Is This A New Beginning For Indonesia?

Indonesia has just inaugurated Joko Widodo as its new president yesterday.

President Widodo, Indonesia’s seveneth president, has brought about new hope for the people of Indonesia with his promises to carry out a wide range of economic reforms. But, there’s going to be an uphill battle for Widodo over the next few years in his term as president.

One of the largest obstacles confronting him would be the large opposition coalition in Indonesia’s parliament. Although Widodo’s political party, the Indonesian Democratic Party of Struggle (PDI-P), is the largest political party in the country’s parliament, Widodo’s political opponents together control about 56% of the 560 parliamentary seats. Widodo would have to manage the demands of the opposition carefully to avoid any kind of political gridlock that might paralyse Indonesia.

Over the past few months, the business and investment communities have been very optimistic about the changes the new president might bring to Indonesia. However, with great expectation comes great responsibility. For instance, Indonesia’s government is expected to spend some US$25 billion to keep fuel prices low in Indonesia next year and that amounts to almost 14% of the country’s total budget. Widodo has announced his plan to cut down on the country’s fuel subsidy program but its implementation is easier said than done.

Furthermore, there are talks that there will be more nationalistic laws being passed in the future by the president. For one, Indonesian lawmakers are already looking at potentially restricting foreign ownership of plantations in the country to no more than 30%. If the law passes, it might force many of the country’s large plantation owners listed in Singapore – some notable examples include oil palm plantation owners Wilmar International Limited (SGX: F34) and Golden Agri-Resources Ltd (SGX: E5H) – to sell off partial ownerships of their plantations in order to meet the new regulations.

Foolish Summary

The president has a tough fight ahead of him. The ability of Widodo to bring together the opposition forces and his coalition might be the key factor on whether he would be able to move the country forward and indeed, create a new beginning for the powerhouse of Southeast Asia.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim owns Wilmar International