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Will Indonesia Replace India in the BRICs?

As India fails to deliver on its promise of growth, a smaller Asian country Indonesia, finds itself in a position to lure investors away from the third largest economy in the region with higher stock market returns, better fiscal management and lower inflation.

“Indonesia looks like it has hit the sweet spot, whereas India is nursing a headache from its latest boom,” says Frederic Neumann, Co-Head of Asian Economic Research at HSBC.

While the two economies aren’t similar in terms of size, with India’s population of 1.2 billion and Indonesia’s at 240 million, the countries share many similarities, leading to comparisons. Both have a burgeoning consumer base and are democracies with an investment grade rating.

India’s economy has hit a rough spot with the slowest pace of growth in three years with the government unable to deliver on economic reforms. On the other hand, Indonesia has won favor with investors over the past few years.

That’s leading Neumann and others to call for Indonesia to be included in the lineup of top global emerging markets. “The term BRICs really misses out on some of the key developments of our time. Indonesia has solid public finances, strong growth, a burgeoning consumer market, and plenty of resources to keep the economy afloat for many years,“ says Neumann.

On the other hand, India, according to Goldman Sachs’ Jim O’Neill, the man who coined the term in 2001, is the BRIC that has disappointed. Late last year O’Neill said that India’s poor record on productivity, foreign direct investment (FDI) and policy reform had made it the most disappointing among the four biggest developing economies – Brazil, Russia, India and China.

For example, India’s fiscal deficit target of 5.1 percent is wider than those of its BRIC peers. Its forecast deficit is more than four times Brazil’s estimated 2012 budget gap of 1.2 percent of output.

“It is difficult to see how India can turn around in the short term. It could in the next couple of years, but that is an eternity from investors’ point of view, ” says Neumann.

He adds that investors have already voted with their feet taking money out of India. The latest evidence of this was in the month of April when offshore investors withdrew some $403 million out of Indian equities and bonds, according to Reuters data.

While it is difficult to estimate how much of India’s loss has been Indonesia’s gain, market watchers say many investors have been increasingly looking at Indonesia as an alternative to India.

“To a large extent investor interest has moved to Indonesia,” Robert Prior-Wandesford, Director, Asian Economics at Credit Suisse told CNBC. “Indonesia’s equity market is hugely better than that of India and in part at the cost of India.”

While the Bombay Stock Exchange’s Sensex was the worst performing major global index in 2011 falling almost 25 percent, the Jakarta Composite Index[.JKSE  3945.68    -99.97  (-2.47%)   ]gained over three percent.

Besides delivering better returns, Indonesia is also catching up with India when it comes to economic growth. India’s gross domestic product (GDP) is expected to expand at just under 7 percent in the current fiscal year, which began April 1, while Indonesia is expected to deliver 6 to 7 percent growth over the next couple of years, say analysts.

Even on trade, Indonesia scores over India. According to brokerage CLSA’s latest forecast Indonesia’s current account deficit in 2012 will be just 0.8 percent of GDP, while India’s will come in at around 3.9 percent.

Rajeev Malik, Senior Economist at CLSA, says in Indonesia’s case, net Foreign Direct Investment (FDI) will offset the current account deficit. In India’s case, he points out, an estimated net FDI inflow of $15-20 billion will be well short of the current account deficit.

“They are doing better although they are not as big an economy as India,” he says.

Credit Suisse’s Wandesford says Indonesia reminds him of India three to four years ago, when there was a huge euphoria over the growth opportunity it offered foreign investors and companies. “In 2005-2008 India could do no wrong, now it is Indonesia.”

India, which was awarded an investment grade rating by Standard and Poor’s in 2007 is now under threat of losing it, with the ratings agency last month downgrading its credit outlook to negative. By contrast, both Fitch and Moody’s upgraded Indonesia to investment grade in December and January, respectively.

Size Matters

But despite the growing pessimism around India, most experts feel that it is not time yet to write off a country of a billion-plus people, if on nothing else than its sheer size.

Some argue that while there is a case for Indonesia to join the BRICs, it shouldn’t be at the cost of India as they both have different comparative advantages. While one is a commodity economy, the other is a services oriented one and an investor, for example, can’t completely replicate his menu of Indian stocks in Indonesia, say analysts.

