| In the beginning of the year, all eyes | | | | on Indonesian politics and the election |
| were on Japan but the Nikkei 225 has | | | | cycle. While fuel subsidies were cut |
| been a major disappointment down 6% so | | | | back sharply reducing pressure on the |
| far this year. Meanwhile China has done | | | | country's budget and currency, other |
| well and Indonesia is the Asia-Pacific | | | | reforms have been pulled back. The |
| region's stock best market this year up | | | | reason is that President Yudhoyono party |
| 27% this year. This is despite another | | | | has only a 10% of parliamentary seats |
| punishing tsunami and concerns about | | | | and needs to have the cooperation of |
| bird flu. | | | | other coalition partners to maintain |
| Americans, in particular, seem to miss | | | | power even though the next presidential |
| the story of this 3,200 mile archipelago | | | | election is scheduled for 2009. |
| and third largest democracy in the world | | | | Indonesia has taken the brave step of |
| Indonesia's President Yudhoyono, a | | | | opening its financial services sector to |
| combination of General, intellectual and | | | | majority investment by international |
| bureaucrat, has made real progress in | | | | investors but it also needs to open up |
| fostering market reforms. Many would | | | | other areas such as infrastructure and |
| categorize Indonesia as a relatively | | | | power. The most important reform to make |
| poor country but I beg to differ. I have | | | | Indonesia more attractive to |
| toured Indonesia from tip to tip and it | | | | international capital is to set up a |
| is a country with many assets and great | | | | transparent and clear approval process |
| promise. Rich in natural resources, a | | | | to cut out red tape and corruption. Then |
| talented and young population, | | | | reinvigorate a previously announced plan |
| strategically positioned to benefit from | | | | to privatize some of Indonesia's 145 |
| Asian growth, a size three times the | | | | largest state-owned companies to |
| that of Texas and the world's fourth | | | | increase their profitability and raise |
| largest population. As a relatively | | | | more government revenue. Finally, why |
| young democracy and developing economy | | | | not follow ten other countries by |
| it lacks an important ingredient for | | | | putting in place a flat tax to rein in |
| economic growth: capital and a financial | | | | bureaucracy, stymie corruption and |
| system to allocate it efficiently. | | | | stimulate growth and productivity. |
| Lower interest rates and strong consumer | | | | Standard & Poor's Ratings Services |
| spending has led to a real economic | | | | recently raised Indonesia's long-term |
| growth rate of 6%. The realization that | | | | foreign-currency credit rating by one |
| Indonesia is taking steps to better | | | | notch to double-B-minus. S&P said the |
| mange its natural resources has also | | | | upgrades reflect Indonesia's improving |
| caught the eyes of global investors. | | | | fiscal and external performance, which |
| Indonesia has 10 billion barrels of | | | | has led to a declining debt burden. It |
| proven and potential oil reserves and | | | | also said the size of the government |
| 180 trillion cubic feet of proven and | | | | debt and high external debt continue to |
| potential reserves. After five years of | | | | constrain the ratings. |
| tough negotiations, Exxon Mobil and | | | | The Indonesian stock market has been one |
| Pertamina finally inked an agreement | | | | of Asia's best this year up 27%. |
| earlier this year. This should help | | | | Investors should take a look at the |
| Indonesia, a member of OPEC, to ramp up | | | | closed-end Indonesian Fund (IF) as the |
| production and move towards being a net | | | | best vehicle to invest in Indonesia. It |
| exporter of energy. | | | | is managed by Credit Suisse Asset |
| Exxon Mobil has operated in Indonesia | | | | Management and trades at a premium of 5% |
| for a century and invested $17 billion | | | | to net asset value with a price of |
| in the country, agreed to explore the | | | | $7.81. |
| dormant Cepu area years ago and by using | | | | The key to a stronger Indonesian economy |
| advanced technology, found proven oil | | | | is more trade and investment. American |
| reserves of 600 million barrels and 1.7 | | | | companies and investors can play a key |
| trillion cubic feet of gas. At peak | | | | role in maintaining America's influence |
| production, Cepu would provide the GOI | | | | in Indonesia which is being undercut by |
| about $2 million per day in revenues, | | | | powerful Chinese economic diplomacy. In |
| add 180,000 barrels a day in daily | | | | fact, we need to pay more attention to |
| production and eliminate gas shortages | | | | this key Muslim nation with a secular |
| in East Java. | | | | democracy than the Chinese do. |
| Investors have to also keep a close eye | | | | |