Indonesia’s role as regional heavyweight

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Jakarta-Indonesia“We are blessed with every kind of energy that you can think of,” an Indonesian energy expert recently gushed during a forum at the Asian Development Bank.

Indonesia, he would later continue during a sideline conversation, has 100 gigawatts of potential hydropower, an immensity of envisioned energy that makes the world’s largest archipelago much more than just another superlative.

While only an anecdote from the energy perspective, the expert’s observations are nonetheless a telling cross-section of the impressive weight that Indonesia wields, especially in circles of market watchers and prospective investors.

Far from being an easily influenced pushover power, Indonesia has shifted its geopolitical stature increasingly closer to the heights of China, becoming the respective de facto leader in its regional grouping – ASEAN. Similar to China’s wavelength, Indonesia’s size, upward economic trajectory and vast trove of natural resources makes it an attractive looker that foreign investors fawn over, raking in record-breaking amounts of FDI in the first quarter of 2013 to the tune of $6.74 billion.

Not all attention comes with solicitation, however. Indonesia’s foreign fame has given it enough moxie to shift through foreign suitors with inexplicable equanimity simply because there seems to be no shortage. As is the prerogative bestowed to regional heavyweights, the conversation no longer is about “what you I can do for you” but “what you can do for me.”

In the case of Indonesia, this hubris is delicately mixed with the political uncertainty imbued into its wheeling and dealing democracy, which often seems to trip over itself in before it even begins walking. The recent blanket of haze originating from Sumatra that chocked Peninsula Malaysia and Singapore highlights this Quixotic inefficiency in governance. Indonesia is the only country in the 10-member bloc that has yet to ratify the ASEAN Agreement on Transboundary Haze Pollution, first brokered in 2002.

The excuses for the 11-year deference of the treaty appear bumbling. The country’s parliament had attempted to ratify the haze agreement, but it was shot down in 2008. The Indonesian government has since recognised that its dense bureaucracy has been inefficient at addressing the treaty, which led to a formal apology by President Susilo Bambang Yudhoyono to address the fallout of the haze.

That Indonesia has been able to perpetuate being the source of an annual plague gives a sense of just how much leeway the ASEAN grouping has awarded it up until now. While Japan and South Korea are the largest foreign investors in Indonesia, Singapore in near neck-and-neck for second, with many other ASEAN nations setting their scopes on opportunities in the archipelago, or, at least, the central island to be exact.

E-commerce and retail groups are hand over fist in their desires to open up operations in Indonesia; the aviation industry has pegged it as one of the premier growth markets of the world. At the focal point of these market-driven aspirations is Java, which has 141 million people, or over half of the country’s entire population. Urban sprawls such as Jakarta, Surabaya and Bandung contribute to the island’s economic steam, which makes up an astounding 80 per cent of GDP, as well as embodying the zeitgeist of consumption. The rapidly growing middle class on this island, perhaps the fasting in the world, has led equity analysts to bet on consumer-related stocks, backing up their confidence by citing the increasingly large role domestic consumption plays in the economy, accounting for 65 per cent of GDP in 2012.

Indeed, the Indonesian middle class is projected to nearly double from 74 million to 141 million by 2020, the Boston Consulting Group forecast in March 2013, with the nation’s buying power on a scalable concomitant level. This extraordinary chuck of emerging Asia will be searching for wonders of BlackBerry for the first time, venturing further out of their borders and gobbling up consumer products that range from DVD players to washing machines.

While not to the earth-shattering dimension that China evokes, Indonesia’s rise in wealth and prominence gives it natural influence over its neighbours, demanding much more out of new comers hoping to win over the ruling business and political elite.

Though political uncertainty is definite – as evidenced by the narrow forthcoming elections in 2014 – Indonesia is a force to reckon with. Better step in line.

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Reading Time: 3 minutes

“We are blessed with every kind of energy that you can think of,” an Indonesian energy expert recently gushed during a forum at the Asian Development Bank.

Reading Time: 3 minutes

Jakarta-Indonesia“We are blessed with every kind of energy that you can think of,” an Indonesian energy expert recently gushed during a forum at the Asian Development Bank.

Indonesia, he would later continue during a sideline conversation, has 100 gigawatts of potential hydropower, an immensity of envisioned energy that makes the world’s largest archipelago much more than just another superlative.

While only an anecdote from the energy perspective, the expert’s observations are nonetheless a telling cross-section of the impressive weight that Indonesia wields, especially in circles of market watchers and prospective investors.

Far from being an easily influenced pushover power, Indonesia has shifted its geopolitical stature increasingly closer to the heights of China, becoming the respective de facto leader in its regional grouping – ASEAN. Similar to China’s wavelength, Indonesia’s size, upward economic trajectory and vast trove of natural resources makes it an attractive looker that foreign investors fawn over, raking in record-breaking amounts of FDI in the first quarter of 2013 to the tune of $6.74 billion.

Not all attention comes with solicitation, however. Indonesia’s foreign fame has given it enough moxie to shift through foreign suitors with inexplicable equanimity simply because there seems to be no shortage. As is the prerogative bestowed to regional heavyweights, the conversation no longer is about “what you I can do for you” but “what you can do for me.”

In the case of Indonesia, this hubris is delicately mixed with the political uncertainty imbued into its wheeling and dealing democracy, which often seems to trip over itself in before it even begins walking. The recent blanket of haze originating from Sumatra that chocked Peninsula Malaysia and Singapore highlights this Quixotic inefficiency in governance. Indonesia is the only country in the 10-member bloc that has yet to ratify the ASEAN Agreement on Transboundary Haze Pollution, first brokered in 2002.

The excuses for the 11-year deference of the treaty appear bumbling. The country’s parliament had attempted to ratify the haze agreement, but it was shot down in 2008. The Indonesian government has since recognised that its dense bureaucracy has been inefficient at addressing the treaty, which led to a formal apology by President Susilo Bambang Yudhoyono to address the fallout of the haze.

That Indonesia has been able to perpetuate being the source of an annual plague gives a sense of just how much leeway the ASEAN grouping has awarded it up until now. While Japan and South Korea are the largest foreign investors in Indonesia, Singapore in near neck-and-neck for second, with many other ASEAN nations setting their scopes on opportunities in the archipelago, or, at least, the central island to be exact.

E-commerce and retail groups are hand over fist in their desires to open up operations in Indonesia; the aviation industry has pegged it as one of the premier growth markets of the world. At the focal point of these market-driven aspirations is Java, which has 141 million people, or over half of the country’s entire population. Urban sprawls such as Jakarta, Surabaya and Bandung contribute to the island’s economic steam, which makes up an astounding 80 per cent of GDP, as well as embodying the zeitgeist of consumption. The rapidly growing middle class on this island, perhaps the fasting in the world, has led equity analysts to bet on consumer-related stocks, backing up their confidence by citing the increasingly large role domestic consumption plays in the economy, accounting for 65 per cent of GDP in 2012.

Indeed, the Indonesian middle class is projected to nearly double from 74 million to 141 million by 2020, the Boston Consulting Group forecast in March 2013, with the nation’s buying power on a scalable concomitant level. This extraordinary chuck of emerging Asia will be searching for wonders of BlackBerry for the first time, venturing further out of their borders and gobbling up consumer products that range from DVD players to washing machines.

While not to the earth-shattering dimension that China evokes, Indonesia’s rise in wealth and prominence gives it natural influence over its neighbours, demanding much more out of new comers hoping to win over the ruling business and political elite.

Though political uncertainty is definite – as evidenced by the narrow forthcoming elections in 2014 – Indonesia is a force to reckon with. Better step in line.

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