Chart of the Week – Indonesia’s Good Position

Indonesia’s favorable demographics, natural resources and relatively stable political environment have set up the country for what could be a very strong decade of growth.

Indonesia’s economy doubled in the past five years and GDP growth was faster than that of India, China and Brazil. In greater Jakarta—the world’s second-largest urban area with roughly 23 million people—GDP per capita grew by 11 percent each year from 2006 through 2009.

More importantly, this growth was driven by the private sector, not by government spending – the private sector accounts for roughly 90 percent of the country’s GDP. In addition, commodities account for only 10 percent of economic growth, which insulates the country from the volatility in commodity prices.

Indonesia’s strength is in its consumers. Over the past five years, the average income has doubled to $2,350 a year and Deutsche Bank thinks that can figure can reach $3,400 by 2011.

Despite this income growth, Indonesia still has the lowest unit labor costs in the Asia-Pacific region (chart), according to JP Morgan, and this has driven manufacturing activities from China into Indonesia.

A Deutsche Bank survey of 50 companies showed a 5 percent jump in employment over the past year. Low wages should help continue Indonesia’s industrial recovery.

Employment growth is key because half of Indonesia’s population is 25 years old or younger. Indonesia’s workforce as a portion of total population will rise over the next 20 years, and this should increase the country’s consumption levels and fuel further economic growth.

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About Frank Holmes 282 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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