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Chapter | Emerging Cities from The Report: Indonesia 2019

Stretching 5120 km from the shores of Aceh to the mountains of Papua, Indonesia encompasses 17,000 islands – around 6000 of which are permanently inhabited – and comprises 34 different provinces, each with its own capital city. Within these islands, 300 distinct ethnic groups exist, speaking more than 700 languages between them. Until the turn of the new millennium, centralisation was seen as the best way forward, and economic development policies were strongly skewed towards Indonesia’s main island of Java, where the country’s capital Jakarta is located. After the resignation of former President Suharto in 1998, however, successive administrations have implemented decentralisation policies, aiming to more evenly distribute authority and investment throughout the country’s many diverse regions. This chapter also contains an interview with Tri Rismaharini, Mayor of Surabaya.

Chapter | Construction & Real Estate from The Report: Indonesia 2019

Supported by strong fundamentals, Indonesia continues to break ground on major construction projects. Fuelled by a comprehensive public infrastructure agenda, large-scale developments have become the norm. However, while the construction sector remains an important pillar of the country’s economy, project development is still hindered by domestic obstacles, including a lengthy land-acquisition process. On the back of a massive infrastructure agenda, new real-estate projects have driven growth in Indonesia’s property sector in recent years. A colourful mix of cultures has influenced the architectural layout of the capital city Jakarta, which is one of the many features that have attracted investors from around the world. While the government of Indonesia has pursued initiatives to bolster property investment, however, currency depreciation, political uncertainty and rising interest rates constrained growth in 2018. This chapter also contains interviews from Basuki Hadimuljono, Minister of Public Works and Housing, and David Cheadle, Managing Director, Cushman & Wakefield.

Chapter | Retail & E-Commerce from The Report: Indonesia 2019

A large and youthful population, a fast-rising middle class and rapid digitalisation have underpinned strong growth in Indonesia’s retail and e-commerce sectors. Indonesian shoppers are the third-most optimistic globally, with consumer confidence benefitting from a steady rise in incomes that has supported recent growth in personal consumption and retail sales. New retail supply is on the rise in Jakarta and also across secondary cities, while occupancy rates of premium-class shopping centres remain above 90%. The formal retail sector could come under pressure in the coming years, however, as rapid growth in e-commerce activities is challenging traditional retail models. Although retail activity remains concentrated in bricks-and-mortar stores and shopping malls, e-commerce growth has soared in recent years, with online sales and customer volumes recording consistent double-digit growth since 2013. This chapter also contains an interview with William Tanuwijaya, CEO and Founder, Tokopedia.

Chapter | Industry from The Report: Indonesia 2019

With the largest land mass, population and economy in South-east Asia, Indonesia is set on becoming the region’s industrial powerhouse. A historical reliance on natural resources has left its industry lagging behind that of regional peers Thailand, Malaysia and Vietnam in terms of exports, even as the country continues to clock robust GDP growth. Excessive bureaucracy and protectionist policies have further hindered the development of manufacturing exports, contributing to the double-digit decline in foreign direct investment in the third quarter of 2018, as well as the country’s persisting trade deficit. However, reforms are taking hold and Indonesia enjoyed GDP growth of 5.1% in 2018, with gains in both light and heavy manufacturing. Estimates put manufacturing’s contribution to GDP at 20.5%, not far below levels in most industrialised economies. This chapter also contains interviews with Airlangga Hartarto, Minister of Industry, and Rosan Roeslani, Chairman, Indonesian Chamber of Commerce and Industry.

Chapter | Infrastructure & Transport from The Report: Indonesia 2019

Inadequate infrastructure has long been a challenge for Indonesia, the world’s largest archipelagic state. With more than 17,000 islands and a population of around 265m, it may be the most complicated country in the world in terms of logistics. Since President Joko Widodo was inaugurated, transport and infrastructure investment has become a key pillar of the Indonesian government’s policy agenda. The scale of infrastructure investment under “Jokowinomics” significantly exceeds that of previous administrations. Among the administration’s initial aims was the construction of 1000 km of toll roads, over 3000 km of railways, 15 airports, 24 seaports, 33 dams and power plants to supply 35,000 MW of energy, altogether costing some $355bn. A further 2650 km of new non-toll roads are targeted in the government’s National Medium-Term Development Plan 2015-19. This chapter also contains interviews with Luhut Panjaitan, Coordinating Minister for Maritime Affairs, and Bambang Brodjonegoro, Minister of National Development Planning.

Chapter | Energy & Mineral Resources from The Report: Indonesia 2019

Replacing diminishing reserves and guaranteeing domestic energy security are two of Indonesia’s policy priorities. As such, oil and gas exploration and development are key areas in which the government is eager to progress. To encourage this, policymakers have adopted a series of reforms aimed at ushering in a new wave of foreign investment in the sector. Similarly, in a bid to offset declining oil fields in western Indonesia, the government is working to incentivise contractors to explore deep-sea areas along the eastern frontier. Substantial mineral reserves have put Indonesia on the brink of a new wave of development. Nevertheless, investors still need to contend with a legacy of regulatory uncertainty and a growing trend of resource nationalisation. While policymakers have made efforts to adjust the regulatory regime, exploration hurdles remain in place in the form of divestment rules and a lack of coordination between central and regional governments. This chapter also contains interviews with Ignasius Jonan, Minister of Energy and Natural Resources, and Arie Prabowo Ariotedjo, President Director, ANTAM.