Our readers tip Indonesia for 2013

Indonesia will grow faster than China next year, according to our most recent web poll.

India and the Philippines — the two other choices — did not even get a look in. Such confidence in Indonesia’s prospects does not reflect what most analysts are forecasting.

Bank of America Merrill Lynch ranks the four countries’ 2013 growth outlook in this order: China (8.1%), India (6.5%), Indonesia (5.8%) and the Philippines (5.7%).

Agreement with the consensus is no measure of predictive accuracy, but China’s economy would have to endure a severe slump to grow less than Indonesia’s in 2013. The Southeast Asian economy has certainly shown some resilience recently, thanks to strong growth in consumer spending and manufacturing — and despite falling demand for its commodities exports.

But concerns remain about corporate governance standards and even security. A dispute between the powerful Bakrie family and Nat Rothschild over an ill-fated partnership in the Indonesian coal industry has reminded foreign investors of the pitfalls that may await them.

It is not the only reminder. A muddle over regulation of the oil-and-gas industry is also causing fear about the investment environment, after the industry’s upstream regulator was declared unconstitutional. In the ruling, a judge said that BPMigas had “opened up the opportunity for the abuse of power”. The agency has since re-emerged with a new name, but its questionable legal status is hardly an encouraging sign for new investment.

The government is also becoming more protectionist amid dwindling profits from the commodities industry.

Despite all this, Indonesia has booked record foreign investment growth during the past two quarters, demonstrating that investors are clearly still enthusiastic about the country — at least for now. Indeed, Indonesia will have had a record-breaking year for foreign investment if the growth trend has continued this quarter.

We will check back on our readers’ prediction in a year’s time.