GBE Domestic Politics

Topics: Elections, Election, Stock market Pages: 7 (1599 words) Published: February 3, 2015
General Business Environment
(Domestic Political Environment)

THE IMPACTS OF POLITICAL TURMOIL DURING GENERAL ELECTION IN INDONESIA ON PALM OIL INDUSTRY
The Case of Golden Agri Resources Ltd.

Lecturer:
Prof. Dr. Mohtar Masoed, M.A.

by:
Nanang Suko Sadono
13/361118/PEK/19272
Batch 63 International

MAGISTER OF MANAGEMENT
UNIVERSITAS GADJAH MADA
YOGYAKARTA
2014
THE IMPACTS OF POLITICAL TURMOIL DURING GENERAL ELECTION IN INDONESIA ON PALM OIL INDUSTRY
The Case of Golden Agri Resources Ltd.

1. INTRODUCTION
In business, it is important to consider the political risk and its impact on the organization. Political risk is worth considering because an action or a change in policy in one country can have a big impact on the financial sector and the economy of that country. Political risks are generally associated closely with the government as well as political and security situation in a country. If the political situation is stable, generally business runs smoothly. In terms of the stock market, a conducive political situation would make the stock price go up. Conversely, if the political situation is uncertain, it would cause the element of uncertainty in the business. In Indonesia, after the fall of the New Order, changes in politics and governance was characterized by a significant change in the political system (a process of democratization) which had opened new opportunities and also new threats to the business community this country. For years, during New Order, political parties in Indonesia were only 3 parties: PPP, Golkar, and PDI. After New Order fell (Reformation Era), the number of political parties involved in general election increased significantly. The 1999 general election, the first general election in Reformation Era, was followed by 48 parties. Despite the number of political parties are always changing during the Reformation Era, political situation was relatively stable. The stability also continued under President Susilo Bambang Yudhoyono. However, in most current general election, few months ago, there were some instabilities in Indonesian politics. This paper will describe these conditions (the last general election) and their impacts on the industry, particularly palm oil industry, using the case of Golden Agri Resources Ltd, one of the biggest palm oil producer in Indonesia.

2. POLITICAL TURMOIL IN 2014 GENERAL ELECTION
General election in Indonesia is run in two phases, legislative election and presidential election. In 2014 general election, the legislative election was relatively conducive There were 15 political parties participated in the election, including 3 local political parties in Aceh. This election was won by PDIP with the total vote 18.95% (www.pemilu.com), followed by Golkar and Gerindra on the second and third place. It was predicted that since the legislative election was held successfully and the situation was very conducive, reflected by there was no substantial protests or objections from the participants, the presidential election (which had two competing candidates, Prabowo Subianto-Hatta Raja and Joko Widodo-Jusuf Kalla) would also run smoothly. However, the facts were totally different. Here are some events or facts that showed the unstable political conditions in Indonesia after presidential election in 2014: Different quick count results

In quick count, both parties (Prabowo-Hatta and Jokowi-Kalla) claimed as the winner of the presidential election. There were some survey organizations stated that the election was won by Prabowo-Hatta, while the others stated the opposite. CSIS (Center for Strategic & International Studies) through senior researcher, Philip Vermonte, stated that there were advantages in Jokowi-Kalla. The figure reached 51.9 percent, while Prabowo-Hatta gained 48.1 percent. There were also some other survey organizations published similar results, stated that the winner was Jokowi-Kalla, such...

References: 6. Diary. 2014. Quick Count Indonesian election : Prabowo vs Jokowi, URL: http://www.redstate.com/diary/tukangsepam/2014/07/11/quick-count-indonesian-election-prabowo-vs-jokowi/, accessed on October 15, 2014.
7. General Elections Commission (KPU). 2014. Presidential Election Result. URL: http://www.kpu.go.id/index.php/pages/detail/2014/316, accessed on October 15, 2014.
8. Golden Agri Resources Ltd. 2014. Preserving the Present Ensuring the Future-Annual Report 2013. Singapore: Golden Agri Resources Ltd.
9. Thatcher et al. 2014. Indonesia 's Prabowo withdraws presidential candidacy - party official. URL: http://www.reuters.com/article/2014/07/22/us-indonesia-election-prabowo-idUSKBN0FR0T720140722, accessed on October 15, 2014.
10. Yahoo Finance. 2014. Composite Index (JKSE). URL: http://finance.yahoo.com/q/bc?s=^JKSE&t=6m&l=on&z=l&q=l&c=, accessed on October 16, 2014.
11. Yahoo Finance. 2014. Golden Agri Resources Ltd. URL: http://sg.finance.yahoo.com/q/bc?s=E5H.SI&t=3m&l=on&z=l&q=l&c=, accessed on October 16, 2014.
12.
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