The Week that Was in ASEAN@Smartkarma - Philippines & China, Vietnam Rising, and Asian Asset Quality

Indonesia Political Risk Analyst

Kevin O’Rourke

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

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Prabowo's rhetoric has become even more strident, but there is no reason -- and no data -- to suggest that he is drawing any closer.  Reliable polling from 2 April showed a stable 18 percentage point lead for Widodo.  In the event that Widodo's win is narrow (a low probability), Prabowo would deploy protesters (a high impact) who could disrupt Jakarta significantly for up to three months.  This low-probability high-impact scenario constitutes a moderate risk.  Exacerbating matters are signs that a Nasdem parliamentary candidate may have manipulated overseas ballots cast in Malaysia -- where his father, Ambassador (and Lion Air owner) Rusdi Kirana, heads the embassy that handles mailed-in ballots.  Quick Counts -- which are far better than exit polls -- will make the presidential outcome apparent (within a 1% error margin) by 16.00 Jakarta time on 17 April.  The finance minister announced tweaks exempting services exports from VAT and requiring tech companies and foriegn owners of legal entities to obtain tax registration IDs.Politics: Gerindra Chair Prabowo Subianto showcased Soekarno-esque oratory and lurid rants in a 7 April rally in Jakarta, declaring that, “The Motherland is being raped!”  This stridency could repel as many voters as it attracts.  There is no reason to expect that he will gain significant ground on President Joko Widodo in the final stretch to the 17 April election.  Anticipating systematic malfeasance, Prabowo called on supporters to stage prolonged protests in the event that he loses.  This elevates the risks of disruptions and currency pressure if Widodo wins by a narrower-than-expected margin (Page 2).  Exacerbating matters are reports of supposed fraud in overseas voting.  A Prabowo campaigner released video on 11 April showing ballots marked for Widodo and the National Democrat (Nasdem) Party.  All overseas voters are part of Jakarta’s Second Electoral District, in which a candidate is Nasdem’s Davin Kirana – son of the controversial (and highly political) Lion Air owner Rusdi Kirana, who is also ambassador to Malaysia, where he heads an embassy that handles mailed‑in ballots (that feature his son as a candidate).  The Election Oversight Agency (Bawaslu) is investigating.  The allegedly mishandled ballots are few relative to the national election, but the affair generates damag­ing publicity at an awkward juncture.  Widodo could mitigate it by sacking Kirana (p. 4).Election Preparations: The presidential result will be apparent, within a one percent error margin, by 16.00 Jakarta time on election day, due to independent Quick Counts – which are different and better than exit polls, as they tabulate official counts conducted at open-air ballot stations immediately after voting in a statistically significant sample of locations nationwide.  However, in 2014, several fraudulent entities produced pro-Prabowo claims about Quick Counts and the same may recur next week (p. 5).Surveys: Three reputable pollsters released data showing Wido­do’s lead unchanged, including Cyrus Network polling that concluded on 2 April (p. 4).  In 2014, the Association of Polling Agencies (Persepsi) ousted Puskaptis from its ranks and declared it fraudulent for having concocted data flattering Prabowo.  Puskaptis is again producing claims that Prabowo is winning.  Similarly, the obscure VoxPol, led by the inexperienced Panji Chaniago, garnered headlines by claiming that the race has narrowed, but Chaniago has a record of statements that are (at best) errant or (more likely) disingenuous (p. 6). <table class="table table-striped"><tbody><tr><td>Produced since 2003, the Reformasi Weekly Review provides timely, relevant and independent analysis on Indonesian political and policy news.  The writer is Kevin O’Rourke, author of the book Reformasi.  For subscription info please contact: &lt;kevin.orourke@reformasi.info&gt;.</td></tr></tbody></table>Justice: Golkar’s Bowo Pangarso claims that he stuffed envelopes at the behest of a minister and Golkar’s Nusron Wahid (p. 10). Policy News: The finance minister tweaked several tax rules, exempting services exports from VAT and tightening IDs (p. 11).

