16-03-2020, 11:57 PM
Generally agree but while Wahid that represents the Muslim majority and old establishment Megawati / Prabowo tried to get a lame duck president, SBY managed to manuveur the politics and push policies, including reforms and anti-corruption forward. I see him as the quiet giant
Inflation was double digits back in Suharto days, which is why you have fantastic sales growth but market trading at single digit PE in the past. IDR hence was perpetually depreciating, which was laughable that they peg IDR to 2500 to USD before AFC.
Inflation was double digits back in Suharto days, which is why you have fantastic sales growth but market trading at single digit PE in the past. IDR hence was perpetually depreciating, which was laughable that they peg IDR to 2500 to USD before AFC.
(16-03-2020, 11:01 PM)karlmarx Wrote: Since the IDR has a long history of devaluation against major currencies, an investor in IDR-denominated assets should be quite worried about possible future devaluation. While there are good reasons for why this was the case in the past, it need not be so for the future.
Like most South East Asian nation during the post-war years, there was a lot of inefficiency in the Indonesian economy due to politically-instituted rent-seeking activities, and nepotism. Bob Hasan, Liem Sioe Liong, and the children and numerous other associates of Suharto collected plenty of 'tax' through economic activities which they monopolised. This 'tax' allowed them to build their private wealth, and develop mostly noncompetitive manufacturing industries. All these 'wasted/misused resources' resulted in high inflation.
Throughout this time, Indonesia did not see foreign investors as a long-term source of their economic development, but tended to treat them as short-term patsies to be exploited. Foreign investors who bought the bonds of Bentoel (a cigarette manufacturer) were given the runaround by the judiciary, when they found that the company's accounting was fraudulent. They never got their money back, and Bentoel was never punished.
A very strong nationalistic/anti-foreigner attitude was cultured since its desire to be free of the Dutch colonial yoke. They were, after all, exploited by the 'white men' for their natural resources, for a few hundred years.
Even so, the USD/IDR throughout Suharto's 30 years was mostly fine, as the country had strong export earnings as an (ex-opec) oil producer. It wasn't until the devaluation of the Thai Bhat in 1997 -- which resulted in the fear of other USD-pegged Asian currencies not being able to hold the peg -- led to the self-fulfilling devaluation of the IDR, and the subsequent ousting of Suharto the following year. The attempt by, and initial failure of, IMF to institute free-market policies in exchange of its rescue package revealed the depth of corruption and nepotism to an international audience.
The subsequent presidents -- Wahid, Megawati, and Yudhoyono -- were from various political factions vying for power towards the final days of Suharto's rule. So it was pretty much business as usual. But since Jokowi won the election in 2014, the old problems of the nation seems to at least not be as prevalent. If not for the recent covid-19 which caused capital outflow, the USD/IDR would only have appreciated slightly, while the SGD/IDR would have been flat, since Jokowi's inauguration.
Thankfully, Jokowi won his second term last year. So we may possibly see greater elimination of inefficiencies in the economy, and more fruitful investments from the government budget. So far, inflation has been lower than the previous decade. If Prabowo had won instead, I think the country will return to its old ways.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
Think Asset-Business-Structure (ABS)
Think Asset-Business-Structure (ABS)