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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.

Chapter | Insurance from The Report: Indonesia 2019

Indonesia’s insurance sector is crowded, reflective of the country’s sizeable population – the world’s fourth largest, at around 265m – as well as its potential. Some 152 companies vied for premium in 2017, operating in an environment that, although it presents significant opportunity, also comes with a measure of insurable risks, in particular from extreme weather and natural disasters. In the highly competitive life market, agents reach out to consumers by offering unit-linked policies, which combine life coverage and regular investment income. While formal products remain outside the reach of most Indonesians for now, the wealthier segments of the market nonetheless represent an attractive target for insurers. This chapter also contains an interview with Jens Reisch, President Director, Prudential Indonesia.

Chapter | Capital Markets from The Report: Indonesia 2019

Indonesia’s capital markets have been on a steady growth path in recent years, with market capitalisation and trading activity showing strong expansion since 2012. Meanwhile, the number of initial public offerings (IPOs) on the Indonesia Stock Exchange (IDX) reached a 26-year high in 2018. Debt markets have been resilient despite widespread global volatility, which prompted significant outflows from emerging markets that year. Nonetheless, some challenges remain for stakeholders: factors such as illiquidity, potential election shocks and stringent regulatory requirements continue to weigh on domestic companies’ market participation. The authorities are seeking to encourage more IPOs and boost broader market liquidity, although regulatory challenges and elevated listing fees continue to impede progress.A planned small and medium-sized enterprise board has yet to be established. New regulations surrounding cryptocurrency trading could also affect plans to diversify IDX product offerings, even as reforms help the sector maintain its upward trajectory in 2019. This chapter also contains an interview with Inarno Djajadi, President Director, Indonesia Stock Exchange.