Indonesia gears up for foreign investment

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Worker at an electronics factory in Indonesia

Indonesia is becoming a new target destination for international investors as the country’s recent economic success story has drawn a solid increase in foreign fund inflows.

The country’s gross domestic product has increased by 50 per cent in the past seven years, the political environment is stable, there is an abundance of natural resources and a huge potential on the domestic market given the 240 million population which makes Indonesia the largest economy in Southeast Asia in terms of size. Indonesia is also the world’s fourth largest country by population behind China, India, and the US, and ahead of Brazil.

Adding to this, Indonesia has still low labour costs in comparison to its regional peers. The average monthly base salary is $182, lower than in the Philippines, Thailand, and Malaysia.

The Indonesian government is currently promoting investment into commodities, infrastructure and industry. The country’s stock market has also drawn a lot of interest of international fund managers on the search for promising emerging markets investment opportunities. The Jakarta Stock Exchange Composite index has risen 5.49 per cent until the end of March this year and more than 15 per cent over the past 12 months. In a country analysis, HSBC has recently described Indonesia’s long-term prospects as “one of the region’s best.”

Investors from China have already secured business in Indonesia. Agreements on infrastructure construction cooperations worth at least $17 billion have been signed in March 2012. The agreements, which included nine memoranda of understanding and several letters of intent, cover 15 projects in the fields of iron and steel, textiles, hydropower, mining, and agriculture. The $12-billion Sunda Strait development project between the China Railway Construction Corp. and Indonesia was the largest of the agreements signed. Commercial Bank of China signed a long-term credit financing agreement with Indonesian national steel company Krakatau Steel.

In 2010, Indonesian President Susilo Bambang Yudhoyono put forward the Master Plan on the Acceleration and Expansion of Indonesia’s Economic Development from 2011 to 2025, which involves a total investment of $200 billion. The plan offers business opportunities to investors from foreign countries.

However, “it is important to also understand that Indonesia is very complex,”, said Kobsak Pootrakool, Executive Vice-President of Thailand’s Bangkok Bank, which is also very keen of investing in Indonesia and already runs a branch in Surabaya.

“It has a massive population, a vast geographical spread across 17,000 islands, and there are immense differences in development and culture in different parts of the country,” Pootrakool said in a recent comment in the Bangkok Post.

“Investors need to look where they go in Indonesia,” he said. Currently, Java is the industrial heart of the country, and 60 per cent of the population lives there.

“Companies looking to develop energy or natural resources generally invest outside of Java and so they need to consider many challenges, such as the level of infrastructure, the cost of transport and the need to provide supporting services,” he added.

But the market remains huge. It is expected that the inflow of investment into Indonesia will trigger a social and economic transformation and create higher income for a growing number of people.

“Within about three years, the number of people considered middle class in Indonesia is expected to triple to around 150 million,” Pootrakool said.

“With the Asean Economic Community only three years away, investors considering setting up production facilities in Indonesia would be well advised to act quickly.”

 

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Reading Time: 2 minutes

Worker at an electronics factory in Indonesia

Indonesia is becoming a new target destination for international investors as the country’s recent economic success story has drawn a solid increase in foreign fund inflows.

Reading Time: 2 minutes

Worker at an electronics factory in Indonesia

Indonesia is becoming a new target destination for international investors as the country’s recent economic success story has drawn a solid increase in foreign fund inflows.

The country’s gross domestic product has increased by 50 per cent in the past seven years, the political environment is stable, there is an abundance of natural resources and a huge potential on the domestic market given the 240 million population which makes Indonesia the largest economy in Southeast Asia in terms of size. Indonesia is also the world’s fourth largest country by population behind China, India, and the US, and ahead of Brazil.

Adding to this, Indonesia has still low labour costs in comparison to its regional peers. The average monthly base salary is $182, lower than in the Philippines, Thailand, and Malaysia.

The Indonesian government is currently promoting investment into commodities, infrastructure and industry. The country’s stock market has also drawn a lot of interest of international fund managers on the search for promising emerging markets investment opportunities. The Jakarta Stock Exchange Composite index has risen 5.49 per cent until the end of March this year and more than 15 per cent over the past 12 months. In a country analysis, HSBC has recently described Indonesia’s long-term prospects as “one of the region’s best.”

Investors from China have already secured business in Indonesia. Agreements on infrastructure construction cooperations worth at least $17 billion have been signed in March 2012. The agreements, which included nine memoranda of understanding and several letters of intent, cover 15 projects in the fields of iron and steel, textiles, hydropower, mining, and agriculture. The $12-billion Sunda Strait development project between the China Railway Construction Corp. and Indonesia was the largest of the agreements signed. Commercial Bank of China signed a long-term credit financing agreement with Indonesian national steel company Krakatau Steel.

In 2010, Indonesian President Susilo Bambang Yudhoyono put forward the Master Plan on the Acceleration and Expansion of Indonesia’s Economic Development from 2011 to 2025, which involves a total investment of $200 billion. The plan offers business opportunities to investors from foreign countries.

However, “it is important to also understand that Indonesia is very complex,”, said Kobsak Pootrakool, Executive Vice-President of Thailand’s Bangkok Bank, which is also very keen of investing in Indonesia and already runs a branch in Surabaya.

“It has a massive population, a vast geographical spread across 17,000 islands, and there are immense differences in development and culture in different parts of the country,” Pootrakool said in a recent comment in the Bangkok Post.

“Investors need to look where they go in Indonesia,” he said. Currently, Java is the industrial heart of the country, and 60 per cent of the population lives there.

“Companies looking to develop energy or natural resources generally invest outside of Java and so they need to consider many challenges, such as the level of infrastructure, the cost of transport and the need to provide supporting services,” he added.

But the market remains huge. It is expected that the inflow of investment into Indonesia will trigger a social and economic transformation and create higher income for a growing number of people.

“Within about three years, the number of people considered middle class in Indonesia is expected to triple to around 150 million,” Pootrakool said.

“With the Asean Economic Community only three years away, investors considering setting up production facilities in Indonesia would be well advised to act quickly.”

 

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