable of
applying for larger loans to fuel its development. In the longer term, becoming a middle-
income country is more likely to attract the kind of foreign investment that would allow it to
avoid the need for such loans.
As a frontier economy, Kenya still needs to invest heavily in development projects. Although,
according to the World Bank, the level of poverty has dropped from 47 per cent in 2005, it
still remains between 34 and 42 per cent. Unemployment is a major hurdle that will need to
be overcome, if poverty is to be further reduced. The population is expected to grow from
43 million to 67 million by 2030, during which time 27 million new jobs will have to be
created. For this to be achieved, foreign investors must be enticed into the country.
Improving Kenya’s infrastructure, especially energy distribution and transportation, will aid
in attracting that foreign investment and encourage private sector-led development.
The Kenyan economy is expected to grow by 6.3 per cent this year, on the back of
investment in the information and communications technology (ICT) sector. The Kenyan
Page 8 of 14
Government has just relaunched its five-year ICT master plan. According to the plan, by
removing barriers and adopting a whole-of-government approach, the ICT sector is to create
180,000 new jobs, account for eight per cent of GDP by 2017 and turn Kenya into Africa’s
leading information technology centre. If the recent oil and gas discoveries in Kenya prove
commercially viable, these too will boost the economy. Kenya, however, faces competition
from other East African states, such as Mozambique and neighbouring Tanzania, in the oil
and gas sector.
Impediments to economic growth remain, however, and are most likely to stem from
political and social unrest. Security is a key concern after the bombing of the Westgate
shopping mall in Nairobi in 2013. Concerns about the security of the country are also likely
to deter foreign investors and limit economic growth.
The Kenyan economy could be poised to become the fourth-largest economy in sub-Saharan
Africa. By becoming a middle-income country, it will be better able to attract further foreign
investment, thereby decreasing its reliance on loans from international institutions.
Mervyn Piesse Research Assistant Indian Ocean Research Programme
*****
Battle Continues against Locust Plague in Madagascar
Work by the UN Food and Agriculture Organization, to control the locust plague wreaking
havoc in Madagascar, has been boosted with the introduction of a fixed wing spraying
aircraft.
Background
In May last year, Future Directions International analysed the impact of a locust plague on
food security in Madagascar. At the time, the locusts had already damaged 40 to 50 per cent
of the rice and maize crops in certain areas. The situation appeared dire, with funds required
to initiate a control campaign by the FAO falling short. Fortunately, in September 2013 the
FAO was able to commence a comprehensive campaign aimed at controlling the spread of
the locusts and alleviating the food insecurity threatening as many as 13 million people.
Comment
The FAO recently announced that, in the first 20 days of March, it was able to treat an
additional 167,000 hectares of land against the spread of locusts in Madagascar. This was
made possible by the addition of a fixed wing spraying aircraft, which opened up areas
previously inaccessible to its three-helicopter fleet. This increase in speed and efficiency has
been crucial in preventing further destruction in as-yet unaffected areas.
Page 9 of 14
In practical terms, the FAO locust campaign stands to make a very real and practical
difference to millions of Madagascar’s population, who are at risk of hunger due to crop
devastation. In Madagascar, rice is the most important staple, eaten three times a day by
most people. A single hectare that is successfully treated against locusts can yield enough
rice to feed almost 60 people for one year. To put this into perspective, the FAO plans to
treat up to 150 million hectares in total. The programme – if successful – therefore has the
potential to spare millions from hunger.
In the meantime, the locust plague remains dynamic. Depending on humidity levels, the
ability of eggs to hatch and for winged insects to spread, has waxed and waned in different
regions since the last analysis by FDI. This means that an additional crop has since been lost
and that more still will likely be lost before the plague is under control. The threat therefore
remains elevated and continues to exacerbate food insecurity.
The current state of food security in Madagascar led the World Bank to approve a US$65
million emergency fund in February 2014. Intended to improve food security, the assistance
will, in the short-term, enable food delivery to vulnerable children and pregnant or lactating
women in the most food insecure regions. A crucial factor is the delivery of food aid to the
districts of Betioky and Ampanihy, epicentres of the current locust plague. In the long-term,
the money will fund safety nets designed to improve farmers’ resilience to the natural
catastrophes that regularly plague Madagascar.
Since democratic elections were held in December 2013, Madagascar has resolved to
recover from the past five years of political instability, which reduced the country’s ability to
prepare for, and respond to, natural disasters. At present, food security for the people of
Madagascar, however, is still unattainable because crop recovery is yet to occur and the
locust plague still presents a threat. To assist Madagascar in its nascent recovery, external
assistance is required, not only to deal with the current food crisis, but also to fund
strategies to increase farmers’ resilience in the face of inevitable future natural
catastrophes.
