On 9 August, Indonesia's incumbent president, Joko 'Jokowi' Widodo named Ma'aruf Amin as his running mate for the April 2019 presidential election. Amin is the chairman of the Indonesian Ulema Council, noted as Indonesia's largest Islamic organizations.

• President Jokowi's nomination of Ma'aruf Amin as his vice-presidential candidate will most probably placate the sentiment of conservative Islamic groups demanding a government that is more agreeable to introduce socially conservative policies.
• Given Jokowi's decision to increase spending on infrastructure and welfare programs, he continues to remain popular among voters.
• In a post-election outlook in which Jokowi and Amin are elected, Amin's influential religious position will likely reduce the risk of mass protests by hard-line Islamist groups such as the Islamic Defenders Front
• Reportedly conservative social policies, however, are unlikely to change Indonesia's outlook to encouraging foreign investment in sectors such as energy, and technology companies in particular are at an elevated risk of increased takedown requests or bans for hosting content perceived to be insulting to Islam.

Ahead of the 10 August deadline for nomination of presidential and vice-presidential candidates for the April 2019 election, on 9 August, President Joko 'Jokowi' Widodo declared that Ma'aruf Amin, the chairman of the Indonesian Ulema Council, would be his vice-presidential candidate. He also affirmed the support of nine political parties (currently part of the governing coalition) for their candidacy.

On the same day, the opposition coalition announced that Prabowo Subianto - the former lieutenant-general of Indonesian armed forces (who was defeated by Jokowi in the 2014 presidential election) - would be their presidential candidate; Sandiago Uno, the incumbent vice-governor of Jakarta, would be his running mate. Given a general noted increase in rhetoric around wanting a government that promotes more Islamist policies, the nomination of Amin as vice-presidential candidate is likely to be crucial to the election outcome.

Regional elections signal closely contested presidential race...

On 27 June, Indonesia concluded 171 gubernatorial, mayoral, and provincial elections. The results in the provinces of West, East, and Central Java and North Sumatra - which account for more than half of Indonesia's electorate - signal a closely contested presidential race. For example, in West Java, Jokowi-backed Ridwan Kamli won the gubernatorial race ahead of the opposition-backed Sudrajat, but only with a narrow margin. Furthermore, although Jokowi's candidates won across Java provinces, the opposition-backed candidate, Edy Rahmayadi, won in North Sumatra (a Muslim-dominated province), indicating it is likely to be a province where both parties undertake multiple campaign initiatives, including rallies and speeches.

... but incumbent president continues to remain popular

In the fourth year of his presidency, Jokowi continues to remain popular, according to social media analysis and an FT Confidential Research survey, particularly given his measures to allocate a significant proportion of the government's expenditure budget towards infrastructure projects and increased subsidies. In the 2018 annual state budget, Jokowi allocated about USD28 billion - the largest ever in Indonesia's history - towards infrastructure development, particularly for roads and airports. Furthermore, in the draft 2019 state budget released on 16 August, Jokowi increased expenditure allocations for fuel subsidies, and announced an increase in civil servant pay. This follows a March 2018 announcement wherein the government stated that electricity tariffs would remain unchanged through 2018 and 2019; most likely a measure intended to appeal to voters in a pre-election year.

Outlook and implications

According to the FT Confidential Research survey, the presidential race is expected to be focused in the aforementioned provinces and in Kalimantan as well, because voters in these provinces reportedly believe that Jokowi needs to encourage conservative Islamist policies more. The results of the gubernatorial elections, therefore, signal that election campaigning will be focused on religious issues. Given these factors, the nomination of Amin - an influential Islamic religious figure - as Jokowi's vice-presidential candidate increases the likelihood of Jokowi returning to presidency for a second term (his last as per Indonesian law). Amin is likely to appeal to Muslim voter sentiment, which has been demanding increased alignment with sharia (Islamic law) in social policies, including introducing a law banning homosexuality and criminalizing infidelity in marriage.

Amin's nomination is also likely to increase the confidence of the Islamic Defenders Front (FPI), a right-wing Muslim organization, suggesting that the government will probably be more responsive to their demands, including nominating parliamentary candidates that also support conservative policies. The FPI holds the potential to organize mass protests on religious issues, thereby reducing the likelihood of such protests in a post-election outlook in which Jokowi and Amin are elected. In December 2016, the FPI rallied around 200,000 Muslims in Jakarta to protest non-violently against then Jakarta governor Basuki Tjahaja Purnama allegedly insulting Islam. Notably, Amin was one of the key witnesses in the case against Purnama, which resulted in him being sentenced to prison for two years for blasphemy.

Despite Amin's nomination and Jokowi's likely victory, however, Indonesi's direction towards increased socially conservative policies will remain distinct, and is unlikely to alter the business environment. The government will most probably continue encouraging foreign investment in sectors such as energy and technology, and an increase in corporate tax remains unlikely. However, in the one-to-two-year outlook, foreign companies will probably face more expectations to respect Indonesia's adherence to Islam in their operations, more so around human resource management and ensuring employees follow such social norms. In particular, the risk is elevated for social media platforms and technology applications whereby the Indonesian government is likely to issue more takedown requests of content that is believed to be insulting to Islam. It is also likely that these takedown requests are likely to include the threat of a partial or total ban in instances where companies decline to comply (see Indonesia: 23 January 2018: Indonesian threat to ban Google increases risk of retrospective taxation and greater content regulation for technology companies).

Going forward, if Jokowi-Amin nominate individuals supportive of such conservative social policies as candidates for the April 2019 parliamentary elections, it will probably further increase the likelihood of Jokowi winning the presidential election. Conversely, if Indonesia's anti-corruption commission initiates investigations against members of Jokowi's government for allegedly being involved in graft, it is likely to negatively impact Jokowi's popularity ahead of the election.

Posted 29 August 2018 by Deepa Kumar, Head of Asia-Pacific Country Risk, S&P Global Market Intelligence