“BRIC investors have a 20-year horizon and India will finally deliver in the long term,” says Neumann.

By CNBC’s Gauri Bhatia

Ranks 9 in the World

Indonesia takes no. 9 position on the list of major countries for direct foreign investment, below Vietnam and Mexico.

The data compiled via the United Nations Conference on Trade and Development (UNCTAD) survey announced by Director of Regional Cooperation of Investment Coordination Board (BKPM) Rizar Indomo Nazaroeddin.

In the survey conducted on 193 countries through out the period 2009-2012, Indonesia remains at no. 9, whereas Vietnam advances from no. 11 in the period 2009-2011 to no.8 in the period 2010-2012. Mexico jumps from no. 12 to no. 6, while China consistently maintains no. 1 position in the two consecutive periods.

Although Indonesia’s position is stagnant, for the period 2010-2012, it manages to beat Germany, Thailand, Australia, Japan, and Malaysia. Its position is further strengthened by investment grades embedded by other institutions in the survey.

According to Deputy Governor of Bank Indonesia Muliaman Hadad, Indonesia’s continued economic growth opens door for the country to develop further.

NUR ALFIYAH

(Source: Tempo Interaktif)

India? Forget it :)

Southeast Asian nations are swallowing an outflow of money from India, as foreign investors lose patience with its policy paralysis and slowing growth and aim instead for more promising emerging markets such as Indonesia.

Corruption scandals and high inflation have added to India’s woes, which have seen growth slow to a three-year low while the fiscal deficit widened to 5.9 percent of GDP in the last financial year.

“India was sold on the promise of high growth which simply hasn’t panned out over the past four years,” said Gautam Prakash, founder of U.S. based hedge fund Monsoon Capital.

Foreign portfolio flows into Indian stocks have dropped 99 percent to just 5.17 billion rupees ($96.5 million) since a March budget that largely disappointed investors.

Among the most significant developments from the shift has been the direction in which money is headed – with a big chunk flowing to Jakarta and other Southeast Asian capitals.

Two provisions put forward in the budget to tax indirect investments and combat tax evasion were the last straw for some global mutual funds, prompting an acceleration of money leaving India.

While the provisions were later put on ice, the prospect that such a tax could be proposed in India was enough for some investors to send their Asia-allocated money further east.

“You’re seeing a situation where the ‘I’ in BRIC is being replaced by Indonesia,” said Tim Condon, head of research and strategy for Asia at ING.

LEFT OUT

An emerging market brochure distributed by Franklin Templeton last month had data on India missing from a world map. From a global leader in emerging market investing, led by omnipresent guru Mark Mobius, that omission was telling.

India exposure in Asia’s biggest equity fund, the $18 billion Templeton Asian Growth fund, dropped to 16 percent of its assets at the end of March from nearly 20 percent a year ago, while exposure to Association of Southeast Asian Nations countries rose to 35 percent from 31 percent during the period.

An ASEAN-focused equity fund launched by Daiwa Asset Management started with about $366 million in February and has since grown to manage about $430 million, while Fidelity Funds-ASEAN has seen a net inflow of nearly $250 million in the last year.

The bigger ASEAN markets do not necessarily offer a compelling case on valuation grounds.

“Generally we are more negative on India than we are positive on the alternatives, such as Indonesia and the Philippines where we feel the markets have perhaps run ahead of themselves,” said David Baran, co-founder of Tokyo-based hedge fund Symphony Financial Partners.

“However, the ASEAN alternatives do have more positives and less negatives than India and we think that foreign investment outflows from India into the ASEAN alternatives are highly likely to increase if anything.”

Indian shares trade at price to book value of 1.9 times, higher than 1.4 times for Asia Pacific shares as a whole but less than 3.1 times for Indonesia, 2.2 times for Thailand and 2.5 times for Philippines, according to data from Thomson Reuters StarMine.

The trend, nonetheless, is clear as money managers shift away from India, at least for the short-term, towards markets that offer the same favorable demographics and growth potential that had previously drawn investors to Delhi and Mumbai.

BETTING ON ASEAN

Funds from firms such as Aberdeen, Matthews and T.Rowe with mandates to bet in Asia invested a smaller percentage of their assets in India at the end of March compared with the year-ago period and more in Indonesia and other Southeast Asian countries than they did a year ago.

