Indonesian Election in 2024: What will Happen to Investments?

As Indonesia braces for a meaningful political event in 2024, with the much-anticipated Indonesian election on the horizon, businesses nationwide are watching the potential implications. 

In this article, we will explore whether these momentous political events will significantly affect business prospects and investments in the archipelago nation.

Understanding the implications of these elections is important for business leaders seeking to navigate the evolving political environment and seize opportunities while mitigating potential challenges in the dynamic Indonesian market.

2024’s Indonesia Election Overview

The political landscape in Indonesia is on the cusp of a significant shift as 2024 approaches. The country is set to experience its first-ever combined election for the general election (Pemilu) and regional head election (Pilkada) in the same year.

The Pemilu, scheduled for February 14, 2024, will encompass the following crucial elections:

• The election of the President and Vice President
• Members of the House of Representatives (DPR)
• The Regional Representative Council (DPD)
• The Regional People’s Representative Councils (DPRD) of provinces and regencies/cities 

The Pilkada will be held on November 27, 2024, to elect governors, deputy governors, regents, deputy regents, mayors, and deputy mayors throughout Indonesia.

What’s New in the Indonesian Election in 2024?

Unlike the previous two-term presidential elections in 2014 and 2019, the upcoming Indonesian presidential election may have three potential candidates: Prabowo Subianto, Ganjar Pranowo, and Anies Baswedan.

Prabowo Subianto is the current Minister of Defence and Chairman of the Great Indonesia Movement Party (Gerindra), receiving primary support from Gerindra and the National Awakening Party (PKB).

Ganjar Pranowo is the current Governor of Central Java, enjoying primary support from the Indonesian Democratic Party of Struggle (PDIP) and the United Development Party (PPP).

In addition, Anies Baswedan, the former Governor of Jakarta, is supported by the National Democratic Party (NasDem), the Democratic Party (Demokrat), and the Prosperous Justice Party (PKS).

The official candidates will be confirmed after completing the registration process on November 25, 2023.

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A Common Cycle during Elections Affecting Business

The election campaigns in Indonesia often presents business with uncertainty which also affects the investment progress in the country. Economic observer Faisal Basri opined that stagnant investment during the election is understandable.

The cycle can be seen from previous elections, such as the 2009 election, where investment only grew by 3.3% from 10%. The same goes for the 2014 election, as the investment grew by 4.6% from 4.4% in the previous year. In the 2019 election, investment growth fell from 7% to 4.5%.

Despite the potential challenge, the Indonesian government is optimistic that the investment will continue amid 2024’s political year.

Indonesian Election: A Recent History

Indonesia is one of the world’s largest democratic countries, having successfully conducted five direct presidential elections. This track record adequately demonstrates Indonesia’s ability to maintain political and social stability during elections, assuring investors regarding security and safety during the electoral process.

While the Indonesian government remains optimistic about the investment climate in 2024, investors might question the continuity of several of President Joko Widodo’s legacies, one of which is the establishment of Nusantara Capital City (IKN).

A Secured Investment Climate

The Head of Fiscal Policy Agency (BKF) of the Finance Ministry, Febrio Kacaribu, is optimistic that investment progress will continue during the 2024’s election. It is driven by good economic performance and credible investment governance that attract investors to Indonesia.

From an economic point of view, there is a considerable possibility of an increase in consumption during the general election, as it involves millions of people participating in several activities, such as campaign attribute selling, etc.

The rupiah exchange rate also increases while other countries are hit with depreciation. Indonesia is ranked fourth among the top 10 IPO markets in the first quarter of 2023, according to Global IPO Watch QI 2023 data.

The achievement is attributed to increased demand for commodities for producing electric vehicles’ batteries. Similarly, the Chairman of the Financial Services Authority (OJK), Mahendra Siregar, conveyed that the investment climate will remain conducive in 2024. 

Will the Indonesian Election Affect IKN’s Progress?

President Joko Widodo has conveyed that the Nusantara Capital City Law (UU IKN) passed in 2022 is an instrument to assure that the project will continue despite the change of the country’s leadership in 2024.

The president stated to have prepared fiscal incentives for IKN, amounting to three-hundred investment packages totaling USD 2.6 billion. The amount has been reserved for the private sector, specifically for housing, transportation, energy, and technology.

Similarly, other ruling coalition members have asserted to include the IKN project in the long-term national development program to ensure the continuity of this legacy. 

IKN has a huge potential for new and renewable energy with nearly 434,000 megawatts and 434 gigawatts, allocated respectively, which include geothermal, wind, solar, and hydropower.

Regarding population distribution, the president suggested that Indonesia is the world’s fourth most populous city and would have no problem populating a world-class city.

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Strategies for Seizing Opportunities

Considering the change of country leadership can present uncertain conduction for investors, businesses should take several measures before making any investment decision during the election period.

1. Concentrate on the result

The most probable scenario indicates that election day will not affect market performance. Irrespective of the election outcome, it is improbable that a new administration would significantly alter the economy or drastically devalue the currency.

2. Don’t predict the future

The future is unpredictable; one must seek opportunities for long-term growth while acknowledging the perfect situation is unattainable.

Historically, investors have achieved tremendous success by maintaining their investments through presidential transitions rather than investing selectively based on their preferred party being in power.

3. Make a sound decision

It is essential to avoid present election-related concerns to drive substantial, long-term changes to the investment management approach.

Avoid Risks during Investment with InCorp Indonesia

The 2024’s election will be the first for Indonesia to have presidential and legislative elections together with the regional heads’ election in the same year. The situation might hinder investment progress due to the uncertain nature of the political year.

However, the government has assured that the investment progress will continue, driven by good economic performance and credible investment governance that can attract investors to Indonesia.
Businesses can enhance the opportunities during the political year by partnering with InCorp Indonesia (an Ascentium Company).

InCorp Indonesia offers services related to Investor KITAS and company registration, ensuring a seamless market entry into Indonesia. Feel free to contact our consultants by clicking the button below.