Budi Gunawan, the National Police chief candidate, came out of the anti graft comission (KPK) building. He was submitting his wealth report. (Antara Photo/Rosa Panggabean)

Business Holding Off Assessment, Markets Remain Unaffected After Joko’s Botched National Police Chief Nomination


JANUARY 13, 2015

Jakarta. President Joko Widodo’s choice of Budi Gunawan as National Police chief candidate — which turned into a blunder after the national antigraft agency named him a suspect — slightly dented the business community’s confidence in Joko’s ability to push reforms in the country.

The Indonesian public was shocked on Tuesday after an announcement from the Corruption Eradication Commission (KPK), which has named Budi a graft suspect, just days after his nomination by Joko to succeed Sutarman, who is due to retire in October.

Hariyadi Sukamdani, the chairman of the Indonesian Employers Association (Apindo) — an influential business lobby — said investors “tended to know” this could occur when, during his cabinet selection, Joko asked the KPK and the Financial Transaction Report and Analysis Center (PPATK) to scrutinize the track records of  candidates.

“For the National Police chief position, why didn’t he ask? There must be something [different about the nomination],” Hariyadi told the Jakarta Globe by phone.

Budi has no affiliation to any political party, but is a close aide of Megawati Soekarnoputri, the Indonesian Democratic Party of Struggle (PDI-P) chairwoman.

He served as her adjutant during her term as president from 2001 to 2004.

“I believe Joko has the ability to manage the government and this issue will not affect his integrity,” said Hariyadi, who is also the president director of Sahid Jaya International, one of the first local hotel chains in the country.

KPK chief Abraham Samad told a press conference on Tuesday that Comr. Gen. Budi Gunawan is a suspect in a graft case that took place while he was serving as the head of the police’s career-building office.

Abraham elaborated that investigators of the antigraft body have been studying the case since July last year. They have found several irregularities in financial transactions involving Budi. This added to flaws with Budi’s track record as he has drew ire due to suspicions concerning the size of his personal bank accounts.

The PPATK unveiled a report in 2010 of several police generals with suspiciously hefty bank accounts, and Budi was on the list.

However, the news seemed to have little impact on the capital markets. The benchmark Jakarta Composite Index gained 26.43 points, or 0.51 percent to close at 5,214.36 on Tuesday.

Yields on the benchmark 10-year government bonds declined to 7.7603 percent from 7.7921 percent. A lower yield means investors favor securities as they indicate a falling risks for holding the debt papers.

The rupiah, meanwhile, weakened to 12,608 per dollar from 12,568 earlier.

Peter Fanning, a former chairman of the International Business Chamber, shared Hariyadi’s view.

“Investors remain optimistic. They know that opportunities are still there and that the investment climate will improve. Foreign investors are aware that politics will always produce strange results and may not be maintained in a way everyone understands,” he said.

Joko earned applause when he made a bold decision to raise the price of subsidized fuel, a move freeing at least $25 billion of subsidy spending that can be diverted into more productive spending including infrastructure, education and health.

He moved further to introduce a fixed fuel subsidy regime and an adjustable price for low-octane gasoline, which gives his finance minister a fiscal room of up to Rp 155 trillion ($12 billion) to jack up infrastructure spending for projects such as dams, water facilities, roads, airports, ports and housing.

Fanning, the former IBC chief, said even if the KPK’s announcement became a bad precedent for the investment climate, it wouldn’t deter investors from pouring more money into Southeast Asia’s largest economy.

“It’s too early to make a call. Optimism remains with the recognition that politics are bound to produce strange results,” he said. “There are matters on which investors are uncertain, but that won’t prevent investment from coming. It may prevent investment from growing as strong as it could be.”

Budi’s nomination was not the first setback for Joko. He has drawn criticism for some of his picks, including when heappointed H.M. Prasetyo, a member of the National Democrat Party (NasDem) and former assistant attorney general, to the post of Indonesia’s top prosecutor.

The pick drew criticism from the KPK’s Abraham, who labeled the appointment as “highly inappropriate,” because the AGO is a law enforcement agency that needs an independent figure with integrity.

It was also seen as a weak commitment from Joko towards combating corruption and revamping the graft-ridden AGO.

Joko, a former businessman who burst onto the country’s political scene with his style and ideas that have proved to be an antithesis to the aristocratic style of the government officials, defeated his political opponent, the retired three-star general Prabowo Subianto, in the July presidential election.

Still, he relies heavily on the support of the PDI-P, the party that nominated his presidency, to smooth his governance.

The PDI-P does not have a majority in the House of Representatives, where it only secured 109 from the total 560 seats.

The party has to rely on support from the People’s Conscience Party (Hanura), NasDem and the National Awakening Party (PKB).