Part of the drop is due to a fall in the value of holdings, but fund flow data tracked by Lipper shows mutual fund clients are responding as well, giving more ammunition to funds betting on Southeast Asia and less to those investing in India.

Investors pulled out nearly $480 million from offshore India dedicated funds in April, increasing the 12-month cumulative net outflows to about $4.1 billion, according to data from Lipper.

By comparison, funds investing in Southeast Asia have seen net inflows of about $900 million in the year ending April.

The gap between the total assets under offshore India funds and that of Southeast Asia fell to a three-year low of about $13.5 billion in April, indicating investors were buying into a region that is home to nearly 600 million people.

Indonesia focused bond funds are in favor too, with eight such funds collecting a cumulative $355 million in the year ending April. HSBC Indonesia Bond Open received $200 million alone.

“We are definitely seeing more interest in ASEAN,” said Matt Pecot, head of Credit Suisse’s prime broking unit in the Asia Pacific.

Net exposure to India in Asia-focused hedge fund portfolios fell to 18.7 percent in April from 32.5 percent in January 2011, according to data compiled by Credit Suisse based on their client portfolios. The same measure for Indonesia surged to 51.8 percent in April from 24.7 percent in January 2011.

Net exposure refers to the difference between a hedge fund’s long positions and short positions. A higher net exposure means funds are expecting the stock market to rise.

BRIC HITS WALL

Ten years ago, Chairman of Goldman Sachs Asset Management Jim O’Neill, then the bank’s chief economist, combined the emerging market growth stories of Brazil, Russia, India and China to coin the famous “BRIC” moniker. O’Neill recently called India the “biggest disappointment” of the BRIC nations.

“India was a 9 to 10 percent growth economy when the BRICs were put together and now it’s slowing. Indonesia was a 4 to 5 percent growth economy and it’s moving in the other direction,” ING’s Condon said.

The top-three BRIC mutual funds by assets invested a smaller percentage of their assets into India at the end of March than they did a year back, according to data from Lipper. They are also underweight compared with their benchmark, meaning they do not expect India to contribute to portfolio outperformance.

Templeton BRIC fund had 11.7 percent of its assets in India, its lowest since June 2009.

“India is getting trapped in that high fiscal deficit, high current account deficit situation and there is no easy way out of that unless it takes the tough steps,” said Binay Chandgothia, portfolio manager at Principal Global Investors.

Indonesia and the Philippines, meanwhile, have neither current account nor significant budget deficits to worry about, although they do share some of India’s problems such as their own fuel and food subsidies, Symphony Financial Partners’ Baran said.

With combined GDP of $2 trillion, 10-member ASEAN is angling for foreign investment. Ranging from resource-rich Indonesia to impoverished Laos and financial centre Singapore, ASEAN is planning a union by 2015 to allow for free flow of goods, capital, services and labor.

“As far as stock prices go, foreigners own approximately 40 percent of the free float of the Indian market,” Baran said.

“It will not take much of an exodus for this to have a significant impact on the market and there are clearly plenty of alternatives in ASEAN.” ($1 = 53.5550 Indian rupees)

Reuters

(Additional reporting by Abhishek Vishnoi in MUMBAI; Editing by Michael Flaherty and Alex Richardson)

Eyeing the booming spot!

Indonesia’s banking sector is becoming a magnet for foreign firms willing to accept an uncertain investment environment in return for booming growth and an untapped market of tens of millions. Major players are watching with interest the outcome of DBS Group of Singapore’s trail-blazing US$7.3 billion deal struck on April 2 to acquire Bank Danamon Indonesia, the nation’s fifth-largest bank. Underlining the uncertainties, the central bank declined to approve the deal until it establishes new rules on foreign ownership, which currently allow local and foreign investors to own up to 99 percent of Indonesian banks.

Bank Indonesia also said investors would require separate licences for different services, such as taking deposits, setting up ATMs and opening branches. A green light on the closely watched deal, which highlights the eagerness of major institutions to expand in Indonesia, would give foreign firms more confidence to invest in an economy that posted 6.5 percent growth last year. “Indonesian banks are attractive because they are growing much faster than foreign banks,” said Harry Su, head of research at Jakarta-based brokerage Bahana securities.

