Is Indonesia a High Risk, High Profit Market?

The Government of Indonesia is focusing on increasing investment, both public and private, to boost Indonesia's economic expansion, particularly in the infrastructure and manufacturing industries in order to improve connectivity in all regions in Indonesia and reduce dependence on exports of raw commodities.

In business activities related to investment, uncertainty and risk are often interpreted and used simultaneously or interchangeably with the same meaning without being realized by business actors. Uncertainty is everything that is not known about the outcome/result of the business at the time the decision is made, while risk is defined as a measurement of the loss identified as a possible outcome of the decision that has been determined.

Uncertainty in the assessment cannot be equated with risk, where risk is a condition/possibility that will be faced by the owner of the asset whether it has the potential to gain or lose.Risk can be caused by various factors, either from the asset itself or from the market conditions in which the asset is located. Meanwhile the uncertainty of the assessment is caused by three factors, namely: disruption in the market (disruption), the availability of input data/information (input availability), and the choice of method or model (choice of method or model).

Disturbances in the market that occur at the valuation date, or current events, such as panic buying/selling or due to loss of liquidity due to the tendency of market participants to make transactions. Lack of relevant input data will lead to uncertainty in valuation due to market disruptions as described earlier, but may also be caused by assets becoming unique or because the market for assets becomes illiquid. Where there is a lack of relevant market data, it may be necessary to extrapolate inputs from directly observable prices for similar assets, or rely on unobservable inputs.

So whether Indonesia is a market with high risks and high returns, of course this goes back to the uncertainty and risk of the existing market in Indonesia.