Having been plagued by a series of misfortunes, Indonesia’s economy and related ETFs may be well-placed to established solid growth rates if the government provides the necessary reforms.
Many outside of Indonesia don’t realize that the country is actually doing quite well, with a stable government and an economy that has evaded the full force of the global downturn – only China and India are growing faster than Indonesia, according to The Economist.
Still, the country has some problems:
- Indonesia remains prone to sectarian and ethnic violence
- More than 15% of Indonesians live below the poverty line
- Unemployment stands around 8%, but the workforce is growing
- Inequality has widened
- Abusers of power in the former regime are going unpunished; Indonesia is rife with corruption
- Infrastructure is poor, if not non-existent
- Choking smog is being pushed down by El Niño weather, which also highlights the country as the world’s third-largest emitter of carbon
On the other hand, there are some hopeful points about Indonesia:
- A young population and a falling birth rate equates to a surge in the ratio of working population to the number of dependents. More than half of the population is likely to live in urban areas, indicating a boost in consumption.
- Circumspect fiscal policy has left the government with enough cash for infrastructure and public services.
- The re-election of Susilo Bambang Yudhoyono and his running mate voices the people’s need for reform.
- Indonesia may enjoy a period of political stability. The process of democratizing the country is now in full swing.
- Market Vectors Indonesia ETF (NYSEArca: IDX): up163.2% year-to-date
Max Chen contributed to this article.