Economy
From The Report: Indonesia 2013
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Indonesia’s place as the largest economy in ASEAN presents a strong value proposition for investors. Already achieving one of the world’s most consistent economic growth rates of above 6% since 2007, with only a minor dip to 4.6% in 2009, Indonesia has continued to impress global investors as more export-oriented economies have wavered. The BKPM has forecast that Indonesia will attract $40bn in total direct investment during 2013, having become the fourth-most-popular destination for FDI in 2012.
This chapter contains interviews with M Hatta Rajasa, Coordinating Minister for Economic Affairs; M Chatib Basri, Chairman, Indonesia Investment Coordinating Board; Gita Wirjawan, Minister of Trade; Suryo Sulisto, Chairman, Indonesian Chamber of Commerce and Industry; Prijono Sugiarto, President Director, Astra International; and Edwin Soeryadjaya, Chairman and Co-founder, Saratoga Capital.
Articles from this Chapter
Pattern of consumption: Natural resources and consumer spending are the engines of growth
M Hatta Rajasa, Coordinating Minister for Economic Affairs: InterviewOBGplus
Interview: M Hatta Rajasa What do you think are the main risks that Indonesia’s economy will face in 2013? M HATTA RAJASA: We realise that the global economic uncertainty remains high since the problems in the eurozone are not likely to be resolved in the near future. Furthermore, these widespread issues will continue to dampen global economic growth. As such, global demand is likely to remain soft, restricting our growth in exports and the industries dealing in this area. At the same time, strong…
Thinking ahead: OBG talks to M Chatib Basri, Chairman, Indonesia Investment Coordinating Board (BKPM)OBGplus
Interview: M Chatib Basri What are your preferences regarding the type of investment you would like to attract, and to what extent can the country afford to become more selective in this process? M CHATIB BASRI: We will focus on value-adding investments that will bring Indonesia to the next stage of development. Such investments are not only sizeable, but also lead to technology transfer and human capital development. While Indonesia has an advantage due to its natural resources, we should try…
Current account in check: Growth spurred spending, and a manageable trade deficitOBGplus
Amidst Indonesia’s open capital markets the deterioration of the current account deficit (CAD) in 2012 was at the centre of investors’ concerns, weighing on the currency throughout the year. One of the main transmission mechanisms of the global economic slowdown on the Indonesian economy, the drop in exports was not matched by a slowdown in imports until the second half of 2012. While debates were held during the summer about whether this reflected an overheating of the economy, authorities…
Gita Wirjawan, Minister of Trade: InterviewOBGplus
Interview: Gita Wirjawan What are the reasons behind Indonesia’s third consecutive trade deficit in July 2012, and what is your forecast for the 2013-14 period? GITA WIRJAWAN: The trade surplus for January to July 2012 was $335m, down sharply from the previous year of $16.3bn. The decline was mainly triggered by the decrease in non-oil trade surplus of $1.4bn, down 91.5% year-on-year (y-o-y) and the oil trade deficit of $1bn. The fall in the non-oil trade surplus was driven by weakening demand…
Reaching out: By decentralising growth, the authorities hope to achieve a more balanced economyOBGplus
Investors have traditionally focused on the largest cities in Java, but as urbanisation and growth spread to more outlying regions in the last decade attention has broadened to provincial urban centres. While challenges remain in coordinating policy amongst three powerful tiers of government, easing infrastructure constraints in larger cities like Jakarta and Surabaya will be key to supporting broad-based growth over the medium term. Given that every 1% increase in urbanisation has led to…
Prijono Sugiarto, President Director, Astra International: InterviewOBGplus
Interview: Prijono Sugiarto What role can foreign direct investment (FDI) play in maintaining Indonesia’s growth momentum? PRIJONO SUGIARTO: FDI’s role in supporting growth will become even more significant as Indonesia has seen its exports weakened by the global slowdown, and will have to rely more on domestic consumption and investment. FDI brings substantial benefits to Indonesia’s economic development in four main ways. First, FDI contributes to the formation of supporting industries…
Edwin Soeryadjaya, Chairman & Co-founder, Saratoga Capital: InterviewOBGplus
Interview: Edwin Soeryadjaya What is the potential of Indonesia’s consumer goods sector and its growth domestically? EDWIN SOERYADJAYA: Contrary to what many people believe Indonesia’s engine of growth is not exports of commodities or manufactured goods. Instead, it is driven by strong domestic consumption and a growing middle class. Some 55m Indonesians are considered to be a part of the “consuming class”, and the trend remains very positive with nearly 5m people entering this segment…
Integrating supply chains: Expanding transport infrastructure to enable growthOBGplus
Foreign direct investment (FDI) flows to Indonesia have consistently set new records since 2010 both in terms of value but also in the economic sectors and the geographic areas targeted. As Indonesia moves from a natural resource investment destination to claim its place as a central cog in the region’s industrial supply chain, despite continuing infrastructure and logistics bottlenecks, multinationals are moving to integrate operations regionally ahead of formal free trade within the ASEAN…
Striking a balance: Organised labour holds the reins of power, for nowOBGplus
Labour relations emerged in 2012 as one of the key downside risks facing Indonesia. Already constrained by one of the world’s most restrictive labour laws, new rules in 2012 hiking the minimum wages in important industrial production areas and curbing the use of outsourced staff to circumvent rules on full-time employees have prompted protests from employers. However, with resilient corporate earnings, exemptions for small and medium-sized enterprises (SMEs), and a legacy of wages lagging…
Fuel for thought: Petroleum subsidies are a hot election issueOBGplus
As a net oil importer, Indonesia’s most pressing fiscal challenge remains its large subsidy bill, which at around 20% of the 2013 budget – some $30bn – accounts for as much spending as education. Although there is widespread agreement that the subsidies are wasteful and disproportionately benefit more affluent Indonesians – the World Bank estimated in 2011 that the richest half of households consumed 84% of subsidised fuel – the politics of raising prices have been daunting. Well-publicised…