“DBS’ current return on investment is around 10 percent, while Danamon’s is around 15 percent,” he said. The growth gap between Indonesia’s banking sector and Western institutions struggling to emerge from the downturn and debt crisis is expected to widen in decades to come, according to a report by PricewaterhouseCoopers (PwC). Indonesia’s banks are growing at a phenomenal rate, much faster than in Europe and the United States, the report said. Indonesia’s domestic banking assets are tipped to grow to US$5.1 trillion by 2050 from US$187 billion in 2009 — a 27-fold increase. Over the same period, US assets are expected to expand just three-fold to US$46.5 trillion.

“Indonesia’s banking sector is currently the best performer in Southeast Asia, especially in profitability,” said Iwan Wisaksana, an analyst at Fitch Ratings Indonesia. DBS’ bid for Danamon is in line with plans by Southeast Asia’s biggest bank to tap into emerging Asia, as it can no longer grow organically in Singapore where market penetration is already high, Su said. By contrast, only around half of Indonesians aged over 15 have bank accounts, authorities say, leaving an untapped market of around 60 million including many now joining the middle class and requiring financial services. “Look at penetration in Asia — Indonesia would be one of the lowest. Even countries like India that have low penetration are above 50 percent,” Standard & Poor’s analytical manager for emerging Asia, Geeta Chugh, told AFP.

International interest has been spurred by a number of factors including the lenient foreign ownership laws that were introduced to boost investment after the 1997-98 Asian financial crisis. The recent doldrums in the West have made buoyant regional economies like Indonesia’s even more attractive, and prompted investors to re-calculate the rewards against the risks posed by opaque legislation and widespread official corruption. Indonesian authorities say that investor confidence has also been boosted in recent months since ratings agencies Moody’s and Fitch bumped Indonesia to investment grade after long years of junk status. The DBS deal would be the largest bank acquisition in Indonesia’s history, but other foreign investors have also been making forays. Commonwealth Bank Australia announced last year it would almost double the number of branches in Indonesia from around 80 to 150 over the next few years. London-based HSBC, which began banking in

Indonesia in the late 19th century, acquired an 89 percent stake in local Bank Ekonomi Raharja in 2009, making it then the third-biggest foreign bank by assets in Indonesia. Smaller institutions like Bank Ina Perdana, Bank Mestika Dharma and Bank Maspion are all reportedly being eyed by investors who are awaiting a resolution on the ownership regulations. Opposition to the Danamon deal is an echo of a recent nationalist outburst over the mining industry, which prompted parliament to pass a law in February capping foreign ownership at 49 percent after 10 years of production. Suggestions that the ownership cap could also be tightened for banks have fuelled uncertainty over the sector’s regulatory environment, said PwC Indonesia’s technical adviser for banking Ashley Wood. A PwC survey of 100 executive bankers in Indonesia released last month showed that the regulatory environment was the top obstacle to growth in the banking sector. “The opportunities here are fantastic, but that comes with a cost,” Wood said.

AFP/ir

A Relationship Worth $45 billion

CHENNAI: Seeing bigger potential in the fast growing business between India and Indonesia, the bilateral trade target for 2015 has been revised from USD 25 billion to USD 45 billion, Indonesian Ambassador Andi M Ghalib said here today.

Indonesia would also resume its plan of commencing air traffic to India this June, he said.

“Earlier, the target was to reach 25 billion USD by 2015. But the bilateral trade has already crossed 20 billion USD. So, on the advice of our President we revised it to USD 45 billion last month,” Ghalib, who arrived here on a week-long trip till April 26, said.

Indonesia is interested in electronics, telecom and textiles, and India in coal, rubber, timber, palm oil and wood products, he said.

Intending to improve relations with India, the southeast Asian archipelago would also start air traffic of the state owned airlines Garuda Airlines from June this year, he said.

“We have proposed to our government to fly Garuda Airlines flights from Jakarta to Delhi, Mumbai, Chennai and Kolkata. Traffic would start this June. However, the destinations in India are yet to be finalised,” the Ambassador said.

Attempting to facilitate further diplomatic relations between the countries, Indonesia has proposed to set up a Consulate office in Chennai, which is yet to be considered by the Centre.

