Potency of Indonesian Market

POTENCY OF INDONESIA

A.   Economy

Indonesia is a country located in Southeastern Asia between the Indian Ocean and Pacific Ocean. It has a strategic location astride major sea lanes and is an archipelago of more than 17,000 islands. Indonesia has a mixed economic system in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation. Indonesia is a member of the Asian Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN) as a leader and the headquarter office is in Jakarta.

Indonesia is the third fastest growing economy in Asia and the largest economy in Southeast Asia. Indonesia’s economy grew by 6.5% in 2011 and forecast to climb to 6.9 in 2012, marking the highest percentage in over a decade.  This GDP growth, however, is not unprecedented because in seven of the last eight years Indonesia’s GDP has grown by more than 5%.  In the last couple of years, corporations and investors have begun to compare Indonesia’s economic growth potential with the likes of India and China.  Strong growth and political stability are two of the main reasons why corporations and investors share this confidence. Indonesia's balance of payments for 2011 also registered a surplus of US$11.9 billion.

Another great sign for Indonesia’s economy is that foreign direct investment increased by 20% last year. And last year experienced higher economic growth than any of its neighbors in this region. In terms of fiscal and monetary conditions, Indonesia is much better than European countries as Indonesia fiscal burden lighter. In monetary policy for example, Indonesia needs to raise SBI (Interest rate) only once while China, Singapore and India need to raise central banks rates 7-9 times in the past 19 months.

B.   Market Potential

·        The consumer market continues to lead growth in Indonesia as the world’s fourth-largest country with more than 240 million citizens (2012), not less than 50% of whom are under the age of 30.

·        Indonesia is a thriving democracy with significant regional autonomy. It is located on the world’s major trade routes and has extensive natural resources.

·        It is a top-ten market for U.S. agricultural products and within the top 30 overall markets for U.S. exports.

·        The number of households in Indonesia with US$5,000 to US$15,000 in annual disposable income is expected to expand from 36% of the population to more than 58% by 2020.

·        More than 60 million low-income Indonesian workers are projected to join the middle class in the coming.

·        Social networking penetration: Indonesia’ Internet users increased from 45 million people (2010) to 55 million people in 2011. Facebook users in Indonesia more than 43 million people, 3^rd rank in the world as per March 2012 (by facebook.com). Twitter users in Indonesia 19.5 million people, 5^th rank in the world and 1^st rank in Asia as per January 2012.

·        Indonesia was ranked 9^th as major destination for FDI. The most attractive economies for the location to invest (world investment prospects).

·        Growing markets include: renovation and construction of regional and municipal infrastructure, military upgrading, safety and security systems and protection of sea-borne traffic.

·        Data from Bank Indonesia (BI) showing that a total of 13.22mln credit cards were in circulation in the country to October 2010.

·        Business Monitor International (BMI) on Indonesia Retail Report forecasts that the country’s retail sales will grow from 1.39trn (IDR) / (US$133.89bln) in 2011 to 2.30trn / (US$222.41bln) by 2015.

·        During Q4/2011, inflows of Foreign Direct Investment (FDI) reached USD4.4 billion, up significantly from USD3.0 billion in the previous period.

·        With market perceptions returning to be positive, portfolio investment showed improvement during last year (2011).