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Is it Finally Indonesia’s Time?

Many people do not realize that Indonesia is the largest Muslim country in the world, with just over 250 million people. It also a thriving democracy that has just recently emerged from a hotly contested presidential election that saw relative newcomer Joko Widodo win a close contest. “Jokowi,” as he is universally known, got his start as the mayor of Solo and later as the governor of Jakarta, Indonesia’s capital. Even with the close result and allegations of fraud by Jokowi’s rival, there was little election violence and a peaceful transfer of power after confirmation of the result from the constitutional court.

So, “Is it finally Indonesia’s time?” This is a question that I have been asking for a good number of years. The market size is the largest in Southeast Asia and one of the largest in the world. The archipelago of around 18,000 islands is stunningly beautiful as well as blessed with a large amount of natural resources. Since my first trip in 1990 it was clear that there is plenty of upside economic potential.

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Politics have long been the major stumbling block for Indonesia, which was ruled by military dictatorships for many years after independence from Dutch colonization. The iron fist of the state and socialist tendencies bred corruption and inefficiency. All this started to change with the downfall of the Suharto regime in 1998 and successive democratically elected administrations. As the politics evolved, so has the economy, and there is stronger growth today as well as opportunities for companies both domestic and foreign.

The major industry sectors in Indonesia include agriculture, mining, textiles/apparel, and tourism. There are also opportunities in the infrastructure space as strong economic growth has led to a growing investment in building. The largest city in Indonesia (and the capital of the country) is Jakarta, which is located on the island of Java. Over the years, Java has gotten most of the attention and investment but there is increasing activity on other major islands.

The mining sector has drawn a significant amount of foreign direct investment (FDI), as well as a good deal of regulatory attention. Due to the fluid political environment it will be critical to keep an eye on government policy and how that might affect business and industry sectors.

For much of the 1990s, Indonesia was a destination for companies looking to lower labor costs on the manufacturing of apparel and shoes. A good friend owned a number of shoe factories and was able to snare a number of contracts from major shoe brands. Some of these jobs have moved on to even lower cost markets but the expertise built up in Indonesia helps retain some of this business.

Indonesia continues to be a top destination for tourists as well. Bali, despite some major dips in tourism after the terrorist bombings in the 2000s, is clearly the most famous, and is an established mecca for surfers, digital nomads, and nature lovers. And while there are numerous less-explored and equally beautiful islands all throughout the archipelago, with regard to the industry as a whole there is a very real concern that infrastructure cannot keep pace with demand.

Human resources, ground transportation, and security are among the key areas of focus. These will be crucial to continue to address when the Association of Southeast Asian Nations (ASEAN) common visa policy is put into effect, as this virtually guarantees a further increase in tourist numbers.

With its large consumer base, natural resources, and status as an ASEAN leader, many of the pieces are in place for Indonesia. The ASEAN integrated economy is slated to become “official” by the end of 2015, which means even more potential, along with numerous challenges. It is Indonesia’s move, and their time. If they want it to be.

For more on topics such as this, head over to the ALSANJ site.

  • Gurtis

    Could really go for some Indomie Migoreng right now!