“Chennai has a lot of potential in business terms and we don’t want to be left behind. We have made a proposal to open a Consulate here, next to the one we already have in Mumbai. The Centre will decide on that,” Ghalib said.

A business delegation from cities across India would visit the south-east Asian archipelago between May 7 and 13 this year on an official trip arranged by the Indonesian government to give a boost to bilateral trade, another official said.

Asked if Indonesian authorities approached Tamil Nadu Chief Minister Jayalalithaa for any business initiatives, counsellor Leonard F Hutabarat said they were hitherto dealing with the business community and they were open for discussions if the state government was interested.

The Ambassador arrived here on a one week trip and would be in the city till April 26.

(The Times of India)

Telkom Indonesia: Going For Growth

By Yianis Mostrous

The Asian telecommunications sector is a top performer in terms of dividend yield, earnings per share growth and return on equity ratios. Asian telecoms offer solid growth and sustainable dividends, providing investors refuge from economic worries and market volatility.

PT Telekomunikasi Indonesia, or Telkom Indonesia (TLK ) is one of my favorites in this emerging market, for long-term growth.

At 237.6 million people, Indonesia has the fourth-largest population in the world of any country. Indonesia is a global growth leader and should remain so throughout 2012, because of its political stability, high consumer base and a thriving economy driven by manufacturing, construction and tourism.

According to the iGR consultancy, the total number of global mobile subscribers will reach approximately 7 billion by 2015, with Asia accounting for 65 percent of the total, representing the biggest region among world mobile markets.

It’s the perfect environment for a well-positioned company such as Telkom Indonesia.

The telecom industry in Indonesia historically was a duopoly dominated by Telkom Indonesia and Indosat (IIT ), with Telkom Indonesia controlling the domestic market and Indosat international calling.

Around the turn of this century, telecom deregulation in this sprawling archipelago nation sparked a period of high growth. Every year between 2005-2010, mobile cellular telephone subscriptions increased by 36 percent and fixed lines grew by 18 percent. Last year, cellular subscribers reached the 250 million mark.

Telkom Indonesia’s subsidiary Telkomsel is the market leader in cellular, with more than 104 million customers. Together with Indosat and XL Axiata Tbk PT (EXCL: Indonesia), it controls 70 percent of the industry. More than 90 percent of Indonesian cellular subscribers are prepaid customers. Indonesia still doesn’t have number portability, which makes “free minutes” and other marketing offers major ways for telecoms to retain customers.

According to the Indonesia Cellular Telecommunications Association (ATSI), the average revenue per user for 2011 was IDR20,000 (USD2.18), bringing total industry revenue to USD6.5 billion. Estimated revenue from the industry’s fixed-line segment reached USD1.1 billion.

Fixed line penetration in Indonesia had been low for years but started reviving in 2007. Since then, it has been growing by about 20 percent. Telkom Indonesia still enjoys a near monopoly in the fixed line segment, because of its extensive coverage across the country.

The expansion of fixed lines has boosted broadband services growth; it now stands at around 1 per 100 people. Although a low per capita number by developed country standards, it represents a growth rate of more than 30 percent per year. Indonesia is now home to more than 50 million Internet users and the world’s third-largest market for Facebook (FB ) (see chart, below).

(Click to enlarge)

Source: ATSI

Telkom Indonesia in March reported that fourth-quarter net profit rose 2.3 percent. Revenue in 2011 was up nearly 4 percent, as the company added 13 million cell subscribers to surpass 104 million. New subscribers are the main source of the company’s revenue growth.

About 60 percent of Telkom Indonesia’s capital expenditures last year went to Telkomsel. The parent company will maintain the same level of commitment this year, with about USD1 billion slated for investment in its cell unit, mainly for 3G data and network infrastructure.

A significant portion of Telkomsel’s growth derives from the country’s Sulawesi province. Located between the islands of Borneo and Maluku, Sulawesi is the world’s 11th largest island with a population of 17 million, equal to 7 percent of Indonesia’s population.

Sulawesi is one of Indonesia’s fastest-growing provinces, but its mobile phone penetration rate remains relatively low, providing plenty of growth opportunities for Telkomsel. Indeed, Sulawesi has emerged as one of the country’s growth centers, surpassing the saturated market of Java.

