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Investments in Indonesia Soar~ Investors flock to new opportunities

Investing in Indonesia: Another Asian ‘Tiger’ Roars Ahead

by Tony D’Altorio, Investment U Research
Investments in Indonesia Soar~ Investors flock to new opportunities

Mention Asia and most global investors will think China or India. But they may want to start paying attention to another country in the neighborhood.

In 2009, Indonesia had the world’s second-best performing stock market, up nearly 86%. And so far this year, it has climbed 45%.

That’s a far cry from October 2008′s dark days, at the peak of the global financial crisis. Back then, Indonesia’s Jakarta Composite Index fell 50%, and even had to shut down for three days.

But today, those troubles seem long past. Things are looking up for the archipelago… and anybody smart enough to invest in it.

Indonesia’s Remarkable Awakening

Indonesia has experienced remarkable change in the past few years.

Twelve years ago, it broke free from three decades of authoritarianism. Today, it has the world’s fourth largest population and is one of Asia’s fastest growing economies.

The country still has issues with deeply entrenched corruption, failing infrastructure and legal uncertainties. Yet it still offers big returns for investors to revel in.

  • Overall, Indonesia has sound economic fundamentals and sustainable economic growth at around 6%.
  • It also boasts low benchmark interest rates, high foreign currency reserves and strong foreign direct investment.

That all factors into why the Japan Credit Rating Agency upgraded Indonesia’s government debt to investment grade this year.

It should know, since Japan is Indonesia’s largest, foreign, long-term investor. Investors there have long-kept parts of their fellow Asian nation in their portfolios.

Other countries are also beginning to take notice. In the World Economic Forum’s 2010-2011 Global Competitiveness Index rankings, Indonesia rose 10 spots to 44th place… the list’s third-biggest mover.

Indonesia’s Middle Class

Americans largely continue to view Indonesia as a commodities-based economy. But private consumption now makes up about two-thirds of the economy there.

It does have an abundance of natural goods such as coal, tin and palm oil. But its commodities sector has actually underperformed this year.

Instead, the consumer sector took off, thanks to the 60 million low-income Indonesian workers projected to join the middle class in the coming decade. If so, that makes the country the fastest growing consumer market after only China and India.

Market research company Euromonitor expects that to continue. It sees the number of Indonesian households with $5,000-$15,000 in annual disposable income growing from 36% of the population this year to over 58% by 2020.

The Asian Development Bank (ADB) also recently noted growth in Indonesia shifting from urban centers on the main island of Java to other parts of the country. And poverty reduction in such rural areas is much bigger than in the urban areas.

Big retailers, banks, automakers, insurers and consumer goods producers are tapping the growth. In return, they’re posting record profits this year.

Astra International (PINK: PTAIF), Indonesia’s biggest automaker, certainly is. Its shares have risen over 60% this year thanks to booming business. Astra’s vehicle sales rose 60% January – September 2010. And the larger share of that came from the islands of Sumatra, Sulawesi and Kalimantan.

As a whole, Indonesia is set to be the region’s largest automotive hub, producing 730,000 automobiles and 7.2 million motorcycles. Despite expanding factory capacity, Astra says it can’t keep pace with demand.

Investing in Indonesia

U.S. investors who want a part of Indonesia’s growth should try one of two ETFs.

  • iShares MSCI Indonesia Investable Market Index Fund (NYSE: EIDO): Fairly well balanced, it has about 29% in financials, 27% in consumer stocks and 22% in commodity stocks. It has about 13% in Astra International, its largest holding.
  • Market Vectors Indonesia Index ETF (NYSE: IDX): It contains about 27% in financial stocks, 23% in consumer stocks and 26% in commodity stocks. Its largest position is also in Astra, but only with 8%.

The only downside to investing in Indonesia is the possibility of a short-term stock bubble. Thanks to QE2, some U.S. dollars could rush in there in search of higher returns.

The search for hard assets has already sent some of its commodity producers’ stocks rocketing higher recently.

Fortunately, many companies there still boast growth well above their 2011 P/E ratios. And the Indonesian rupiah continues to gain against the dollar.

