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Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., a boutique investment advisory firm based in San Antonio that manages domestic and offshore funds specializing in the natural resources and emerging markets sectors. The company’s no-load mutual funds include the... More
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  • Policy Reforms Pave Way for Indonesia 1 comment
    May 13, 2011 10:14 AM

    Known as the world’s largest archipelago, Indonesia is made of 17,000 islands—eight major ones—between the Indian and Pacific Oceans with the most volcanoes in the world. Almost half of the country’s population lives in an urban environment. Jakarta, the capital and largest city, is home to more than 9 million people. Literacy in Indonesia is high: 90 percent of the population aged 15 and over can read and write.

    Map of Indonesia

    Yet this highly literate country lags nearby southeastern Asian countries when it comes to infrastructure, according to a recent report by Morgan Stanley.

    • Less than 10 percent of the population has access to the Internet compared to 25 percent of people in nearby countries of Thailand and Vietnam.
    • About 40 percent of the roads are unpaved in Indonesia, whereas Singapore and Thailand have nearly 100 percent of the country’s roads paved.
    • A third of Indonesia’s population has no electricity, while Malaysia, the Philippines, Thailand and Vietnam all have electrification rates close to 100 percent.

    This should improve soon. As I often say, government policy is a precursor to change and recent major policy reforms, along with an attractive cost of capital and access to funding, are now paving the way for Indonesia to commit dollars to their sorely needed roads, railways, airports, electricity and telecom projects.

    Indonesia InfrastructureBy Morgan Stanley’s estimation, Indonesia will spend approximately $250 billion over the next five years on infrastructure alone.One third of this amount – $85 billion – is estimated to be spent on electricity, 27 percent will go toward roads, and 21 percent on telecom. This investment in infrastructure should help to push the southeastern Asia country’s GDP growth to more than 7 percent a year by 2015.

    Multiple resource companies should be benefactors from this infrastructure spending – 50 percent of all the projects are cement-intensive, to give one example – and that’s why we plan on keeping an eye out for opportunities for the China Region Fund (MUTF:USCOX).

    Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

    Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

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  • blunderbuss
    , contributor
    Comments (416) | Send Message
     
    I haven't invested in Indonesia, but I've been there a few times and I know people who live there. They regale me with endless tales of politicos feathering their own nests with public money that is intended for infrastructure programs.

     

    Any Indonesian reading this blog knows that one of the reasons Indonesians don't get ahead is KKN (korupsi, kolusi dan nepotisme) -- corruption, collusion and nepotism. The cronyism and nest-feathering that took place under the likes of "Gus Dur" Wahid are legendary in Asia.

     

    According to my sources, the 2004 tsunami that wiped out over 200,000 people from this earth was widely seen as a windfall for corrupt government officials and do-nothing "charities". Roughly a third of that money just plain disappeared into foreign bank accounts for various bush-league ministers.

     

    And let's not get started on Tommy Suharto. Now that he's free from prison after serving four years for ordering the murder of a judge (!), he's running for office (!!). This is the sort of man who will no doubt appoint a network of cronies to "manage" your investments.

     

    www.thejakartapost.com...

     

    One of the commenters in that thread dismisses Jakarta as a "laughing stock" compared to neighboring cities like Singapore and Hong Kong. Are you seriously advising investors to look to this troubled archipelago?
    13 May 2011, 11:10 AM Reply Like
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