Potential Investors Cautious on Indonesia

By webadmin on 12:07 pm May 30, 2012
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Zakir Hussain – Straits Times

With Indonesia’s presidential elections coming up in 2014, some potential investors are taking a wait-and-see stance. But political observers say whoever wins will matter little to the country’s business climate.

All the prospective candidates want Indonesia to become a developed economy, and policies will be broadly directed that way, said political economist Umar Juoro.

“Whatever we do, we will still need foreign direct investment. The difference is in degree,” Umar, of the Habibie Center, told a panel discussion at the Globe Asia Business Summit yesterday.

Indonesia’s economy is booming, but foreign investors have been wary of an upsurge in economic nationalism in South-east Asia’s largest economy — at a time when it badly needs foreign funds to develop further.

While state-owned and local firms are likely to be favored for industries such as oil and gas, there are opportunities for foreign investors in many other areas, said Fauzi Ichsan, managing director of Standard Chartered Bank in Indonesia.

“If you are in the consumer sector selling things to 240 million people, you are less likely to face this (barrier).”

He pointed out that 65 percent of the Indonesian economy is powered by domestic consumption, which will remain the backbone of the economy, a sentiment shared by consumer analysts and equity investors who spoke yesterday.

Some investors are concerned that a president elected on nationalist rhetoric may be cool towards greater foreign participation in the economy.

But Fauzi noted that it was the father of Great Indonesia Movement Party chief patron Prabowo Subianto — the late Soemitro Djojohadikusumo — who helped open up the economy under former president Suharto.

“One could also predict that if Prabowo becomes president, (his brother) Hashim will be quite involved, and his brother is an international businessman,” he said.

“With (Golkar chairman) Aburizal Bakrie, he is pro-business, some would argue he is going to be quite good for business.”

Recent surveys show both men among the top three potential candidates, along with former president Megawati Soekarnoputri.

Umar, however, said the Democrat Party of President Susilo Bambang Yudhoyono, who cannot run again by law, could offer up a dark-horse candidate. While his ratings have slipped, Yudhoyono remains widely popular.

That popularity, he noted, could be transferred to his wife Ani, similar to what former Argentine president Nestor Kirchner did with his wife Cristina Kirchner.

Or it could be shifted to a figure like Coordinating Minister for Politics, Law and Security Djoko Suyanto, as former Brazil president Luiz Inacio Lula da Silva did with incumbent Dilma Rousseff.

Other candidates include army chief of staff Pramono Edhie Wibowo and World Bank managing director Sri Mulyani Indrawati.

And Indonesian Institute of Sciences political analyst Siti Zuhro said new candidates could yet emerge between now and 2014.

“We need a candidate with integrity, credibility, competence and capacity,” she said, holding out hope that a fresh candidate such as State Enterprises Minister Dahlan Iskan could prove viable.

But Fauzi was less optimistic, saying Indonesia was trapped in political reforms introduced after Suharto’s 1998 downfall, which have led to a hung Parliament and a weak coalition government. “But so long as there is no coup d’etat, the business sector moves along and it is happy with 6 per cent GDP growth a year.”

Reprinted courtesy Straits Times