Jinny Collet Research Assistant Global Food and Water Crises Research Programme
*****
Thailand’s Failed Rice Subsidy Scheme: The Final Blow for
Prime Minister Shinawatra?
Thailand has lost its position as the world’s top exporter of rice – a position held for three
decades – after a bungled government subsidy scheme involving speculation over rice
Page 10 of 14
prices. Slow repayments to Thai farmers have created dissent among Prime Minister
Yingluck Shinawatra’s traditional base in the north and bolstered fervent opposition
amongst opponents of the Phau Thai party.
Background
The Thai Government’s disastrous rice subsidy scheme has created a US$13.9 billion hole in
the domestic economy, amounting to 3.6 per cent of the country’s GDP (2013). A decline in
rice prices of up to 15 per cent at the end of 2013, has left the government with no choice
but to sell its perishable stockpiles at reduced rates. Prime Minister Shinawatra’s position is
on the line as she faces judgement at the corruption judiciary in May over the rice scheme,
which could see her banned from politics for five years.
Comment
Government rice stockpiling reached double the volume of Thailand’s annual rice trade – 18
million tonnes – in the last quarter of 2013. Thai traders’ attempts to create an artificial
supply limit in 2012 and 2013, have allowed other countries, such as India and Vietnam, to
fill the gap in global supply. The scheme has been a fiscal disaster for the caretaker Prime
Minister. A spokesman for the People’s Democratic Reform Committee (PDRC), an
opposition political pressure group, argues it would be impossible for the government to pay
all rice farmers; the Thai Government now relies on bank loans to partially recompense one
million farmers for overdue payments of US$3.6 billion.
The subsidy scheme was originally designed in 2011 to benefit rice farmers, who form a
large portion of the electorate. Poor rice farmers were to benefit as the government took
their produce, at approximately double the market rate, US$457 per tonne. The aim was, in
turn, to stimulate domestic demand. The government, as the world’s largest exporter,
planned to withhold supplies, intending to drive prices up – thereby compensating the
government for its gamble.
The gamble did not pay off, however. Decreasing prices encouraged further stockpiling,
causing rice exports to plummet by more than three million tonnes. India overtook Thailand
as the world’s leading exporter, trading 9.03 million tonnes in 2013. Thailand was only
slightly ahead of Vietnam, exporting 6.72 million tonnes to Vietnam’s 6.7 million. The Thai
Government is now left with a glut of supply, forcing many farmers to sell produce almost
one-third cheaper than at pre-subsidy prices.
The scheme’s failure could lead to substantial economic ramifications for Thailand’s rice
industry, if the stockpile cannot be sold off. A recent increase in demand for rice may assist
the recovery, as Thailand seeks to lock in government-to-government deals to sell off the
remaining stockpile of ten million tonnes. The government will still face a hefty loss,
however, because some of the rice is of low quality, due to long-term storage, and stocks of
sub-standard rice illegally traded from Burma/Myanmar have also reduced stock value.
Thailand must sell its remaining stockpile, otherwise quotes for Thai rice will continue to
decline, prolonging the financial strain on local farmers.
Page 11 of 14
Deadly protests over the scheme, perceived as a practice of “vote buying” amongst the
government’s voter base in the north, highlight the civilian discontent with the government.
The Prime Minister will soon face the National Anti-Corruption Commission (NACC), charged
with dereliction of duty over the scheme. The allegations claim she ignored warnings that
the scheme fostered corrupt practices between traders and government officials. Pheu Thai
supporters, however, allege that the NACC has links with the opposing Democrat Party and
is attempting a “judicial coup d’état”; evident they claim from its shelving of major
corruption cases against the former Democrat government.
The subsidy scheme, now suspended, has put significant doubt over the political future of
Prime Minister, Yingluck Shinawatra, and may spell the end of the Shinawatra family at the
top of Thai politics.
Jack Di Nunzio Research Analyst Global Food and Water Crises Research Programme [email protected]
*****
Wait and See: Uncertainty to Continue Ahead of Indonesia’s
Political Transition
The results of Indonesia’s recent parliamentary elections, which indicate that a weak
coalition government and further political dysfunction are likely, will do little to boost
investor confidence.
Background
As Indonesia heads towards its biggest leadership transition in nearly a decade, political and
economic uncertainty is likely to continue following the recent parliamentary election. While
official results for the 9 April election are not expected until early May, informal tallies
suggest a weak coalition government is likely; the PDI-P, the country’s main opposition
party, reportedly secured only 19 per cent of the overall vote. It will now have to rely on the
support of other minor parties to form government and nominate the popular governor of
Jakarta, Joko Widodo, for the upcoming presidential election in July. He is still expected to
win, but the prospect of a fractious parliament is likely to hamper investor confidence in the
future.
