Sat, 05 Jun 2010

From: Reuters

Europe's debt woes have had a limited impact on the domestic economy, the central bank said, as it kept benchmark interest rates unchanged at 6.5% for a tenth month

Jakarta: Indonesia has a "good" outlook due to its resources and large population, putting the nation in a favourable position to attract investment, Templeton Asset Management's Mark Mobius said.

"Overall we have a positive take on investment opportunities there," Mobius, who oversees about $34 billion (Dh124.8 billion) in emerging markets as Templeton Asset Management's Singapore-based executive chairman, wrote in his blog dated Wednesday. "Indonesia has a young, growing population and Jakarta, the capital of Indonesia, is expected to be the largest city in the world within two decades."

The Jakarta Composite index has rallied 11 per cent this year, the best performer among major Asian markets, as the $514 billion economy expanded and companies including PT Bank Rakyat Indonesia boosted earnings. The central bank yesterday kept its benchmark interest rate at a record low of 6.5 per cent for a tenth month, judging inflation isn't yet a threat.

The nation's economy, the biggest in Southeast Asia, will grow at 6 per cent this year, up from 4.5 per cent in 2009, the International Monetary Fund forecast in April. That would make the nation of 248 million the best-performing economy after China and India among the Group of 20 countries.

Indonesia is the most attractive among Southeast Asian markets, Antoine van Agtmael, chairman and chief investment officer of Emerging Markets Management, said in a television interview on Wednesday.

Inflation averaged 3.8 per cent in the first five months of 2010, easing from 7.6 per cent in the previous two years. The Jakarta Composite rose 2.4 per cent to 2,799.21 as of 3.37pm local time.

Radicalism is a concern if not kept under control, Mobius said. "If the government is unable to discourage radical forms of Islam, there may be considerable risks to the political and economic aspects of the country."

The domestic economy is improving and the country's fundamentals remain strong, the central bank said yesterday, adding that Europe's debt woes have had a "limited" impact on Indonesia.

President Susilo Bambang Yudhoyono has pledged to double spending on roads, seaports and airports to $140 billion over the next five years to help deliver average growth of 6.6 per cent in his remaining term that ends in 2014.

Indonesia's economy expanded 5.7 per cent last quarter, the fastest pace in more than a year.