Indonesian vice president to contend for top job
President Susilo Bambang Yudhoyono is likely to head a reform-driven
alliance with Islamic parties after his vice president, Jusuf Kalla of
Golkar, broke off coalition talks to challenge him for the presidency,
Yudhoyono is by far the most popular candidate in the run-up to the
presidential election on July 8, with support of more than 50 percent
against less than 5 percent for Kalla, recent opinion polls showed.
A coalition between Yudhoyono's Democrat Party and small Islamic
parties is seen as more likely to push for reform of the civil service,
judiciary and police, and clamp down on graft, in a bid to attract more
investment and revive economic growth.
The Democrat Party won a fifth of the votes in the April 9
parliamentary election, early counts showed, putting it ahead of
Kalla's Golkar Party, with about 14 percent, and giving it a strong
position in coalition talks.
Kalla's surprise bid for the presidency follows a week of negotiations
between Golkar and the Democrats, which broke down on Wednesday amid
disagreements over which candidates Golkar should field to run as
Yudhoyono's vice president.
The move pushed the Indonesian rupiah and stocks moderately lower on Thursday.
But some analysts see Golkar's move as positive for Yudhoyono, because
the party hampered his reform efforts during his first term. Relations
between Yudhoyono, a former general, and Kalla, a fast-talking
businessman, have soured.
"That's good news overall," said Kevin O'Rourke, a Jakarta-based political risk analyst.
"It means a better chance for Yudhoyono of having an independent
approach to a second term and accelerating reforms in areas where
Golkar has offered resistance in the past, particularly the civil
service and the judiciary."
Kalla and former President Megawati Sukarnoputri of opposition party
PDI-P are due to meet late on Thursday for coalition talks, although
analysts do not see either of them posing a strong challenge to
Yudhoyono in the presidential race.
However, Golkar and PDI-P could form a strong opposition bloc in parliament, potentially making it harder to pass legislation.
Golkar, once the political machine of former President Suharto, has
held power for 33 out of the last 38 years. It is well-funded by
business interests and is currently the main member of Yudhoyono's
coalition in government.
But the party appears to be in some turmoil over its poor showing in
the election and what strategy to follow. At a party conference on
Thursday, it eventually decided to field Kalla against Yudhoyono.
"Golkar without Suharto has been in a process of continuous
fragmentation, and not only have they been consistently dropping in the
polls but they are almost hopelessly fragmented," said Jeffrey Winters,
an Indonesia expert at Northwestern University.
"I see this flip-flopping as an indication that Golkar is really in much worse decline than even the numbers indicate."
Indonesia's financial markets fell on Thursday following the news that
Golkar had pulled out of coalition talks. The rupiah and local stocks
had both rallied in the days after the Democrat Party tripled its votes
in the parliamentary election.
The main stock index had risen 11 percent between April 13, when
trading reopened after a holiday, and Tuesday's close. On Thursday, it
was trading down just over 1 percent.
The rupiah, the best-performing currency in Asia this year with a 1.5
percent rise against the dollar, fell 0.6 percent to 11,000 per dollar.
"I don't think there are conclusions to be drawn yet; it's just another
twist and turn in the process, and there'll be a few more," said James
Bryson, a Jakarta-based fund manager at HB Capital, on news that Golkar
had pulled out of coalition talks.
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