Telkomsel controls 87 percent of the North Sulawesi market, while also commanding an 89 percent share of the Eastern Indonesia market that includes Sulawesi, Maluku and Papua. The region accounts for around 13 percent of Telkomsel’s total mobile subscriber base.

On the operating side, Telkom Indonesia has been cutting costs by forcing the early retirement of employees, bringing the total workforce below 20,000 from above 25,000 in 2007. This trend will enhance margins and mitigate the company’s perennial problem of wage inflation.

Management also is proposing an increase in the stock’s dividend payout ratio from 50 percent to 65 percent for 2011, and a steady increase from 2012 onward. The company’s solid cash flows and low debt levels will help the company’s case when regulators review the proposal. The government still owns close to 53 percent of Telkom Indonesia and has a say in major management decisions.

The rapid growth of Asia’s telecom industry during the past decade has attracted investments from foreign telecoms. Notably, Singapore Telecommunications Limited (SGAPY.PK ) owns about 35 percent of Telkomsel, while Qatar Telecommunication Company (DSM-QTEL) owns 65 percent of Indosat.

Telkom Indonesia’s stock trades at a reasonable valuation of 11.7 times expected earnings. The shares offer a 5 percent dividend yield, with a 3 percent share buyback program.

http://seekingalpha.com

Knock..Knock..Knocking on BRICS’ Door

By Kester Kenn Klomegah

Indonesia’s keen interest in becoming the newest member of BRICS – a bloc of emerging-market nations comprised of Brazil, Russia, India, China and South Africa – has sparked off a round of debate on the future and efficacy of South-South groupings.

István Tarrósy, assistant professor of political science at the Department of Political Studies at the University of Pécs and managing director of the Africa Research Centre in Pécs, Hungary, said that Indonesia’s development statistics make the country a shoe-in for membership: it is the largest economy in southeast Asia and is a demographic giant with a population of 248 million people, making it the fourth most populous country in the world, ahead of even Brazil and Russia.

It also has an active labour force of 117 million people, as of 2011.

Indonesia has long been recognised as a leading actor in the developing world, most notably for its active role within the Non-Aligned Movement (NAM) ever since it hosted the Bandung Conference in 1955.

“Its voice has always been decisive in any issue connected with the then Third World, today, the Global South. In terms of South-South cooperation, and in light of a redefined system of North-South dialogue within a gradually more multi-polar world, Indonesia has its place among the top categories of states influencing how our transnational global world develops,” Tarrósy told IPS.

Furthermore, given the country’s “pragmatic foreign policy practices and long-term cooperation with countries of the region and beyond, Indonesia could strengthen the common voice of emerging economies via BRICS. With the potential entrance of Indonesia, BRICS would then need to redefine, or rather refine its status as (possibly) one of the most important inter-regional groupings of countries of the global South,” he added.

Another significant issue is the investment sector, on which developing or emerging economies rely heavily. Foreign direct investment (FDI) into Indonesia, and Indonesian FDI flown into other, less strong economies across southeast Asia and beyond, could be further encouraged by BRICS membership, which would facilitate better trans-regional cooperation.

For instance, it could pave the way for increased “South-South cooperation in Africa, with a more substantial Indonesian role in project generation and financing. In addition to China’s and India’s growing presence and involvement in the African continent, Indonesia could play (a bigger role), particularly if we (acknowledge) the growing amount of official development assistance (ODA) emerging economies have granted Africa,” according to Tarrósy.

Indonesia is one of Asia’s leading economic powerhouses; with last year’s economic growth recorded at 6.5 percent, the country is poised to overtake Russia in the regional economic race, said John Mashaka, financial analyst at Wells Fargo Capital Markets.

He told IPS that Indonesia recorded exports worth 204 billion dollars in 2011. Compared to its European counterparts like Greece, Italy and Spain, which are still floundering in the economic slush of the 2008 crash, Indonesia’s credit ratings shot up and the country’s economic outlook remains favorable.

Its domestic market is huge and the current economic boom can be attributed to its political stability and sound economic and monetary policies, which have attracted consistent FDI.

