Indonesia lies at the intersection of the Pacific Ocean, along the Malacca Straits and the Indian Ocean. Over half of all international shipping goes through Indonesian waters. Increasingly, Indonesia is playing a more dominant role in global affairs. It is Southeast Asia’s only member of the G-20, the latest global grouping for transnational economic policy. Standard Chartered sees Indonesia’s inclusion in the G-7 by 2040, provided that growth achieves its potential by 2012, moving the economy ahead of South Korea by 2016 and Japan by 2024. Indonesia is also a leading member of ASEAN, shaping integrative approaches in the region for security, trade and commerce, and will be the integral part of the ASEAN Economic Community in 2015. Finally, Indonesia is emerging as a key player on cross-cutting international policy issues as climate change, which will have direct and indirect impacts on business and investment decisions.
With a population of 240 million people, Indonesia has a large domestic market to offer, over 50% of which lives in urban areas and adopt a modern lifestyle. A growing and affluent middle class supports GDP growth with approximately 70% of GDP accounting for private consumption.
Doing Business in Indonesia
While continually maintaining socio-political harmony, Indonesia enthusiastically develops its economy through numerous commerce and financial cooperation with different countries. Apart from providing a solid ground for business and investment, Indonesia is indeed an equatorial paradise where rich cultural heritage blends perfectly with beautiful landscape. Indonesia is simply a wonderful place to mix business with pleasure.
As the world’s fourth most populous country and the largest economy in Southeast Asia, Indonesia never stops showing robust economic development. Having learnt from previous financial crisis, Indonesia eagerly builds stronger economic performance despite global sluggish markets. Such sturdy economic foundation combined with appropriate policy measures, Indonesia enjoys less impact of the global financial crisis compared to what had happened in other countries.
Adding to its remarkable fiscal and political transformations during the last decade, Indonesia is also undergoing a major structural shift in terms of demographics. Of the 240 million people, over 50% of the population is under 29 years old, and 60% of the population is under the age of 39, with around 52% of the population living in urban areas. This provides dynamic labor market participation, growing at 2.3 million per year. A rapidly urbanizing population also provides strategic pools of labor force in various centers of investment. With such great number of population, Indonesia indeed offers a large domestic market with over 53% live in urban areas and adopts modern lifestyle. Another important fact is the growing and affluent middle class supporting the GDP growth with approximately 56.7% of GDP of private consumption (as of 2010); while Consumer Confidence in Indonesia is at an all-time high, consistently reaching over 110 points until May 2011.
Having GDP of nearly US$707 billion in 2010, and estimated to achieve US$800 billion in 2011, Indonesia is indisputably one of the fastest growing economy in Asia and the largest economy in Southeast Asia. Much less affected by the global financial crisis than its neighboring countries, Indonesia’s economy grew by 4.5% in 2009, 6.1% in 2010 and is expected to reach 6.4% this year, providing a case for Indonesia’s inclusion in the so-called BRIC economies. With the successful debt to GDP ratio management in reducing from 83% in 2001 to 26% by the end of 2010; as the lowest among ASEAN countries aside from Singapore and ranked 1st among Asia-Pacific sovereigns by Standard & Poor’s for best fiscal balance. With the estimation that the nominal per capita GDP is expected to quadruple in 2020 Indonesia will be the engine of ASEAN economy.
Indonesia’s economic progress has also been acknowledged globally. Fitch credit ratings has upgraded Indonesia to BB+ with a stable outlook, Standard & Poor’s has improved Indonesia’s credit rating to BB+, and the Japan Credit Rating Agency (JCR) vote for investment grade. At the same time, Indonesian government continuously improves business climate and investment protection, incentives and facilities. These two sides of advancement confirm Indonesia as one of the most attractive investment destinations in the region. This development can be achieved owing to the fact that Indonesia is abundant in natural resources, especially in minerals, and strongly supported by a dynamic demographic base of more than 240 million people including over 40 million middle-class population whose middle-to-high income creating a large potential market. With development potential is far from saturated and inexpensive labor cost, Indonesia keeps proving itself to be an ideal place for investment in various fields. Economically strong, politically stable, reform minded, Indonesia is indeed an emerging global powerhouse in Asia.