The closely contested Indonesian presidential election has produced a clear winner. The world's fourth-most-populous nation may have finally got the reform-minded leadership necessary to help its economy take off. Endemic corruption, a shaky legal system and misguided policies are frittering away the country's natural advantages of energy and mineral riches and a young workforce. Popular Jakarta Governor Joko "Jokowi" Widodo reassures on two counts.
First, he appears to be uncorrupt, and has no known ties to former dictator Suharto's cronies. Secondly, his win looks decisive. An eight-million-vote victory over ex-general Prabowo Subianto could force the latter's coalition to weaken. If Golkar, the second-most popular political party, switches its allegiance to Jokowi, the president-elect will have a majority of lawmakers backing him. Indonesia's big challenges are to rein in creeping nationalism and become more of a "producer" economy. The archipelago has the world's second-most optimistic consumers, but in ease of starting a business, it is ranked 175th out of 189 by the World Bank. Indonesian productivity has long stopped catching up with the West. And yet, prices of things workers consume have zoomed to 80 percent of US levels, as the commodities boom created by Chinese demand hurt competitiveness.
Commodity prices have eased, but rather than deepen the production base with foreign investment and technology, policies have turned insular. A move to promote refinery investment has degenerated into an ugly spat with foreign miners. Parliament is working on a bill that will force foreigners to pare down their stakes in domestic banks. The nationalistic tilt could have worsened under Prabowo. That risk is gone - though not entirely. Jokowi shares founding President Sukarno's ideal of economic self-reliance, but hopefully will restrict that to plans for growing more food locally.
More broadly though, investors will expect the president-elect to deepen Indonesia's engagement with the world, and use his popularity to restrain wage growth even as he invests in education, health and old-age security. The country's consensual style of policymaking makes it hard for an Indonesian leader to push his agenda. A credible win, though, gives Jokowi and Indonesia a shot at real change.
