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Exactly why should India Privatize?

The Indonesian government is doing what it can to attract desperately needed foreign investment. It is a pity the courts keep messing it up. Nick Parsons reports.

Dear Readers, Bank Mandiri is very pleased to be a sponsor of this special Asiamoney supplement, Invest in Indonesia 2004.

On the eve of the October meeting of the International Monetary Fund and World Bank Group, Alan Reynolds, a senior fellow with the Cato Institute in Washington D.C., recounts his views on just what impact the organization has had in Asia.

Islamic finance is alive and kicking in Malaysia. The race is on to structure deals that are Syariah compliant, with the prospect of attracting some of the estimated US$250 billion in assets held by Islamic institutions globally. Many of the banks in Malaysia are gearing up for this growing, and potentially very profitable market.

Investment banks are all about dollars and cents. But the issue of branding is a hot one that can have far-reaching effects on the bottom line, writes David Evans.

Investors that are prepared to take a long-term view on Indonesia believe it offers attractive returns and good opportunities. Asiamoney spoke with three investors and one analyst for their views on where the money is flowing, the impact of this year's elections, which sectors offer the most potential and how they are dealing with liquidity issues.

After just four years in business, it's hard to believe that Mandiri Sekuritas is the leader in Indonesia's corporate and government bond market, both in secondary market trading and new issuance. But the numbers don't lie. In 2004, despite a slump in corporate bond issuance in Indonesia, Mandiri has managed to keep its lead on the secondary market trading—adding both depth and liquidity to this growing market. Mandiri Sekuritas trades an average of IDR200 billion worth of bonds a day, up 10-fold compared to trading volumes just six months ago. But Mandiri's lead in the bond market is just one example of why Mandiri was created in the first place: to be the foremost investment bank and securities firm in the country—leading in financial market strength, market leadership and professional integrity. Bank Mandiri, the largest public bank in Indonesia, decided it needed to create a dedicated securities arm that could take the lead in furthering the development of the country's capital markets. And today, it is leading the development of the bond market.

The news that Anwar Ibrahim, the former deputy prime minister of Malaysia, was finally released from jail after six years should be greeted as a very positive development for Malaysia and the region. It suggests that Prime Minister Abdullah Badawi really is attempting to rub out some of the black marks that blot the country's resume and put more distance between himself and the previous regime of Mohamad Mahathir. But while Badawi has definitely accrued a couple of political brownie points both at home and abroad it's important for him to realize that it will take a lot more than the odd symbolic gesture to regain the trust of skeptical and nervous investors. While the investment community applauded the news, not many started picking up the telephone and screaming buy. What should also be pointed out is that while some of the people that Asiamoney spoke to made claims that it was a good day for Malaysia and for freedom of expression, they would only do so from behind the wall of anonymity. Evidently Malaysia still has a long way to go. This month, Asiamoney is pleased to present its first ever trade finance poll for Asia. The results were eye opening with HSBC the runaway regional winners. Citigroup were unfortunately left speechless by their disappointing showing and were unable to comment on why they lag so far behind their archrival in all of the poll's categories. The results were also surprising in terms of what clients want from banks when deciding where to put their business. Apparently pricing is not what it is about at all but effective Internet distribution capabilities, with clients listing reliable electronic delivery channels and online platforms as the most important reasons for choosing a bank.

Anwar Ibrahim's release jumpstarts the market, but it soon ran out of gas.

Indonesia has entered a new era of democratization and political stability with the completion of the general election of its multi-level Parliaments last April, and the first round of direct Presidential election last July. The election in April was the world's largest one-day democratic exercize by any standard. There were 147 million registered voters with over 80 per cent turn out, electing 550 members of National Parliament (DPR), 128 regional representatives (DPD), and more than 14,000 members of 32 provincial and about 440 district Parliaments (DPRD) from 448,705 candidates. The two elections required almost 1 billion ballots paper and 100,000 tonnes of materials to be printed and distributed to 595,000 polling stations in a country with a distance from east to west equal with Dublin to Moscow, and north to south equal with Amsterdam to Rome. Not only has Indonesia advanced on the political front, but just as important, it has advanced on the road of economic reform with three major watersheds being reached. First, Indonesia has successfully graduated from the IMF Program and has been following its own reform blueprint as laid out in the Government's White Paper on Economic Policy Program. In addition, two of the three main institutional legacies of the crisis have now been closed down with their missions broadly accomplished. Namely, the Jakarta Initiative Task Force (JITF) which oversaw the working out of debt agreements between private creditors and debtors, and the Indonesia Bank Restructuring Agency (IBRA) which oversaw the recovery of bank assets and the sale of banks that had been taken over by the government. The remaining legacy of the crisis—the Blanket Guarantee—will be replaced in the near future with an Indonesian Deposit Insurance System (LPS). The draft bill of the LPS is expected to be approved by the Parliament in September this year.

The release from prison of Anwar Ibrahim, Malaysia's popular former deputy prime minister, certainly caused a stir in the markets. But will there be more substantial changes after the initial buzz? Keri Geiger reports.