Comment
Although the parliamentary election took place without incident, analysts have cautioned
that the splintered results will lead to further uncertainty, with a weak coalition government
set to take power in October. The PDI-P, headed by former president Megawati
Page 12 of 14
Soekarnoputri, was widely tipped to win. Having announced weeks before the election that
Joko Widodo, commonly referred to as Jokowi, would be their presidential candidate come
July, party managers were hoping to secure 25-30 per cent of the popular vote. Instead, they
will likely have to settle for 19 per cent, well below the 25 per cent needed to nominate a
candidate outright under Indonesia’s electoral laws. Barring a dramatic improvement in
counting, the PDI-P will have to form a coalition with a number of minor parties to take
power and nominate the 52-year old.
Few would bet against the former furniture salesman, despite a weaker-than-expected
showing for the PDI-P. But the results have fuelled unease among analysts, with many
fearful that a coalition government will face fierce resistance in implementing much-needed
social and economic reforms. The legislature has become increasingly independent of late,
but the result has not always been positive: the parliament has taken on an obstructionist
bent in recent times, with Vikram Nehru, a senior associate at Carnegie Endowment for
International Peace, lamenting that, ‘the relationship between the executive and parliament
has become dysfunctional’.
That trend may get worse after the latest results. Though the deal broking will continue for
some time, there will be more parties in parliament than before, with many smaller Islamic
parties doing far better than expected. That would make the legislature even more unstable,
compounding the challenges facing Jokowi as he tries, for the first time, to govern a highly
decentralised and combative democracy. The PDI-P, in response, has said that any running
mate of Jokowi would have to ensure good governance and effective institutions, though its
efforts to form a coalition have been slow.
Yet, whoever wins come July, a weak coalition government is likely to hamper investor
confidence, at least in the short-term. The unofficial results were met with a sell-off from
investors in local stocks and bonds, with the Jakarta Composite Index, Indonesia’s stock
exchange, plunging 3.16 per cent on 10 April, the steepest decline in eight months. It has
since recovered, but similar dips may occur in the future.
The problem for Jakarta is that investors remain unconvinced that an incoming government
will be able to bring about major changes. Many are predicting that the investment climate
could actually worsen, with the government increasing regulation in a bid to add further
value; restrictive trade laws and a controversial ban on raw mineral exports have rankled
investors this year already. Given that, market watchers are likely to “wait and see” how the
next few months play out. As Christian de Guzman, a vice president of the sovereign risk
group with Moody’s Investors Service, told the Jakarta Post on 21 April, ‘the uncertainty
about the road ahead is affecting investors’ appetites for Indonesian assets’.
South-East Asia’s largest economy has long been described as at a crossroads. Now, with a
new president and government to take office in October, the depiction is apt: while the
country has the potential to become one of the worlds’ leading economies by 2030, its
nationalist policies and distaste for laissez-faire economics threaten to plunge it into further
legal and regulatory chaos.
Page 13 of 14
After a difficult 2013, in which it was dubbed one of the “fragile five” economies, Indonesia
has made an impressive recovery, becoming the best-performing Asian share market this
year. Investors, however, are not completely sold on the country – much will depend on how
the government and the untested Jokowi perform, come October. Protectionist policies and
dysfunctional governance could convince investors that the country is too fragile after all.
They will have to wait and see.
Andrew Manners Research Analyst Indian Ocean Research Programme [email protected]
*****
What’s Next?
Indian Defence Minister AK Antony will meet with a visiting senior Chinese military delegation on 23 April.
New Zealand Foreign Minister Murray McCully and European Commissioner for Development Andris Piebalgs are to visit the South Pacific from 23-27 April. The joint mission will visit Samoa, Tuvalu, Kiribati and the Cook Islands to view progress being made on renewable energy initiatives and to discuss opportunities for further co-operation with Pacific governments.
US President Barack Obama will visit Japan on 23 April, South Korea on 25 April, Malaysia on 26 April and the Philippines on 28 April.
The Western Pacific Naval Symposium, underway in the Chinese city of Qingdao, concludes on 24 April.
On 24 April, the African Union Peace and Security Council is scheduled to hold a discussion on the implementation of a road map to a conflict-free Africa by 2020.
Afghanistan is expected to release the preliminary results of its 5 April national elections on 24 April.
Phase six of India’s Lok Sabha elections, covering 117 seats in 12 states, including Jammu and Kashmir, Tamil Nadu and West Bengal, will be held on 24 April.
The first South Asian Labour Conference will take place in Lahore on 24-26 April. Participating are Pakistan, Afghanistan, Bangladesh, Sri Lanka, the Maldives, Nepal and Bhutan.
The Asian Development Bank is slated to approve US$400 million in assistance for Pakistan on 26 April.
India’s Defence Research and Development Organisation has indicated that it will conduct a high-altitude interceptor missile test over the Bay of Bengal on either 27 or 28 April.
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