The Indonesian elections have come out as expected with President Susilo Bambang Yudhoyono being assured of a second term after having maintained a 60 percent majority in the voting due to his transparent management, efficient budgetary spending, his ability to maintain price stability plus the Indonesia's good fortune to not having been seriously impacted by the global crisis. The return of his presidency showcases many economic policies in trade and investment that are worth watching as they may hamper Thai trade and investment; Indonesia's economy maintained growth in 1Q09, compared to most countries in Asia that faced economic contractions.
KASIKORN RESEARCH CENTER (KResearch) is of the view that Indonesia's economy in 2H09 will likely improve and sustain growth momentum of 3.4-4.5 percent over the entirety of 2009, along with the possibility that it may accelerate to 5-6 percent in 2010. If Indonesia's economy can grow as thought, Thailand would benefit from exports of rice, corn, Halal food – particularly fish – as well as rubber and rubber products (including concentrated rubber latex, vulcanized rubber and tires), textile materials (synthetic filament yarn), underwear, panty hose, tights, stockings, slippers, paper, radios, televisions, computers and parts, construction materials (steel), etc. These goods would see brisk business with Indonesia's improving economy and appreciating forex rate that makes Thai exports less expensive for them. However, some risk factors would include fluctuating forex rates, plus inflation that may rise and affect consumer purchasing power there, not to mention their stringent import regulations, etc.
Interesting investment channels in Indonesia for Thai business to support their growing domestic economy include construction that looks bright with continued growth thanks to the benefits of short- and long-term economic stimulus measures and low interest rates. Meanwhile, food business, especially Halal foods, where Thailand's processing potential and Indonesia's abundant raw materials could grow steadily to support Indonesia's large domestic market. Other possibilities include the industries of rubber production, textiles and garments, footwear, tourism and retail business, etc.
Risk factors that might affect business in Indonesia include inflation that may increase over the remainder of the year that could affect production costs.
Export goods production in Indonesia may be affected by strong forex fluctuations, causing production to slow, as could the risk of the H1N1 flu pandemic that might affect tourism and domestic retail business, etc.
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