Indonesian Rupiah - up on growth

Ever since the current president of Indonesia was elected, I have been very excited by Indonesia`s prospects. The reasons are thus:

1. Leadership: The values and leadership style of PM Dr Susilo Bambang Yudhoyono are conducive to stable government. The PM is US-educated so there is some hope that he will embrace western values. He has also been concillatory with US and Australian governments.
2. Tourism: The tourism industry was hit by terrorism, and less so by the tsunami. It appears that Indonesian police have had greater success rooting out terrorism than the Philippines.
3. Values: Indonesia has long been divided by different values (religions) and ethnic groups that have fought over control of resources > mining revenues. This and corruption has undermined the rule of law.
4. Infrastructure: there is some hope that Indonesia will be able to develop basic infrastructure to service industry.
5. Industry: Certainly the Indonesian coal & minerals industries will benefit from renewed investment. Oil & gas exploration and development also will boost national income since indonesia is a net energy exporter.
6. Civil Unrest: The government is close to negotiating a peace agreement with the Free Aceh Movement in North Sumatra. This region controls a significant share of the country`s oil production capacity, so will aid further investment.
7. Trade: Exports are up 30% in the last year since Dr Y`s election.

There is every reason to believe that Indonesians will be less prone to embracing terrorism if their prospects for employment are raised. but it only takes 1 to set a bomb. Given the stronger terms of trade of Indonesia (from net energy exports) and its stronger leadership, it seems to have less upside than the Philippines peso, but represents a safer bet.

- Andrew Sheldon www.sheldonthinks.com