“In short, Indonesia is an economic power to be (reckoned) with and its decision to join the BRICS could have a huge impact in terms of the body’s credibility. Indonesian membership will definitely solidify BRICS’ capital composition, and also bring on board extraordinary fiscal capability,” Mashaka told IPS.

BRICS versus IBSA?

Thomas Lawo, executive director of the European Association of Development Research and Training Institutes (EADI) in Bonn, Germany, doubts that BRICS will be a major game-changer in global geopolitics in an increasingly multi-polar world, mostly because of its members’ divergent economic trends and political interests.

On the one hand, Russia is set to re-emerge as a strong global power with a dominant role in central and western Asia, along with India and China.

“But India needs to sort out its internal rifts and neighbourhood problems first, while China is becoming a strong force to reckon with in Asia, Africa and Europe. China is definitely the (primary) growth-engine of Asia and is stepping up its influence in the global economy (armed) with military strength to match its ambitions,” Lawo said.

Indonesia, on the other hand, is more comfortably clustered with South Africa and Brazil as a regional power and an economic anchor-country for the southeast Asian region, but lesser on a wider global scale.

Another possibility is the re-emergence of a politically stronger ASEAN, now that Burma (Myanmar) is opening up to its neighbours. In this context, the MIST countries – Malaysia, Indonesia, Singapore and Thailand – will become more relevant, if they can overcome their internal problems and play the regional integration card.

Alexandra A. Arkhangelskaya, head of the Centre for Information and International Relations at the Institute for African Studies at the Russian Academy of Sciences, explained to IPS that after the admission of South Africa, BRICS will likely be expanded to include Indonesia, Turkey, Australia, Nigeria and Mexico.

If this happens, she stressed, BRICS will be pushed to clearly articulate its specific identity in the international arena.

The rise of BRICS as regional bloc also raises the question of whether its role is very different from that of IBSA, the same group minus China and Russia.

BRICS has certainly attracted a lot of attention and it is widely accepted that the bloc will try to achieve certain broad economic reforms as well as attempt to restructure the Western-dominated global financial architecture.

Still, Arkhangelskaya believes that the extent to which IBSA will be forced to live in the former’s shadow will very much depend on South Africa, which is currently “sitting on two chairs”, as well as China’s role in BRICS and the world economy.

Experts fear that IBSA will be forced to dissolve in the light of BRICS’ expansion.

Some analysts still argue that IBSA and BRICS represent the old clash of India versus China; others believe it is more likely that the groups will find themselves on very different tiers of the South-South multilateral cake.

Although there is some overlap in core issues, the fact remains that the BRICS countries are more focused on economy, while IBSA is concerned with promoting democratic values and other causes common to the three countries, and has a distinct personality of its own.

Thus, IBSA can remain an instrumental and practical mechanism of the three countries representing three different continents, sharing their interests and strengthening their economic cooperation to further the interests of the South.

(Source : InterPressService IPS.org)

Mengisi yang ditinggalkan Vietnam

by Akhyari Hananto

Tentu kita masih ingat, 3-5 tahun lalu, seluruh dunia menggambarkan betapa hebatnya pertumbuhan ekonomi China, India, dan Vietnam.  Iya kan? Kita ingat betapa seolah-olah semua analisa ekonomi dari para ekonom dunia selalu terhubung dengan ekonomi ketiga tersebut.  Terutama Vietnam, yang bahkan digadang-gadang akan segera melewati ekonomi Filipina dalam waktu dekat.

Beberapa teman saya dari Eropa mengatakan bahwa orang2 Vietnam bahkan lebih rajin dan disiplin dibanding dengan orang China sekalipun (yang terkenal rajin dan disiplin), sehingga kemajuan ekonomi Vietnam dalam 20 mendatang hampir tidak terhentikan. Saya setuju bagian pertamanya..

Di Vietnam sendiri, optimisme dan kepercayaan diri juga begitu membumbung tinggi. Mulai dari pemerintah, media, dan rakyat biasa meyakini bahwa inilah era kebangkitan mereka. Teman2 di Filipina pun..sebenarnya mulai grogi dan nervous karena kalau ekonomi Vietnam maju, Filipina-lah yang akan menjadi “korban” pertama yang dilewati.