So in the long-term, Indonesia looks good… and is set to look even better.

Good investing

Balifornian Tours is the ultimate in custom guided tours to Bali and Indonesia


New 2010 Indonesia Surfing Champion is Crowned

Putra Hermawan is the 2010 Indonesia Surfing Champion - Bali Surfing News and Blog
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Putra Hermawan: the Indonesian champ

When a national champion is crowned in the last seconds of surfing contest you're witnessing a breathtaking moment.

It happened in Asia. The 2010 Indonesia Pro Surfing Tour reached its climax in the Rip Curl Surf and Music Festival, held at Kuta Beach’s famous "Halfways".

Dedi Santosa was trying to beat Marlon Gerber and needed an 8.65-point wave to claim the 2010 Coca-Cola ISC Tour. But Santosa missed the score in the last 30 seconds of the final heat and delivered the championship to Putra Hermawan.

18-year-old Putra Hermawan is the youngest ever ISC Tour Open Division champion.

Marlon Gerber, the event winner, dedicated his first ISC tour win to his friend Andy Irons who tragically passed away recently.

Husni won the Longboard Division for the second time, Dyah Rahayu Dewi took her second win in a row in the Women’s Division and Jeren Kiring claimed the National GromSearch Final.

2010 Coca-Cola ISC Tour Open Division Results:

1. Putra Hermawan
2. Dedi Santoso
3. Pepen Hendrik

Rip Curl Surf and Music Festival results:

1. Marlon Gerber
2. Dedi Santosa
3. Raditya Rondi
4. Wayan Suprayitna

Balifornian is the ultimate custom tour guides in Bali and Indonesia and can get you to all the best surf spots


Best of Indonesian Surfing Championship Tour Awards

 The crowning of the Coca-Cola ISC Tour surfing champions took place in the Discovery Kartika Plaza Hotel in Kuta - Bali, where hundreds of surfers, surf industry members, media, and supporters gathered to celebrate the 7th year of continued growth and success of the ISC and to applaud the achievements of the 2010 ISC champions.

The evening program got started at 8:30 pm with MC Tai Graham welcoming the attendees and introducing ISC CEO Tipi Jabrik, who also welcomed the audience and gave a brief summary of the year's activities, which included sanctioning and running a total of 19 events during 2010.

There were 7 Open/Women/Masters Division events (Oakley, Rusty, Reef, the government of West Java, the government of Rote Ndao, Quiksilver, and Rip Curl), 2 Pro Junior Division events (Billabong and Oakley), 8 Junior Division events (Rusty, Quiksilver and Rip Curl), and 2 Specialty events (Oakley World Pro Junior and Bali International Sport Week) for a total of 19 events.

Next, Jabrik presented appreciation awards to representatives of event sponsors Oakley, Rusty, Reef, the West Java government, the Rote Ndao government, Quiksilver, and Rip Curl, and surf industry supporters Baliwista (Bali Lifeguard Department), the environmental group GUS (Gelomban Udara Segar), and media including SurfTime Magazine, and Magic Wave Surf Community Newspaper.

Finally, Jabrik presented the largest appreciation award to Sri "Ipung" Purwanto, Coca-Cola Amatil Indonesia's Corporate Social Responsibility Coordinator. Earlier this year the ISC and CCAI signed a historic 3-year sponsorship agreement, and Mr. Puranto told the audience how pleased he was to be part of this program that is not only helping to grow the sport of surfing in Indonesia but also creating more awareness about the environment and working to clean up Bali's beaches and the ocean.

A buffet dinner followed, during which the audience was treated to a spectacular "Year in Review" video by ISC's videographer Sean Gilhooley.

Then it was on to the crowning of the 2010 Indonesian Surfing champions, with the highlight of the awards being the crowning of 18-year-old Putra Hermawan from Nusa Lembongan as 2010 ISC Open Division Champion. He takes home a check for an unprecedented Rp 100 million (approximately $11,000 USD), the largest amount ever given to an Indonesian surfing champion. He also won the Pro Junior Division Championship (under 21 years of age), for which he received another Rp 5 million ($550 USD). Hermawan was last year's Junior Division Champion as well, so in just two years he has won 3 division titles, indeed an impressive accomplishment.

