Industry Retail
From The Report: Indonesia 2014
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Indonesia has all the makings of an industrial powerhouse: a young and talented population, relatively cheap labour and a large domestic market. The country has the capacity to develop its industrial capacity, specifically in terms of export-oriented industries. Indeed, manufacturing is vital to the Indonesian economy. Without it the country would have a difficult time addressing its current account deficit, escaping the middle-income trap and taking the edge off the commodity cycle. Indonesia must look for advantageous terms in foreign trade agreements and ensure that it is able to remain competitive in terms of import and export trade balance. Though national and presidential elections in April and July 2014, respectively, may bring some uncertainty for investors, on the whole most indicators point to a year of expansion for the economy. The challenge for the sector at this point is to make sure that a lack of infrastructure and demands for increased wages do not derail the return and rise of Indonesian manufacturing.
This chapter contains interviews with Irvan K Hakim, President Director and CEO, Krakatau Steel (Persero); Klaus Lesker, Member of the Executive Board, Ferrostaal; Hiroyuki Fukui, President Commissioner, Toyota Motor Manufacturing Indonesia; and VP Sharma, CEO, Mitra Adiperkasa.

Articles from this Chapter

Overview

Back on track: Leveraging strengths to resume upwards trends
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Indonesia has all the makings of an industrial powerhouse: a young and talented population, relatively cheap labour and a large domestic market. The country has the capacity and the conditions to develop industry, specifically export-oriented industries. Manufacturing is also vitally important to Indonesia. Without it and without its growth, the country will have a difficult time addressing its current account deficit, escaping the middle-income trap and taking the edge off the commodity cycle. Building…

Analysis

Building up metals processing: New policies help the sector advance
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Indonesia has long pushed to move more of its industrial processing onshore to both protect and encourage local manufacturing. At first, efforts to rectify the situation were inconsistent. Regulations were passed but not applied, or loopholes were built in that seemed to water down what at first appeared to be draconian measures. When Indonesia successfully intervened in the markets, as it has done in the textiles sector, it did so carefully. The government made sure it adhered to both the letter…

Interview

Irvan Kamal Hakim, President Director & CEO, Krakatau Steel (Persero): Interview
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Interview:Irvan Kamal Hakim What sort of difficulties do domestic steel manufacturers currently face in Indonesia? IRVAN KAMAL HAKIM: Industry players are optimistic that by 2015 global steel markets will rebound. We believe that the economic recovery in Europe will propel higher demand for Indonesian steel. Also, we must not forget the Chinese market. Many economists feel that China can quickly raise its GDP growth from the current 7.5%, which will impact world steel markets. For instance,…

Interview

Klaus Lesker, Member of the Executive Board, Ferrostaal: Interview
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Interview:Klaus Lesker What opportunities will Indonesia’s plan to become a centre for automobile production create for manufacturing and petrochemicals industries? KLAUS LESKER: Being the largest economy in South-east Asia, with strong and still increasing domestic consumption, Indonesia offers highly captivating business and investment opportunities for those who wish to support these aspirations. One opportunity is the rising demand for plastics and the raw materials needed to process…

Analysis

Revving up a sector: On track to capture greater market share
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The automotive sector in Indonesia saw surprising growth in 2013. Although industry players and analysts had largely anticipated a flat year, 1.23m units were sold, an increase of 10.2% from 2012. But despite the healthy rise in sales, concerns remain. The somewhat strong performance comes after a run of exceptional growth – 25%, 17% and 57% in 2012, 2011 and 2010, respectively – and was achieved in part as a result of heavy discounting and promotion. Like the general economy, the industry has…

Analysis

Pharmaceutical boom: The introduction of universal health care looks set to generate new opportunities for foreign drug makers in the long term
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With the introduction of universal health care in Indonesia on January 1, 2014, the pharmaceutical sector in the country is set for a boost. While the roll-out of the programme will be slow, a much expanded proportion of the population will be able to receive increasingly advanced and innovative drugs for their ailments. The Big Project The World Bank has estimated that the universal health care programme will cost between $16bn and $19bn a year by the time it is fully implemented in 2019. From…

Interview

Hiroyuki Fukui, President Commissioner, Toyota Motor Manufacturing Indonesia: Interview
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Interview:Hiroyuki Fukui What future role is there for Indonesia as an automotive export centre, and to what extent will developing markets shape this direction? HIROYUKI FUKUI: We are optimistic about the country’s role and potential going forward, especially for exports to developing countries. For many years, we have exported our vehicles to countries across the ASEAN region and, recently, we have also increased exports to the Middle East. Other destinations for Indonesian exports include…

Overview

Middle class reconsidered: New highs and lows for both the sector and consumers
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A fast-growing middle class in Indonesia means more malls, products and higher sales. Recent numbers appear to demonstrate that this very dynamic, which has been heavily discussed and promoted over the past few years, was in fact holding in the country. After some signs of weakness in the middle of 2013, the retail market came roaring back with a string of strong indicators: retail sales were up 11.4% year-on-year in September 2013, 12.9% in October, 1.9% in November and 26.6% in December. The momentum…

Analysis

The e-commerce question: Paving the way for global firms to sell online
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E-commerce in Indonesia is booming, but it is not clear whether foreign investors can legally participate in the expanding field. In 2013 the government announced that online retailers would be treated like all others: any company without a shop larger than 2000 sq metres must be Indonesian-owned. By implication, that would mean all internet retailers would have to be locally controlled. The rule was written so broadly that it seemed to include anyone conducting online transactions of any kind in…

Interview

Virendra Prakash Sharma, CEO, Mitra Adiperkasa: Interview
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Interview:Virendra Prakash Sharma How will downward revisions of Indonesia’s GDP impact retailers’ expansion plans going forward? VIRENDRA PRAKASH SHARMA: While it is true that this could affect the expansion plans of some companies, for retailers operating within the middle to upper income groups there is great resilience. Demand in this area of the market is therefore unlikely to be badly affected. Going forward though, such revisions affect overall market sentiment and with GDP growth…

Analysis

Steady development: New outlets are transforming the retail make-up
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Indonesia has a fast developing retail sector, and all signs point toward it evolving quickly from highly fragmented and basic in terms of quality, service and efficiency to one similar to advanced ASEAN countries, with modern trade outlets and large groups leading the way. Indonesian consumers are active and increasingly prosperous. Firms are investing and quickly upgrading, and are under considerable pressure to improve given the fast rise in wages and the need to better manage their operations.…

Analysis

Tempering retail: A moratorium on the construction of malls in Jakarta has split opinion
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Alongside Indonesia’s emphasis on the importance of economic development, the country is at the same time working to protect itself from some of the unintended consequences of that development, especially in the retail sector. The emerging middle class will continue to help drive the economy forward, but the retail sector that serves it has the potential to damage the physical environment as it builds the infrastructure needed to meet the demands of new consumers. The consumers themselves, meanwhile,…