What do the likely next leaders of India and Indonesia think about foreign business? (and what can you do about it…)

Indonesia and India are due for elections in 2014. Two long-standing reformers will be exiting the stage. Two leading candidates have emerged – Jokowi (Indonesian) and Modi (India) – names that you will hear a lot more about in the coming months.

The large democracies of India and Indonesia will both have new leaders by the end of this year. In India, current prime minister, Manmohan Singh, is stepping down – in Indonesia, incumbent president, Susilo Bambang Yudhoyono, has served two consecutive terms and cannot be re-elected.Background

Parallels can be seen in the rise of prime ministerial candidate Narendra Modi in India and presidential candidate Joko Widodo (“Jokowi”) in Indonesia – both known as economic reformers and now favoured to win the elections. After somewhat indecisive leadership periods in both countries, investors are hoping for Modi and Jokowi to significantly reform their respective economies.

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India’s Narendra Modi Born 17 September 1950 Chief Minister of the state of Gujarat since 2001 Member of the opposition Bharatiya Janata Party (BJP) and favoured to win the general election Nearly eight in 10 Indians hold a favourable view of Modi, compared to only 50% who feel the same way about Congress Party candidate Rahul Gandhi Modi would be expected to follow a Hindu nationalist agenda The party’s priorities are jobs, investment, manufacturing and infrastructure

Modi’s expected approach to FDI

As Chief Minister of the state of Gujarat, Modi has earned credit with pro-business reforms and has streamlined bureaucracy and achieved significant improvements in the state’s infrastructure. The Gujarat Government has been claiming to be India’s growth engine and the country’s largest beneficiary of FDI. Recent figures, however, suggest that Gujarat has received US$ 8 billion in FDI between 2000 and 2013, while other states such as Maharashtra received US$ 46 billion during that period.

Although investors should not expect any changes in the protectionist attitude regarding India’s retail sector, BJP is likely to propose raising the cap on foreign ownership of Indian defence industry enterprises to 49% from 26% currently.

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Indonesia’s Joko Widodo – “Jokowi” Born 21 June 1961 Member of the Indonesian Democratic Party – Struggle (PDI-P) Mayor of Surakarta between 2005 and 2012 Governor of Jakarta since 2012 Declared his candidacy for the presidential election in March Recent polling puts Jokowi on around 40% of the vote, former general Prabowo Subianto, candidate for the Great Indonesia Movement Party, on 17%, and Aburizal Bakrie, candidate for Golkar, on 11% (Roy Morgan Research)

Jokowi’s expected approach to FDI

In his role as Jakarta’s governor, Jokowi – seen as incorruptible – has set clear and practical priorities for Indonesia’s capital, ranging from public transportation to healthcare, to education and poverty eradication.A Jokowi administration would be expected to promote PPP investment in underfunded sectors such as transport infrastructure and healthcare. However, his party has historically favoured protectionist policies, which suggests radical moves to further open up Indonesia’s economy are unlikely.

Jokowi’s thinking around infrastructure priorities can be gleaned from his “Medium Term Development Plan” for Jakarta, which prioritised:

1. Development of the Transportation System
2. Controlling and mitigating floods
3. Improving the Quality of Environment in Residential and City Areas
4. Improving the Quality and Quantity of Open Parks
5. Reducing Economic Gaps and Creating Jobs
6. Developing Multicultural Centers
7. Improving Government Services
8. Improving the Quality of Education
9. Improving the Quality of Public Health