Mungkin sangat sedikit yang menyangka, bahwa Vietnam akan “tumbang” bahkan sebelum benar-benar “tumbuh” secara nyata.

Menurut majalah The Economist, yang paling “pincang” dari perekonomian Vietnam saat ini adalah inflasinya yang “tidak terkendali”, dan dalam 3 tahun terakhir, 2 kali inflasinya menembus angka di atas 20%. Bahkan para jurnalis yang akan mengabarkan inflasi tersebut, dihalang-halangi oleh pemerintah. Banyak sekali perusahaan bangkrut, BUMN dan perbankan di Vietnam juga makin ketara ketidak-efisienannya serta terjerumus dalam korupsi.

Cukup mengagetkan kiranya, karena selama 2003-2007, ekonomi Vietnam tumbuh rata2 8% setahun, salah satu yang tertinggi di dunia, disebabkan oleh membanjirnya investasi luar negeri ke Vietnam. Namun saat ini, banyak pengamat yang memprediksi bahwa Vietnam hanya akan tumbuh di bawah 5%, sesuatu hal yang tak terbayangkan bagi negara yang sedang membumbung harapannya tersebut.

Masih menurut the Economist, pada 2020, ekonomi Vietnam hanya 1/3 dari seharusnya (kalau paling tidak tetap tumbuh 7% per tahun). Kebimbangan investor kini makin menjadi-jadi setelah inflasi menembus rekor 20%, dan lagi, biaya tenaga kerja di Vietnam tidak lagi murah. Sehingga di Indonesia kita sering dengar banyak perusahaan2 manufaktur yang memindahkan investasinya dari Vietnam ke Indonesia, atau negara lain.

Dan sepertinya, para pemimpin Vietnam menyadari itu, namun terlambat berbuat sesuatu.

Bukan karena ekonomi Vietnam turun saya gembira, namun ini momentum penting bagi Indonesia untuk  mengisi “ruang kosong” yang ditinggalkan Vietnam, dan Indonesia mempunyai semua yang dibutuhkan untuk itu, inflasi yang rendah (4.5% tahun lalu), serta indikator2 ekonomi lain tetap tumbuh terjaga.

Yang penting bagi Indonesia adalah, menjaga agar ekonomi tetap tumbuh stabil, inflasi terjaga, defisit terjaga, politik dan keamanan stabil, serta yaa…tentu saja teman2 diplomat ekonomi mampu menjalankan tugasnya.

Mari, sebelum terlambat..

300 Million reasons to invest in Gresik

Wilmar Group, a Singapore-listed CPO producer, plans to pour $300 million in investments in Gresik, a city in East Java to build a flour mill and bio-refinery plant, a senior executive at the Indonesian unit said.

“We are building a flour mill through PT Wilmar Nabati Indonesia, in Gresik,” said MP Tumangor, commissioner of Wilmar Indonesia. “It will be completed in 2013.”

Tumangor said the bio-refinery plant that is being constructed will be used to process crude palm oil into some derivatives.

There are at least 40 derivatives that can be developed, and Wilmar has just produced 20 of them.

Wilmar will only supply up to 30 percent of the CPO needed for the bio-refinery plant and has plans to buy more from other plantation companies, including state-owned enterprises.

Tumangor said Wilmar is hoping to invest $300 million, which is part of the group’s investment plan in Indonesia in the next two to three years.

“Wilmar sees a potential in Indonesia’s natural resources. It [the country] also offers a big market,” Tumangor said in a press release on Sunday.

Tumangor said that the company’s expansion plan reflected the company’s intention not to focus solely on the crude palm oil business.

He said Wilmar has put a total of Rp 33 trillion ($3.6 billion) worth of investments in Indonesia since 1991, when it began its agro-business in the country.

According to the group’s statistics, Wilmar booked $37.8 billion in sales from Indonesia for the period 2007-2011.

As much as 63 percent of its products was sold overseas and 37 percent was for the local market.

Apart from Indonesia, Wilmar also owns the CPO plantation operation in Malaysia, and sugar mills in Australia

Reuters reported on Feb. 22 that Wilmar International Ltd., booked a 57 percent increase in net income for fourth quarter 2011 from the same period a year earlier, thanks to a big revaluation gain in its core palm oil business and from its enlarged sugar operations.

Antara