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Published: Monday June 16, 2014 MYT 2:25:02 AM
Updated: Monday June 16, 2014 MYT 2:26:28 AM

Nationalist tone, protectionist promises, dominate Indonesia presidential debate

JAKARTA (Reuters) - Indonesia's two presidential candidates traded nationalist rhetoric on Sunday in a debate ahead of July's election, with the front-runner suggesting he would make Southeast Asia's biggest economy more protectionist.

The tone of the debate, which focused on the economy and was the second ahead of the July 9 vote, is likely to add to concerns among foreign investors over how welcome they are in the resource-rich state whose fast growing, fast consuming, middle class is offering mouth-watering business opportunities.

"Every country has barriers ... (we can) make it a bit more difficult for foreign investors," front-runner Joko "Jokowi" Widodo said during the televised debate, in response to a question about the proposed opening up of Southeast Asian economies from next year.

"I believe our economy can grow by more than 7 percent (compared with little more than 5 percent estimated this year) with conditions. First, the investment climate has to be more open and let local investors create growth."

Some recent opinion polls have suggested his lead is narrowing against his rival, ex-general Prabowo Subianto who has adopted a heavily nationalist campaign from the outset.

It was a theme he repeatedly turned to in Sunday's debate.

"Our sources of wealth are controlled by foreign hands, foreign companies, so the wealth flows out from the country ... Indonesia's wealth should be controlled by our country," said a confident looking Prabowo, dressed in his campaign white safari shirt and wearing the national black "peci" hat.

By contrast, Jokowi, in a dark suit, looked more ill-at-ease than in the previous debate when he was accompanied by his running mate, Jusuf Kalla.

Kalla was widely seen to have helped win the first round by targeting Prabowo's controversial human rights record when he was a senior general.

Jokowi made an oblique jibe at Prabowo's periods living overseas, when he referred to his own upbringing and education as being entirely in Indonesia.

Prabowo is the son of one of Indonesia's best known economists and his brother one of its richest businessmen. His ex-wife, a daughter of former autocrat Suharto, sat in the front row with other members of his team.

Jokowi comes from a humble background, going on to develop a successful furniture business before moving into regional politics.

There were few surprises in the well-mannered debate and at one stage Prabowo crossed the stage to embrace his rival and express agreement with Jokowi's reference to the importance of a creative economy. Prabowo's only son is in the fashion business.

'A CONTRACT IS A CONTRACT'

Much of the debate focused on the need to raise up Indonesia's millions of poor, improve education and health care and to spend more on a ramshackle infrastructure that is dragging down productivity and scaring off investors.

Prabowo's insisted he was not against foreign investment but the possibility that he might become president has been weighing on both the rupiah and Indonesian share prices.

Whoever wins will take over an economy whose once stellar growth has started to slow and whose current account deficit remains stubbornly high.

The latter is in large part due to the country's massive fuel bill, exacerbated by costly fuel price subsidies that are sapping the state budget.

Perhaps surprisingly, neither candidate made a reference to the fuel subsidies whose eventual elimination would hit the poor hard but are seen as a priority to get national finances on track. Both candidates have in the past said they wanted to do away with the subsidies eventually.

"There was nationalistic rhetoric yes, but that has been a feature of the last two elections so I'm not surprised this is coming up. In the context of elections, candidates will try to avoid being portrayed as people who will sell out the country and both candidates did that tonight," said Paul Rowland, Jakarta-based political analyst at Reformasi Weekly.

"What was interesting was that Jokowi simply said 'a contract is a contract' and that contracts that have already been signed need to be respected. That should be comforting for investors."

It has become a central issue as the outgoing government battles with major foreign mining companies over contracts after it enforced in January a ban of exports of mineral ores, demanding instead they first be processed before shipment abroad.

(Additional reporting by Kanupriya Kapoor, Nilufar Rizki and Eveline Danubrata; Editing by Sophie Hares)

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