The Jakarta Post looks at the prospects of
the 2019 economy to see the potentials amid challenges posed by the global
environment. Compiled by Marchio Irfan Gorbiano, Norman Harsono, Rachmadea
Aisyah, Riska Rahman, Riza Roidila Mufti, Stefanno Reinard Sulaiman and Winny
Tang, this is part two of the outlook:
Investment Coordinating Board (BKPM) head
Thomas Lembong responded with a smile when reporters asked him in December
whether he was optimistic about the investment climate in 2019.
His smile may linger on his face as
Indonesia received several pieces of good news toward the end of 2018 that
could boost investment in 2019, notably that of the government’s acquisition of
the Grasberg gold and copper mine in Papua from Freeport McMoRan.
The government also received news of a
potential $1 billion investment by Pegatron Corp., a Chinese company that
assembles iPhones, to build a manufacturing plant in Riau Islands, in addition
to a Rp 12 trillion ($824.9 million) investment plan by Korean automaker Hyundai
to build an Indonesian factory with a capacity of producing 250,000 cars
University Indonesia's Institute for
Economic and Social Research (LPEM UI) has forecast a better investment climate
in 2019, especially after the presidential and legislative elections in April,
in addition to Indonesia’s expected improvement in capturing investment
potential from companies escaping the United States-Chinese trade war and
relocating their production plants out of China.
Energy policies in 2019 will likely have a
similar goal as in 2018, which is to ensure the most affordable fuel and
electricity, which mostly comes from dirty energy, throughout the country.
Therefore, fossil fuel will continue to
drive Indonesia's energy sector this year and is likely to get special
treatment from the government, either in terms of incentives or policies.
In March 2018, President Joko
"Jokowi" Widodo ordered the Energy and Mineral Resources Ministry to
ensure the affordability of fuel and electricity prices until the end of 2019.
However, a small move by the government to
phase out fossil fuel by increasing the blending rate of biofuel to diesel fuel
from 20 percent, which was enforced in September 2018, to 30 percent by 2020
may have significance in 2019.
The biodiesel policy is likely to be the
only major development in renewable energy as sector experts and players
recently predicted that 2019's political year would slow down efforts to have
cleaner energy, including investment in it.
The government is maintaining its target of
20 million foreign arrivals and 275 million domestic tourists in 2019, despite
acknowledging that it was unlikely to reach the 2018 target of 17 million
foreign arrivals as a result of natural disasters that hit the country.
In an effort to achieve the 2019 target,
Tourism Minister Arief Yahya said the government had prepared three
extraordinary programs — boosting cross-border tourism, especially at potential
entry points like Riau Islands; establishing tourism hubs in neighboring
countries such as Thailand, Singapore and Malaysia; and opening a low-cost
terminal (LCCT) at Soekarno-Hatta International Airport.
The government also aims to boost meetings,
incentives, conferences and exhibitions (MICE) tourism, which is perceived to
attract high-spending tourists, as well as the millennial tourism market.
Coordinating Economic Minister Darmin
Nasution said the government had set a target of completing 79 national
strategic projects (PSN) out of a total of 223 before the end of the 2019 third
President Jokowi recently said several
major projects, such as the Kuala Tanjung Port in North Sumatra and Makassar
New Port in South Sulawesi, were scheduled for completion early 2019. A number
of toll roads, including Batang-Semarang and Salatiga-Surakarta in Central
Java, Banyuwangi [East Java]-Merak [West Java] were scheduled for completion at
the end of 2018.
The Transportation Ministry is expected to
implement a new regulation on online transportation services in May 2019. The
new regulation features minimum service standards (SPM) in security, safety,
amenity, affordability and orderliness of vehicles. The ministry is also
working on another regulation on online motorcycle taxis that is expected to be
introduced in 2019.
The ministry also expects several
transportation infrastructure projects to be completed in the near future,
including the MRT in Greater Jakarta and several airports that are expected to
significantly boost tourism.
The local digital economy is projected to
grow significantly in 2019, riding on a momentum of bombastic growth
projections, investor confidence and government support.
A Google-Temasek report released in
November estimated that the size of Indonesia’s digital economy could triple
from US$27 billion this year to $100 billion by 2025 – equal to annual growth
of about $10.4 billion.
The report also predicts that growth will
be led by e-commerce, online travel, ride-hailing services and online media,
likely to be followed by financial technology (fintech).
A McKinsey & Company report released in
December predicts that Indonesia’s e-commerce sector alone may grow at least
sevenfold from $8 billion last year to $55 billion by 2022.
Meanwhile, a recent Bain & Company
survey found that 49 percent of investors believed that Indonesia would be the
second-hottest digital economy market in Southeast Asia in 2019, trailing just
Similarly, the Google-Temasek report found
that Indonesian startups secured the second-highest average investment ($5
million) in the region this year, after Singapore’s average of $6 million.
Communications and Information Minister
Rudiantara was bullish in his view of Indonesia’s digital economy, saying he
expected to see Indonesia’s fifth unicorn and first decacorn (company valued at
more than $10 billion) by the end of next year.
However, technical challenges remain for
the digital economy, such as cybersecurity and electronic payment systems,
which are the top concerns among businesses, according to a recent Dell
Technologies survey and the Google-Temasek report.
Another pressing concern is a shortage of
skilled digital talents, who may expect salary increases of up to 50 percent if
they move jobs next year, according to a Robert Walters survey.
To address the shortage, digital literacy
programs were initiated this year by private and public sector figures such as
Minister Rudiantara, who pledged to train 20,000 local digital talents in 2019,
and Alibaba founder Jack Ma, who pledged to train 1,000 local developers every
year for the next 10 years.
Source: The Jakarta Post