Why Indonesia’s Growing Economy Has A Bright Future

With a wealth of natural resources — including copper, gold and coal — Indonesia has become an increasingly attractive investment market for China. That, coupled with a growing …

With a wealth of natural resources — including copper, gold and coal — Indonesia has become an increasingly attractive investment market for China. That, coupled with a growing middle class, high literacy rates and an improving debt rating, demonstrates Indonesia is an economy on the rise. See the following article from Money Morning for more on this.

It’s an open secret that Indonesia’s economy is on the rise. In the spirit of March Madness, it’s something of a sleeper.  That’s why China, which is always looking for promising new investments, is looking to make inroads there.

Indeed, China’s appetite for commodities makes Indonesia – with its close proximity and abundance of natural resources – an ideal partner.

PetroChina Co. Ltd. (NYSE ADR: PTR), Sinopec, Sinosteel, Minmetals and China Investment Corp (CIC) – Beijing’s $300 billion sovereign wealth fund – are all aggressively scouring South East Asia’s largest economy for takeover targets and joint venture partners, the Live Trading News reported.

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Targets include liquefied natural gas (LNG) projects, oil blocks owned by foreign companies, and coal mines, with some potential deals worth more than $1 billion, according to investment banking sources who know and advise the companies.

“There’s enormous interest from China in Indonesia,” said an Asia-based investment banker who has advised regional resources companies on deals in Indonesia. “These include financing deals, stakes.”

In fact, China Railway Group Ltd. on Thursday won a $4.8 billion contract to build and operate an Indonesian coal railway. The deal lets state-run China Railway design, build, and manage the railway in South Sumatra for Indonesia’s Bukit Asam Transpacific Railway Corporation for a period of 20 years.

Indonesia is the world’s largest exporter of thermal coal, and last year 15% of those exports went to China.

Natural gas also is high on China’s shopping list, Live Trading News’ sources said. China’s LNG imports increased by two-thirds last year to 5.53 million metric tons.

“Indonesia is a country that is blessed with incredible mineral riches, including some of the largest copper and gold mines in the world – not to mention plenty of rubber plantations and food,” says Money Morning Contributing Writer Jon D. Markman. “Literacy rates are high, the middle class is large and growing, and there is a ton of potential in the domestic economy. Think of Indonesia as a South Seas version of Brazil, but without Mardi Gras.”

Earlier this month, Indonesia’s sovereign-debt rating was lifted to its highest level in 12 years after Bank Indonesia (BI), the country’s central bank, raised its growth forecast for 2010 gross domestic product (GDP) to a rate of 5.5%-6.0%. The rating was last raised in 2006, and is now just two levels below investment grade – on par with Turkey. The central bank maintains an economic growth forecast of 6.0%-6.5% for 2011.

This article has been republished from Money Morning. You can also view this article at
Money Morning, an investment news and analysis site.


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