The Women's Division championship was won by 28 year old Yasnyiar "Bonne" Gea, originally from Nias but now living in Bali, making this her 3rd consecutive ISC Women's Championship title.

Taking the Longboard Division Championship again this year is 29 year old Husni Ridwan from Batu Keras, West Java, and the Masters Division Championship (over 35 years old) was won by Ketut "Kombong" Juliarta in his first season competing as a Master.

Rounding out the awards was 14-year-old Jeren Kiring from Bali hoisting the Junior Division (under 16 years old) Championship trophy. In just two years of competition, this adept young surfer has risen from virtual obscurity to Indonesia's Junior surfing champion. Certainly this won't be the last time this young man will climb on a stage to accept another championship trophy.

With the awards presentations completed, it was straight into the music with the live band Shaggy Dog from Jogjakarta. They treated the audience to just over an hour of their upbeat tunes before calling it a night.

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Indonesia to sell Carbon Credits for Sustainability

Indonesia Hopes to Sell Carbon Credits for Its Forests

Trees smolder after a clearing fire near Bukit tiga puluh natural forest in Riau, Central Sumatra, Indonesia (file photo)
Photo: AP - From VOA News

Trees smolder after a clearing fire near Bukit tiga puluh natural forest in Riau, Central Sumatra, Indonesia (file photo)

The international community will gather next week in Cancun, Mexico to negotiate an agreement to curb man-made climate change. While there are fears that goal will not be met, some countries already are implementing part of the plan - by reducing emissions due to deforestation and degradation. Heavily forested countries such as Indonesia hope to see more progress on the effort in Cancun.

Indonesia has almost 1 million square kilometers of forests, the second-largest in the world after Brazil's. The World Bank estimates that if the world put a monetary value on the carbon stored in trees, Indonesia could earn up to $2 billion a year by selling carbon credits.

Jakarta is ready for the plan, known as REDD for reducing emissions from deforestation and degradation. There are several pilot projects throughout the archipelago, and earlier this year the Russian company Gazprom bought the first carbon credits from a REDD project.

Agus Purnomo is the head of the Indonesian Climate Change Council:

"This shows that despite all the challenges that we are trying to overcome on good governance issues, on availability of resources, on expertise and whatnot, there are real opportunities of making things happen," said Purnomo.

Most climate experts say that greenhouse gases, such as carbon dioxide, released by burning oil and coal, contribute to warming temperatures. To reduce the warming, countries are negotiating a binding plan to cut emissions.

For some nations, that will mean reducing the use of fossil fuels. But in heavily forested countries, such as Indonesia, it could mean protecting forests, which absorb carbon dioxide.

But the REDD plan has problems that need smoothing out, mostly due to poor governance in developing countries. For example, there is the question of how to guarantee that the carbon credits sold will not be wiped out by illegal logging. Environmental group Greenpeace warns that corruption also could reduce the benefits.

Nonetheless, Norway has committed $1 billion for Indonesia to protect its forests. Purnomo says this show of confidence has helped the country to start reforming its forest management.

"It's just like when you want to make a turn on a tanker ship: it will take several days to do a real turn," said Purnomo. "For us, it will mean several months to make a change. But the seriousness, the efforts, the consultations, the designs that have been put in place in the last two months is amazing. It's unprecedented"

In January, Indonesia begins a two year moratorium on new permits to clear natural forest.

Agus Sari, who heads Indonesian operations for the U.S. company Sustainable Conservation, says the progress made is not yet enough for a large carbon market to take off.

"We are probably 25 percent toward what we should have had in terms of good governance, but you know, it's 25 percent more than it used to [be]," said Sari. "But I think time-wise it is not too bad because if REDD was ready now, I don't think Indonesia would be ready"

Many taking part in climate negotiations see REDD as one of the least controversial points and they expect to make headway on implementing the program during the Cancun summit. But it might still be a few years before carbon credits from forests are sold widely.

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