Diverging paths: Turkey and Indonesia

Turkey is no Indonesia, Standard & Poor?s declared this week. 

But the two countries have many things in common. Both are composed of Muslim majorities, both are listed under the MINT (Mexico, Indonesia, Nigeria and Turkey) grouping, trailing the BRICS. Both countries have received a BB+ rating from S&P recently. 

But the similarities end there, says Standard & Poor?s. In a press release, the ratings agency noted that Indonesia and Turkey are taking divergent paths. Turkey?s outlook is negative, while that of Indonesia is positive. So as developing markets are being shaken up and we are waiting for the imminent rate rise decision of the U.S. Federal Reserve, Turkey is negatively discriminated while Indonesia is positively discriminated. Why?

Last year, both Turkey and Indonesia had presidential elections. President Recep Tayyip Erdo?an was elected in Turkey, and President Joko Widodo, popularly known as Jokowi, was elected in Indonesia. The difference was that Mr. Erdo?an is an old-timer with a new title, while Jokowi was more like the Erdo?an of 2002 ? a young mayor challenging the old guard of his country. 

President Jokowi has been a breath of fresh air, bringing political stability and a sense of economic reform to Indonesia. President Erdo?an?s election, on the other hand, burdened Turkey?s system with the crushing weight of his personality. He has effectively shifted the executive branch of government from the Prime Ministry to the Presidency. He is already calling the shots, but he also wants to sign the papers. That is one of the reasons why the country suffers from the kind of economic and political uncertainty that Mr. Erdo?an?s very government had cured a decade ago. 

So the market is bearish on...