Having been plagued by a series of misfortunes, Indonesia’s economy and related exchange traded fund (ETF) may be well placed to established solid growth rates if the government provides the necessary reforms.

Many outside of Indonesia don’t realize that the country is actually doing quite well, with a stable government and an economy that has evaded the full force of the global downturn – only China and India are growing faster than Indonesia, according to The Economist.

Still, the country has some problems:

• Indonesia remains prone to sectarian and ethnic violence
• More than 15% of Indonesians live below the poverty line
• Unemployment stands around 8%, but the workforce is growing
• Inequality has widened
• Abusers of power in the former regime are going unpunished; Indonesia is rife with corruption
• Infrastructure is poor, if not non-existent
• Choking smog is being pushed down by El Niño weather, which also highlights the country as the world’s third-largest emitter of carbon

On the other hand, there are some hopeful points about Indonesia:

• A young population and a falling birth rate equates to a surge in the ratio of working population to the number of dependents. More than half of the population is likely to live in urban areas, indicating a boost in consumption.
• Circumspect fiscal policy has left the government with enough cash for infrastructure and public services.
• The re-election of Susilo Bambang Yudhoyono and his running mate voices the people’s need for reform.
• Indonesia may enjoy a period of political stability. The process of democratizing the country is now in full swing.

• Market Vectors Indonesia ETF (NYSEArca: IDX): up163.2% year-to-date

For more information on Indonesia, visit our Indonesia category.

Max Chen contributed to this article.

Tags: Asia, Emerging Markets, Frontier Markets, Global ETFs, IDX, Indonesia