Prabowo's rhetoric has become even more strident, but there is no reason -- and no data -- to suggest that he is drawing any closer.  Reliable polling from 2 April showed a stable 18 percentage point lead for Widodo.  In the event that Widodo's win is narrow (a low probability), Prabowo would deploy protesters (a high impact) who could disrupt Jakarta significantly for up to three months.  This low-probability high-impact scenario constitutes a moderate risk.  Exacerbating matters are signs that a Nasdem parliamentary candidate may have manipulated overseas ballots cast in Malaysia -- where his father, Ambassador (and Lion Air owner) Rusdi Kirana, heads the embassy that handles mailed-in ballots.  Quick Counts -- which are far better than exit polls -- will make the presidential outcome apparent (within a 1% error margin) by 16.00 Jakarta time on 17 April.  The finance minister announced tweaks exempting services exports from VAT and requiring tech companies and foriegn owners of legal entities to obtain tax registration IDs.Politics: Gerindra Chair Prabowo Subianto showcased Soekarno-esque oratory and lurid rants in a 7 April rally in Jakarta, declaring that, “The Motherland is being raped!”  This stridency could repel as many voters as it attracts.  There is no reason to expect that he will gain significant ground on President Joko Widodo in the final stretch to the 17 April election.  Anticipating systematic malfeasance, Prabowo called on supporters to stage prolonged protests in the event that he loses.  This elevates the risks of disruptions and currency pressure if Widodo wins by a narrower-than-expected margin (Page 2).  Exacerbating matters are reports of supposed fraud in overseas voting.  A Prabowo campaigner released video on 11 April showing ballots marked for Widodo and the National Democrat (Nasdem) Party.  All overseas voters are part of Jakarta’s Second Electoral District, in which a candidate is Nasdem’s Davin Kirana – son of the controversial (and highly political) Lion Air owner Rusdi Kirana, who is also ambassador to Malaysia, where he heads an embassy that handles mailed‑in ballots (that feature his son as a candidate).  The Election Oversight Agency (Bawaslu) is investigating.  The allegedly mishandled ballots are few relative to the national election, but the affair generates damag­ing publicity at an awkward juncture.  Widodo could mitigate it by sacking Kirana (p. 4).Election Preparations: The presidential result will be apparent, within a one percent error margin, by 16.00 Jakarta time on election day, due to independent Quick Counts – which are different and better than exit polls, as they tabulate official counts conducted at open-air ballot stations immediately after voting in a statistically significant sample of locations nationwide.  However, in 2014, several fraudulent entities produced pro-Prabowo claims about Quick Counts and the same may recur next week (p. 5).Surveys: Three reputable pollsters released data showing Wido­do’s lead unchanged, including Cyrus Network polling that concluded on 2 April (p. 4).  In 2014, the Association of Polling Agencies (Persepsi) ousted Puskaptis from its ranks and declared it fraudulent for having concocted data flattering Prabowo.  Puskaptis is again producing claims that Prabowo is winning.  Similarly, the obscure VoxPol, led by the inexperienced Panji Chaniago, garnered headlines by claiming that the race has narrowed, but Chaniago has a record of statements that are (at best) errant or (more likely) disingenuous (p. 6). Produced since 2003, the Reformasi Weekly Review provides timely, relevant and independent analysis on Indonesian political and policy news.  The writer is Kevin O’Rourke, author of the book Reformasi.  For subscription info please contact: &lt;kevin.orourke@reformasi.info&gt;.Justice: Golkar’s Bowo Pangarso claims that he stuffed envelopes at the behest of a minister and Golkar’s Nusron Wahid (p. 10). Policy News: The finance minister tweaked several tax rules, exempting services exports from VAT and tightening IDs (p. 11).

No Narrowing / Moderate Unrest Risk / Overseas Ballot Case / Tax Rule Tweaks / Quick Count Methods