You can contact the author (Teguh Hidayat) by email, The author live in Jakarta, Indonesia.

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Political Developments & Its Effect on JCI

In one of his annual letters, Warren Buffett once said this, 'We hope that you will stay with us forever (read: be a shareholder of Berkshire Hathaway forever), and will not sell your stock just because you worry about economic and political turmoil in the United States.’ Take a look that Buffett said two words: the economy, and politics. Buffett said the words because, based on his experience as an investor, there are at least two things that can make the American stock markets, including the company's performance in it, decreased, ie the problems related to to the economy and political situations, both in the national and global scale.

And in fact, the economy and politics are two very different things but can not be separated, and they both affect the performance of the stock market. Jakarta Composite Index (JCI) as an indicator of the performance of Indonesian stock market could only rise o if supported by a consistently growing economy in real terms. While the Indonesian economy can only grow if supported by a cool political condition, where the politicians are able to stop punching each others and start working properly. In conclusion, JCI will be able to rise consistently if the occupants of parliament building can actually 'work for the people' as they promised, instead of throwing interrupts (or even chairs) in the plenary session.

Meanwhile, if it does not work that way, the impact on JCI would be bad. All this time I thought that ‘the economy’, both global, macro (country’s economy), sectoral, and micro (corporate performance), was the only thing that affects the movement of JCI, while politics has no effect at all. But later I found out that it is because the tension of politics in Indonesia, especially in the terms of President Susilo Bambang Yudhoyono (SBY), was cool. The only policital turmoil I can remember is when SBY and his Democrat Party, in 2009 – 2010, got heavy attacks from their political oppositions using the case of Bank Century, even there was a suggestion to depose the President. But still, Sir Beye managed to ‘wipe’ it all.

Logo of PT Bank Mutiara, Tbk (BCIC), which previously known as Bank Century

Because there wasn’t a serious political issue during 10-year tenure of SBY, the JCI only fall down if there was an economic issue, like the global financial crisis in 2008, and when Indonesia experienced a slowdown in economic growth in 2013. Beyond that years, the JCI always rise with various rate of growth.

While the United States (USA) had another story. Since the Greek Crisis issue ends by the end of 2011, the Wall-Street headlines filled with news related to the Debt Ceiling, Quantitative Easing, Fiscal Cliff, until the United States Shut Down. I needed some time to realize that those issues are not economic issues, but political. In case where the United States Government had to shut down offices and laying off hundreds of thousands of civil servants, for example, it was one point of disputes between President Obama and the House of Representatives concerning the draft of State Budget, and not because the United States economy is actually in trouble. But still: When the 'shutdown' was announced, the Dow Jones et al fell shortly after.

Then how about politics in Indonesia under the leadership of the new president, Joko Widodo (Jokowi)?

If SBY is an accomplished politician, then like it or not, not so with Jokowi. As a 'worker and servant for the people', Jokowi had a very good track record when he occupied the position of mayor of Solo, and when he became the Governor of Jakarta, where in less than 2 years since he was sworn in, there are a lot of positive changes that can be directly felt and seen by all citizens of Jakarta.

However, as a politician, Jokowi is still not experienced enough. If you read the profile of senior politicians in Indonesia, then you will find that they are usually already involved in politics since they were young, usually by being activists in their college (if he is a civilian). For example the first President of Indonesia, Sukarno, he has joined political organizations since the age of 16 years, and had set up his own political party, National Party of Indonesia, (Partai Nasional Indonesia/PNI) at the age of 28 years.

As for politicians with a military background, their political ability has been formed since they were in the military service. If a private willing to be promoted to ranks of corporal, sergeant, major, lieutenant, colonel, to generals, then he must have the ability to lead (leadership) his men on the battlefield, where the higher his ability to lead, the higher the rank. And such skill of ‘leadership’ is the basis of politics itself, is not it?

Then, Jokowi? Well, Jokowi is an ordinary civilian, without any military background, withour background of noble or wealthy families, and also: Without political background. Jokowi political career only started when he became mayor of Solo in 2005, or less than 10 years ago. Before that, Jokowi was an entrepreneur with a career that is also unremarkable: Took school and college, graduated, unemployed for a while then work for a company, resign of office to open his own company in the field of wooden furniture, experienced ups and downs including being fooled, and finally success exporting furniture to Europe.

In short, Jokowi is not a special figure at all, or we can call him: a commoner. That’s why I can understand if Prabowo Subianto could not immediately accept his defeat in the presidential election, because how could a former general of Indonesian Special Force, a son in law of late President Suharto, was derived noble (Prabowo is one of descendants of Tumenggung Banyakwide, a general who served Prince Diponegoro in the Java War in 1825 – 1830), a supreme leader of a large political party, and had assets of billions, lose the election to a.. carpenter?

Back to Jokowi. Although he does not have a background as an experienced politician, but Jokowi is the fact the elected-President of Indonesia for the period 2014 – 2019. However, the lack of political experience makes his position, politically, not to be strong enough. Because, remember this: The tasks of the president are not only carrying out the development, welfare of the people, and the like, but also to build a coalition in parliament, because that was how the democratic system works. The late President Suharto had successfully reigned for more than 30 years, because he was able to control the parliament building occupants with his strong leadership. Sir Beye and Megawati were also able to fulfil their terms as President until the end of the period, because they are able to build a communication with the members of the parliament.

While BJ Habibie and Gus Dur, they both could not control or establish communication with senators, and consequently they both get kicked out. The failure of BJ Habibie and Gus Dur is not because they 'did not side with the people', but because they could not be reconciled with the legislature, or in other words: Did not able to do the politics.

And Jokowi, though he may be completely independent in carrying out his duties as a President, but in political terms, he could not moving freely, because in his own party he is still a subordinate of Megawati as party chairwoman. Now imagine: Jokowi invites certain political figure, say Sir Beye, for casual chat over lunch, and the chat went so well that Sir Beye agreed to provide support to Jokowi in Parliament (though no longer served the President, but SBY still has political power in his capacity as a top leader of the Democratic Party).

But if Megawati do not agree with the existence of SBY in the coalition, what could Jokowi do?

In this case I was thinking that, if Jokowi wants to run his government smoothly, then maybe he should coup Megawati as party leader, and makes the party (PDI-P) as his own. When Anas Urbaningrum had started his own faction in the Demokrat Party, SBY goes quickly to get rid of him through the KPK, so the party return into his own. There should not be two leaders in the party. And because it is Jokowi who became president, then he should become the supreme leader of his party, instead of Megawati.

But Jokowi is not the type of backstabber like that. In fact, probably, he did not care about that. I can imagine that Jokowi only thinking about his duties as a President, where he could visit Aceh to Papua, directly supervise the developments of infrastructure and others, rather than wasting time for debate with the parliament. And if people can see this, then although Jokowi may be frequently interrupted by Fadli Zon et al in the parliament, he will still gain the sympathy of the people, and it is a very important matter to keep the government remained firm. Still remember when Jokowi criticized severely by a politician who is a member of City Council of Jakarta, but this politician even get bullied by the public through television and social media?

But whatever. One thing for sure, if SBY was a great politician (and that's why Indonesia is relatively safe from political upheaval during his 10 years in power), then Jokowi does not yet have the same capacity. And that's why I see that in addition to economic issues, JCI in the future will also occasionally shaken by political issues. When JCI declined lately, it's obviously because Jokowi camp failed in the fighting of election of Chairman in the House (excluding other factors such as the weakening of Rupiah). If later Jokowi lost again in the election of Chairman of the Assembly, then the market will be shaken once again. We'll see.

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