Indonesia election good for region: Fund managers
Indonesia election good for region: Fund managers
Anusha Attygalle, Dow Jones, Singapore
The conclusion of Indonesia's presidential election is positive for the investment climate in southeast Asia as a whole, international fund managers said on Tuesday.
The holding of a smooth, largely violence-free vote in the world's most populous Muslim country should help rehabilitate the entire region in the eyes of foreign investors, and may encourage fresh long-term fund inflows into a range of countries, they said.
"We are increasingly seeing countries that were considered less open to foreigners on a path to liberalizing" politically, said Stephanie Lee, Singapore-based fund manager at Aberdeen Asset Management Asia, which has US$37.5 billion under management.
The election "is a positive sign for global fund managers", she added.
The apparent landslide election victory for challenger Susilo Bambang Yudhoyono may draw fresh money to Indonesia because he's viewed as a more decisive figure than incumbent Megawati Sukarnoputri and more likely to push through economic reforms, such as punishing former bank owners who misused $16 billion in emergency loans during the Asian crisis and have so far paid back little of it.
In addition to international funds, the Indonesian-Chinese business community may repatriate significant amounts of money from offshore accounts in places such as Singapore if it concludes Yudhoyono is an economic pragmatist. Indonesia's Employers Association, which has many prominent ethnic Chinese members, is working with the American Chamber of Commerce to prepare a roadmap of economic reforms that will be presented to Yudhoyono.
But the repercussions of the election will be felt beyond Indonesia's borders. Malaysia, Thailand and the Philippines - and by extension Singapore, which lies at the center of the region - have all been concerned by the threat of Islamic extremism, separatism or violence in recent years. A car bomb this month near the Australian embassy in Jakarta, which killed nine people, was the most recent reminder of the threat.
The Indonesian election suggests such conflict can eventually be resolved through peaceful, democratic means. Fund managers are encouraged that extreme Islamic rhetoric played little part in the Indonesian election campaign, which focused instead on issues such as jobs and corruption. And Yudhoyono's new Democratic Party is expected to rely on a wide coalition of secular and moderate religious parties.
"As the world's most populous Muslim country, Indonesia is an important showcase that democracy can work in Muslim countries," said Singapore's DBS Bank in a research note.
"Indonesia is increasingly viewed as a moderate Islamic country," it said, noting that "Yudhoyono has an opportunity to win back foreign investor confidence."
Foreign governments generally share the perception that Yudhoyono, a former general who has trained with the U.S. military, will be tougher on terrorism than Megawati was.
Furthermore, the Indonesian vote follows an election in Malaysia in March which sent a similar signal; Prime Minister Abdullah Ahmad Badawi's ruling coalition crushed the main fundamentalist Islamic party in that election.
This month, the unexpected release of Malaysian dissident politician Anwar Ibrahim from jail showed a further easing of political tensions in the country.
Anwar's release "emphasized that more governments in the region are looking to free up control and commercializing their policy-making", said Aberdeen's Lee.
Partly as a result of such events, "we are seeing a steady flow (of equities funds) both to Indonesia and Malaysia," she said.
Fund managers said they would watch in the next few months whether Yudhoyono and Abdullah actually proceeded with concrete economic reforms.
Among the challenges facing Yudhoyono are a potentially hostile Parliament and an entrenched political elite that could fight a rearguard action to block reform. Foreign investors will also be keen to see whom Yudhoyono appoints to key economic jobs in his cabinet; that's not likely to become clear before Oct. 20, the date set for the formal presidential inauguration.
Meanwhile, Abdullah will have to deliver on his reform promises - particularly efforts to restructure large, locally listed corporations with government links - to sustain fund inflows.
If reforms in Indonesia and Malaysia do go ahead, fund managers say, there could be a fresh influx of foreign money chasing shares of banks, construction, utility and property companies.
"The big (stock) movers are to be those areas seen as the engines of growth," said Aberdeen's Lee.