a GDP size of nearly US$ 550 billion in 2009, Indonesia is the third
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% last year and is
forecast to climb to 5.6% in 2010 and further still to 6% in 2011,
providing a case for Indonesia’s inclusion in the so-called BRIC
economies. Future economic expansion is expected to include more
inclusive growth as nominal per-capita GDP is expected to quadruple by
2020, according to a Standard Chartered report.
A large part of our economic success is a result of prudent
fiscal stewardship that focused on reducing the debt burden.
Indonesia’s debt to GDP ratio has steadily declined from 83% in 2001 to
29% by the end of 2009; the lowest among ASEAN countries, aside from
Singapore which has no government debt. The country is ranked 1st among
Asia-Pacific sovereigns by Standard & Poor’s for best fiscal
In January 2010, Fitch ratings upgraded Indonesia’s credit
rating to BB+ with a stable outlook. The rating upgrade is in line with
Indonesia’s strong and sustained growth, and improving fiscal
position. It is especially an enormous vote of confidence for
investments in Indonesia - putting us only 1 notch below investment
grade. Indonesia is on the right path towards attracting larger pools
of fixed income and capital flows, as well as drawing in those funds
which have so far been precluded from investing in non-investment grade
These achievements have increased the frequency with which
Indonesia is being compared to middle-income developing nations like
Brazil, India and Mexico. Economically strong, politically stable,
reform minded, Indonesia is an emerging global powerhouse in Asia.
Real GDP Growth
Realized Foreign Direct Investment
Indonesia’s vibrant economy is political stability. A decade ago, many
analysts envisaged that certain break-away provinces would bring about
Indonesia’s “balkanization”. In 2001, Indonesia embarked on an
ambitious and challenging decentralization effort. While it has been
challenging journey, today Indonesia is one of the most decentralized
countries in the world with substantial funds and authorities devolved
to the regions.
Significantly, Indonesia is the only country in
Southeast Asia that has bucked the trend of a democracy in trouble.
Democracy is blossoming in a country that was once ruled with an iron
hand for 30 years. Indonesia has gracefully transformed from an
authoritarian state to a regional role model.
Recently, and for a
third time in a row, Indonesia completed another round of a peaceful
and successful legislative and presidential elections. The election
confirmed the people’s confidence in President Susilo Bambang
Yudhoyono’s leadership, who won more than 60% votes from 176 million
registered voters. President Yudhoyono’s party, Partai Demokrat,
controls over 25% of plenary votes, providing him with a stronger
mandate to lead Indonesia in the next five years.
STRONGER INVESTMENT CLIMATE
economic policies are on a firm footing. So are its measures to attract
foreign investment. Below are a few of Indonesia’s latest improvements
to our investment climate:
Investment Law No. 25/2007:
updated investment law redefines “capital investment” as all
investments, whether by domestic or foreign investors, for the first
time offering equal treatment to all investors. There is no longer a
limit of 30 years on foreign investment permits, and gone is the
provision in Law 1/1967 for there to be divestment. Additionally, the
new law allows for the unimpeded reparation of capital.
One-stop-shop (PTSP) and National Single Window (SPIPISE)
has launched a one-door integrated service (PTSP) and an electronic
automation platform for investment licenses and non-licensing services
(NSWi) to not only reduce the number of procedures and amount of
documentation needed to invest in Indonesia, but also to bypass the need
to physically come to our offices to apply for certain services. The
new system has revamped internal processes and rectified human resource
constraints to increase the speed and improve the quality of investor
The system was first launched in January 2010 in the Free Trade Zone and Free Port of Batam.
is a renowned market for resource extraction, seen as even more
attractive than for instance, South Africa, Australia and Canada in
terms of mineral prospectivity, as per Pricewaterhouse Coopers.
country is home to a biodiversity that is only second to Brazil, just
to mention a few. These resources provide tremendous investment
opportunities. Moreover, development potential is far from saturated,
particularly in renewable energy.
DYNAMIC DEMOGRAPHIC BASE
is the 4th most populous nation in the world. Apart from 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, with the same percentage living in urban areas.
This provides for dynamic labor market participation, growing at 2.3
million per year. A rapidly urbanizing population also provides for
strategic pools of labor force in centers of investment.
with this demographic bonus is Indonesia’s commitment to improve
productivity and the education level of its youth, with 16% of total
government expenditure on education. This expenditure is higher than
any other sector. Currently, the majority of university graduates are
trained in technical fields such as finance and economics (28%) or
engineering and sciences (27.5%).
Labor cost is still relatively low in urban centers, even as compared to urban centers of investment magnets China and India.
BURGEONING DOMESTIC MARKET
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.
statistics fare well for many industries, including retail and consumer
products, food processing, as well as automotive industry.
STRATEGIC LOCATION AND EXPANDING GLOBAL INFLUENCE
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.
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.