The largest economy in Southeast Asia now has its first exchange-traded fund with the launching Tuesday of the Market Vectors Indonesia Index ETF (NYSE Arca: IDX).

The new fund comes with an expense ratio expected to wind up at 0.71%. According to Van Eck, Indonesia is one of the region's least correlated emerging markets to those in developed markets.

IDX's underlying index had 25 stocks entering 2009, each of which were based in Indonesia or had at least 50% of their revenues generated onshore and within that country's borders. Banks made up 31% of its constituents; Energy had 15.7%; Telecom had 12.7% and Materials 11.4%. Its top three individual names were: Bank Central Asia (8.8%), Telekomunikasi Indonesia (7.5%) and Bank Rakyat Indonesia (7.0%).  

The index can contain a minimum of 25 names, but not more than 75. It is reviewed on a quarterly basis. To be eligible for inclusion in the index, constituent stocks must have a market capitalization of greater than $150 million, a minimum 3-month average daily trading volume of at least $1 million and a minimum monthly trading volume of 250,000 shares in each of the past six months. The target market coverage for the index is 90% of the free-float market capitalization of the investable universe.

In announcing the new ETF, Van Eck Global noted that Indonesia has made "great political and economic strides in recent years."

Last year, the index declined by 58.89%. But in the past three years through 2008, it had gained some 2.71% and 11.23% in the past five years. By contrast, the broadly diversified iShares MSCI Emerging Markets Index ETF (NYSE: EEM) fell 50% last year; it lost an average annualized 8% in the past three years; and gained 6% in the past five years.   

"Like all emerging markets, Indonesia is challenged by the current global economic climate, but its ongoing reforms should help sustain its longer-term growth potential," Jan van Eck said in a statement.

With its first directly elected president in 2004, Indonesia's real gross domestic product growth rate has averaged 5.5% in the past five years, according to a white paper provided by Van Eck Global. Other potentially significant fundamental factors the research piece points to include:

• Indonesia has the fourth-largest population in the world, with more than 240 million people. Private consumption rates are rising, now accounting for about half of all GDP growth.

• Rich reserves in hydrocarbon oil and gas, accounting for 40-50% of the world's reserves. The country has 170,000 tropical islands, making it a strong agricultural environment complete with ample room for fisheries and forestry reserves. 

• A diversified exports base. Oil and gas account for 20%, down from 50% in the 1980s. Manufacturing of a variety of goods, from textiles to chemicals to electrical appliances, comprise some 80% of the country's export activities. Indonesia's ties with China and India are on the rise, as well.

A copy of the fund's prospectus can be found here.