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.