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Northstar Advisors sees recovery in consumer, financials in Indonesia

DAVOS, Switzerland (Reuters) - Consumer-related sectors are the top 2017 picks for Northstar Advisors, which manages over $2 billion dedicated to investing in Indonesia, its co-founder and managing partner, Patrick Walujo, told the Reuters Global Markets Forum on the sidelines of the annual World Economic Forum in Davos.

The following are edited excerpts from the conversation:

Q: What is Northstar's key focus in 2017? Which sector interests you the most in Indonesia this year?

A: We see a recovery in the financial and consumer sectors in 2017, those sectors had suffered from relatively high interest rates and declining purchasing power in the midst of soft commodity prices and budget pressures. It boils down to implementation and political stability, both of which we are comfortable with. We are also seeing robust activities in the Indonesian digital sector. Infrastructure is another exciting area. The government is looking to privatize some big infrastructure assets.

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Anything that is driven by consumers is a good sector to focus on. We have been pleasantly surprised by Indonesians' speed of technology adoption.

Q: What are Indonesia's biggest red-flags on a 3-5 year basis?

A: We are watching carefully the implementation and speed of some of the government's initiatives. Indonesia needs to move things along faster. Corruption, policymakers' bureaucracy and infrastructure are the biggest problems for Indonesia besides debt that continues to pile up. Indonesia is also still commodity-driven.

The government is controlling the budget deficit at around 2 percent of GDP. The absolute debt number is increasing but as percent of GDP, it is actually declining. Public debt is around 25 percent of GDP, a level that is manageable.

Indonesia's infrastructure needs rejuvenation and development. We have been impressed by how fast the current administration is pushing infrastructure. Things are getting developed.

Q: Corruption has been a persistent issue. How is it going to be any different now?

A: My observation is that this administration is clean and transparent. The drive against corruption by KPK (Indonesian ICAC) coupled with free press is real. The country has made a lot of improvement in the combat against corruption. It's a long battle and moving on the right direction.

Indonesia has withstood tests since President Suharto's fall. But it is not to be taken for granted. I would choose the current system anytime. With all its pitfalls, any other alternative is worse.

Q: The U.S. accounts for roughly 10 percent of Indonesia's trading activity. Any discussions regarding Trump's policies or potential impact?

A: Everybody is watching President-elect Trump's policies carefully. The fact that the Trump organization had decided to do business in Indonesia hopefully meant that the president-elect had a favorable view on the country.

(Reporting by Divya Chowdhury; Editing by Neil Fullick)