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