Postcard from Indonesia
By James Thom, Investment Manager, Aberdeen Asian Equities
Since our last postcard, I am pleased to note that news flow from Indonesia has continued to be broadly positive. Though the fiscal woes of the West have been somewhat of a hindrance to global growth, economic indicators in Indonesia have been robust. We believe Indonesia is poised for sustained and stable growth, underpinned by domestic demand and a steady flow of investment. As Southeast Asia’s most populous country and one rich in natural resources, the archipelago’s long-term potential is undeniable. Just look around and one sees a young, thriving and increasingly educated population that is enjoying rising income levels. This surely bodes well for the country’s long-term prospects. Still, visiting companies in Indonesia is
not always an easy task with the notorious Jakarta traffic not to be underestimated! More generally this reflects a business environment that is becoming increasingly constrained by the lack of infrastructure development. This may soon change, though, with the potential passing of a new land law and a ramp-up in infrastructure spending. Astra International, for example, is investing 750 billion rupiah in a toll- road operator which oversees a stretch of highway spanning Greater Jakarta and owns the right to develop two additional ones. The government has also pledged to increase infrastructure spending, which will include the construction of 4,000 km of road, 150 km of rail, and 14 new airports. This should provide better access to the country’s more than 17,000 islands
“We believe Indonesia is poised for sustained and stable growth, underpinned by domestic demand and a steady flow of investment.”
22 On the corporate front, Indonesia is
no less well endowed. It is home to good quality companies, most notably in the consumer sector, possessing proven track records of operating under challenging circumstances. One of our holdings is Unilever Indonesia. This local subsidiary of Unilever Plc has a leading market share in several products across the home and personal care segment as well as the food and ice cream segment — goods that are well positioned to ride on fast-growing consumer demand. Though still a work-in-progress and
the recent global upheaval in financial markets notwithstanding, Indonesia is poised for growth and could prove rewarding for investors for many years to come.
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