Randomly Noted

We can’t really call them capital controls, or even quasi-capital controls. Can we call them capital curbs? Capital management?
Perhaps we can call them Claytons controls, after the nonalcoholic drink that was popular in the 1970s and 1980s for its slogan: “The drink you have, when you’re not having a drink.”

Asian nations aren’t calling their recent actions “capital controls,” and the measures being taken certainly aren’t draconian; so far this year it’s mostly been rhetoric from authorities, about watching hot money flows, while there have been modest steps in Taiwan, South Korea and Indonesia to make it a bit harder for people to move money around.

But it is clear that authorities are growing more anxious about how fast money can come in–and out–of their countries.

Continue reading…

To understand why Indonesia is moving forward and Malaysia isn’t, consider this horrifying story, “Malaysia Court Canes Three Women.”

The recent canings of four Muslim men and, for the first time, three Muslim woman, for having sex out of wedlock come after last year’s caning verdict – still not carried out – against a 32-year-old Muslim woman caught drinking beer in a hotel bar.

The only conclusion one can reach is that radical Islam’s influence is growing in this lush southeast Asian country of rich natural resources. Will Malaysia’s forward-thinking Muslims, and its ethnic Chinese and Indian minorities, permit this drift to continue? Have a look at colleague James Hookway’s piece, in which he notes that the main moderate Muslim opposition leader, Anwar Ibrahim, is on trial for alleged sodomy – “a charge that he denies and that he says was fabricated to destroy his political career.”

Meanwhile, Indonesia, with its own Muslim majority, is enjoying robust economic growth and there are signs it’s becoming easier to do business there. Just this week, an Indonesian court issued a ruling that in effect will let France’s Carrefour keep a majority stake in a local retailer. As colleagues Edhi Pranasidhi and Reuben Carder write, “the decision will give a filip to Carrefour’s aim of competing for market share in Indonesia” as incomes and consumption rise. This is Indonesia’s moment, as I’ve written before.

The Indonesian rupiah’s strength is highlighted in today’s “Money Talks” column by DJN’s Rosalind Mathieson; she writes that a politically stable, economically promising Indonesia has given the local currency a big boost (especially compared with the rest of Southeast Asia.) There are risks, but relatively minor ones. Volatility surrounding July’s presidential election isn’t much of a worry, in my view, given the likelihood of Yudhoyono’s peaceful re-election. Rising crude oil prices could swell the fiscal deficit, thanks to the government’s addiction to fuel subsidies. Upside factors include the resource-rich economy’s exposure to a recovery in commodity prices, although Ros points out that a stronger U.S. dollar could weaken the rupiah’s appeal. Continue reading…

Nicholas Cashmore of CLSA coins ”Chindonesia” – China, India and Indonesia being “Asia’s next growth triangle.” It’s about time financial analysts and other pundits started recognizing Indonesia’s potential: Convincing political stability borne out  by the recent elections; abundant, diverse natural resources demanded by “Chindia,” among others; a rising middle class=increasing domestic demand. Private- and public-sector corruption remains a problem, but watch for political and legal discipline to bring it under control; some say the situation’s already improving. Cashmore writes: “High (and growing) public debt levels and poor demographic structures in western economies mean economic growth will be lower for longer and the focus of attention will shift further east.” After reciting a litany of Indonesia’s virtues, he remembers Australia and its natural resources trove:  “Australia is a dominant supplier” to rest-of-world. “Could the group be expanded to 4? Chindoralia?” Continue reading…

Indonesians have something the Thai don’t:  A convincingly stable political economy. Peaceful parliamentary elections appear to have robustly supported the Democrat Party of President Yudhoyono. Shares are up today (Monday) and the Indonesian rupiah’s firm. There really was no reason for Indonesians to punish Yudhoyono’s party, given the respectable trajectory the country’s been on from an economic and security standpoint. Could this sprawling archipelago of wondrous natural resources with a majority Muslim population be emerging as a smart play for foreign investors who hitherto would have avoided it due to perceptions of political risk? The WSJ cites a Jakarta-based political analyst named Kevin O’Rourke saying continuation of coalition-party government will stymie needed economic reforms as Yudhoyono will have to negotiate with his partners.  In contrast to O’Rourke, an economist named Helmi Arman at Bank Danamon tells DJN investors expect “continuity on the implementation of market friendly policies” if Yudhoyono is re-elected in July presidential elections.  More broadly, the WSJ story notes: “Overall, the results showed Indonesia, a country that has only recently been grappling with homegrown Islamic terrorist groups, is becoming a deep-rooted secular democracy. In 2004, Islamic-based parties, some of which had espoused Islamic law for Indonesia, did better than expected.”