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Should You Invest in the Indonesia ETF?


ETF stands for exchange-traded fund. For those who are unfamiliar, these are securities that represent shares in a collection of securities. As a result, ETFs are similar to mutual funds, though these are listed on exchanges with the result that they can be bought and sold in a similar manner to stock shares. Regardless, ETFs can be based on a wide range of things. For example, some are based on the stock shares that make up a particular stock market index. Meanwhile, others are focused on specific sectors. As such, it should come as no surprise to learn that there are ETFs based on certain countries, with Indonesia being an excellent example.

What Is the Current Outlook for Indonesia?

Indonesia is much overlooked. However, that is a serious mistake because there are a number of things that make it a country worth paying attention to. Various states existed in what is now Indonesia long before the Europeans came. Furthermore, it is important to note that these states were by no means isolated, as shown by their trade with China, the Indian subcontinent, and other parts of the world. In fact, it is interesting to note that Islam had arrived in what is now Indonesia by 13th century with the result that it went on to become the most dominant religion on both Java and Sumatra by the end of the 16th century.

Europeans started visiting the region in the early 16th century. In particular, it is worth mentioning that the first Dutch expedition to the region set out in 1595. Something that soon resulted in further Dutch expeditions when it produced a 400 percent profit. This was the process that resulted in the Dutch East India Company, which proceeded to carve out the Dutch East Indies. In earlier periods, the emphasis on profit-making meant that its efforts were focused on a small number of islands. However, a combination of ambition, security concerns, and imperial prestige caused the Dutch to expand their control as well as their influence over the entire region, which became easier and easier with the Industrial Revolution. By the early 20th century, the Dutch controlled the full extent of what would become Indonesia.

Having said that, there was constant or near-constant resistance to Dutch rule throughout this period. In time, there was the creation of a shared Indonesian identity, which in turn, brought about the creation of a shared Indonesian independence movement. Perhaps unsurprisingly, the Dutch came down hard on it. Something that presumably contributed much to most Indonesians welcoming the Japanese ouster of the Dutch administration in World War Two, which lasted for a very short period of time because the Japanese administration proceeded to prove itself to be even more ruinous. Still, this period saw a massive increase in the number of Indonesians in lower-ranking leadership positions, thus enabling Indonesian leaders to make connections with the Indonesian masses in a way that wasn't possible before. Something that contributed much to Indonesian success in the Indonesian War of Independence that followed World War Two in spite of considerable Dutch brutality.

Not everything has been smooth sailing for Indonesia since that time. For instance, there was an attempted coup d'etat in 1965, which remains rather mysterious even in the present time. On its own, it would've been bad enough. However, the attempted coup d'etat was blamed on the Communist Party of Indonesia, with the result that it was effectively destroyed in an anti-communist purge that killed between 500,000 and 1 million people carried out by the army under Suharto. Soon afterwards, said individual came to power at the head of a U.S.-backed dictatorship, which ruled until the late 1990s when the Asian financial crisis proved to be too much for it.

Nowadays, Indonesia seems to be in a good position. There were serious issues such as corruption, instability, and internal conflict that continued well into the 2000s. However, recent times have been better though far from being problem-free, not least because of an improving economy. For instance, Indonesia has seen a 70 percent increase in GDP per capita, which has come with a corresponding fall in the poverty rates in both urban and rural areas. Thanks to that, it isn't unreasonable to speculate that Indonesia is in a good position to capitalize upon its natural advantages.

For those who are unfamiliar, Indonesia is huge in more than one sense of the word. In total, it consists of more than 17,000 islands, which are enough to make it the 14th biggest country in the entire world when measured on the basis of land area. That means that Indonesia has a lot of natural resources, some of which have been tapped into and some of which have not been tapped into. Moreover, Indonesia is home to more than a quarter billion Indonesians, meaning that it is surpassed in this regard by just three countries - China, India, and the United States. Suffice to say that is a lot of human potential, particularly since the Indonesian population is younger than a lot of its counterparts out there.

Should You Invest in the Indonesia ETF?

On the whole, there is good reason to believe that Indonesia has the potential to do well in an economic sense for the foreseeable future. However, that isn't enough for people to just jump right into investing in Indonesia ETFs. First, interested individuals need to make sure that they have a clear idea of what they want as an investor. After all, they can't choose the right investments unless they actually have an investment goal in mind. Even something as simple as saving for retirement can help interested individuals come up with concrete steps for realizing their desired aim.

Second, interested individuals need to look into what the specific Indonesia ETF actually entails. Countries are very broad concepts, so it stands to reason that country-associated ETFs actually cover a very wide range of securities. Generally speaking, people invest in developing economies because of the high rewards that can come from such investments. However, the downside to that would be the higher risks. On top of that, it tends to be much more difficult for interested individuals to scrutinize foreign securities compared to domestic securities, meaning that even more care is necessary. As such, interested individuals need to answer the question of whether a particular Indonesia ETF is well-suited for them or not using their own particular preferences, though they are feel to seek out sources of expertise and experience to provide them with more perspective.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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