Indonesia Needs New Infrastructure Approach (CAT, FLR, IDX)

Jonathan Yates:  For Indonesia to meets its goal of 7% yearly growth by 2014, there is much work to be done by companies like Caterpillar Inc. (NYSE:CAT) and Fluor Corporation (NYSE:FLR).

The largest economy is Southeast Asia has been growing at over 6% annually for the past five years, but the infrastructure of the island nation is woefully behind. A November 2011 Financial Times article described the country’s growth as threatened by bottlenecks at harbors and airports. In the article, the chairman of Indonesia’s Association of Charter Airlines lamented that, ”Our international airport has reached nearly twice the capacity it was built for.  It is unworkable.”

According to The Jakarta Times, the Indonesian government has lagged in addressing the issues. The newspaper reported in January that the government has been pushing public-private partnerships since 2005, but only picked five projects to showcase in 2011. Construction has not started on any of them.

Nonetheless, there is progress. Caterpillar has announced it will invest $200 million to expand an excavator plant in West Java. Fluor built a new coal-fired power plant in 2011. The question is: what other companies will step up? And will the Indonesian government help or hinder them?

Investors looking to bet on Indonesia’s future may be interested in the Market Vectors Indonesia Index ETF (NYSEArca:IDX), which is up 3.69% so far this year.

Written By Jonathan Yates From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

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