Russia, for its part, cannot seem to escape the investor-unfriendly headlines. Sweden's Ikea has leased diesel generators to circumvent Russian bureaucrats who allegedly demanded bribes to provide electricity to the chain's stores. Then the Swedish retailer revealed that the Ikea executives in charge of leasing the generators were taking bribes, too. Petro oligarch Mikhail Khodorkovsky has been in jail on fraud charges since 2003: His supporters say the charges were trumped up to give the Kremlin an excuse to seize his company. (The government denies this; Khodorkovsky is on trial for fresh charges.) William Browder, chief executive officer of Hermitage Capital Management, once Russia's top foreign investor, was banned from the country in 2006 for tax evasion: He says his company was grabbed by criminals who pulled off the tax scam. "Russia is just not a good place to put your money," says Richard Shaw, managing principal of QVM Group, a South Glastonbury (Conn.) investment advisory.
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Indonesia, the world's fourth-most-populous country and largest Muslim democracy, has corruption, too. In part, that's a legacy of the Suharto dictatorship that ended in 1998. Yet Tom Lydon, president of Global Trends Investments, says the Asian nation has more going for it than Russia. "Beyond natural resources, it is supported by improving domestic consumption, and anticorruption efforts appear to be working." Indonesia has sentenced several politicians and former ministers for corruption. In its latest Global Competitiveness Report, the World Economic Forum ranked Indonesia 44th out of 139 countries—up from No. 54 the prior year. (Russia came in at No. 63.)
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The iShares ETF allocates just 2.6 percent of its money to Indonesia. That will change, say Indonesia backers; 12 years after its financial crisis the archipelago is China's third-largest trading partner, foreign investment has more than tripled since 2004, and gross domestic product is growing faster than Russia's. While Russia's Micex index has fallen 22 percent from its December 2007 peak, the Jakarta Composite Index is approaching an all-time high. Russia's market fortunes have fallen so low that some investors are taking a second look, especially since Russian corporate profits have been robust. "Russia really stands out as being cheap and attractive," says Maarten-Jan Bakkum, an emerging-market equity strategist at ING Investment Management in The Hague.
Indonesia's supporters say that over the long haul the Asia nation has the edge. More than half of the population is under 30, while aging Russia faces a paucity of productive labor. The Kremlin may have to commit increasing sums to care for the elderly, says Wijayanto, managing director of the Paramadina Public Policy Institute in Jakarta. "Indonesia," he says, "has the potential to become a key global player."
Rather than be concerned with trendy acronyms, being less catch-phrasy and more realistic's always a good idea.