The campaign of Indonesia's presidential frontrunner, former businessman Joko Widodo, is adopting a protectionist tint as the race against his lone rival tightens with weeks to go before the election.
The party backing Widodo, who won the confidence of investors with his small-business background and focus on infrastructure as governor of Jakarta, says it will restrict foreign access to Indonesian bank stakes. The Indonesian Democratic Party of Struggle, or PDI-P, also aims to review trade deals and boost mining-company payments to the government.
Widodo's latest campaign manifesto, a copy of which was obtained by Bloomberg News this week, co-opts parts of the platform advocated by ex-army general Prabowo Subianto, Widodo's only challenger. The rhetoric may unnerve foreign investors who have poured record amounts into Southeast Asia's biggest economy.
"As the campaign season heats up, there will undoubtedly be more nationalistic bombast from both sides," said Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp.
"Foreign investment can and does vote with their feet - something that whoever wins the presidency would have to reckon with eventually."
The presidential race has shifted in recent months from one in which Widodo was the clear favourite. A Saiful Mujani Research and Consulting poll conducted in April showed 51.6 per cent of respondents would choose Widodo for president and 35.7 per cent would pick Prabowo. In December, Widodo had 62 per cent and Prabowo 23 per cent. A May poll by the Populi Center showed an even narrower gap - 42.4 per cent for Widodo and 35.5 per cent for Prabowo.
Prabowo gaining
Prabowo's hand has strengthened in recent weeks as he secured a coalition with Golkar, the country's second-biggest party, whose chairman Aburizal Bakrie gave up his own presidential bid. The outcome confounded expectations Golkar would tie up with Widodo, who got former Golkar chairman Jusuf Kalla as his running mate.
Prabowo, who has formed a coalition with more political parties than Widodo, wants to cut foreign loans to zero by 2019, according to his manifesto released by the General Elections Commission. He said in January he would "face off" against foreign investors to hammer out fair terms.
Widodo's platform cites a target of lifting the level of Indonesians' savings. In an opinion piece attributed to him in the Kompas newspaper in May, Widodo said an emphasis on market forces had trapped Indonesia in dependence on foreign capital.
'Real worry'
"There is some real worry in their campaign about Prabowo," said Paul Rowland, an independent Jakarta-based political analyst. "It is taken as a given in politics that you must be a nationalist."
Even so, whoever forms the next government may be more flexible once the heat of the election is off, Rowland said.
A Widodo government would balance the interests of the country with business needs, PDI-P secretary-general Tjahjo Kumolo said in May.
Indonesian stocks surged after Widodo said he would run for president earlier this year. The benchmark Jakarta Composite index (JCI) has fallen 0.6 per cent in the past two weeks, paring its gain for 2014 to about 16 per cent as the challenge to Widodo for the top job increased.
Force Majeure
A growing appetite for policies that safeguard Indonesian interests has already spurred President Susilo Bambang Yudhoyono's government to ban exports of mineral ores and limit bank ownership by overseas companies. It has also set new limits on foreign investment in oil services, storage and retail trade, even as it has allowed greater access to selected power plants, ports and airports.
Newmont Mining Corp. (NEM), the world's second-largest gold producer, declared force majeure on copper sales from Indonesia this week, after the export ban on mineral ore forced it to shut down its mine in the country.
Widodo would keep the export ban, his vice presidential candidate Kalla said this week. A Widodo government would seek to boost exports of processed minerals rather than raw ores and give incentives for local miners, according to his party's latest 129-page policy document policy document, which expands on a shorter version released last month.
Bank Ownership
It would also limit the expansion of plantations, seek self-sufficiency in rice and corn to reduce food imports and require reciprocal access to the countries of foreign lenders seeking entry to Indonesia.
In 2012, years after the Asian financial crisis of the late 1990s forced Indonesia to sell local banks to foreign lenders, the country limited financial institutions to buying 40 percent stakes in lenders. That scuppered a $6.5 billion bid by Singapore's DBS Group Holdings Ltd. to buy PT Bank Danamon Indonesia in what would have been Southeast Asia's largest bank takeover.
In contrast, the Philippines, which has won credit rating upgrades in recent years, is seeking to ease restrictions for foreign investors in banking.
Investors hoping for a dramatic easing of the recent mining restrictions will be disappointed, said Bill Sullivan, a Jakarta-based lawyer specializing in mining at Christian Teo Purwono & Partners.
"Regardless of which political parties form the new government of Indonesia and who is the new president, no one is going to magically 'press the re-set button,'" he said. "Resource nationalism has simply come too far in Indonesia and been accepted as a good thing by too large a segment of the population."
