Wake up to
Indonesia's investment potential
As a fellow democracy with the world’s largest Islamic population, with 253
million people spread across an archipelago of 17,000-18,000 islands, and an
economy growing 6 per cent a year, Indonesia is the waking giant only 800
kilometres beyond Australia’s northern border.
With burgeoning cities in clear need of greater infrastructure development,
the time is right for Australian institutional investors to establish a
foothold in this market through vehicles such as superannuation. A growing
middle class presents tremendous opportunity for established Australian
businesses and ambitious entrepreneurs who want to expand their operations
beyond our borders into exciting frontiers.
With a GDP per capita of $US4,271 and a middle class expected to double to
140m by 2020, it is no surprise our key competitors have awoken to the
potential of this market which is expected to overtake Australia’s GDP by 2022,
on a steady path to becoming the world's fourth biggest economy by 2040. However some Australian investors appear asleep at the wheel, with sections of
our business and investment community seemingly indifferent to the need for an
enduring two-way relationship.
Following his election victory on September 7 it is no surprise Tony Abbott
made his first overseas trip to Jakarta, where accompanied by a delegation of
20 prominent business leaders he held bilateral talks with Indonesian President
Susilo Bambang Yudhoyono. Pushing a message that “Australia is open for business”,
the Prime Minister was keen revive momentum toward two-way trade and investment
between both nations.
Indonesia is only our 21th largest trading partner (2.4 per cent of our
total trade, or $14.6 billion in 2012), despite being our closest neighbour and
despite other nations -- Japan, China, United Kingdom, United States, Singapore
and Korea -- all having established stronger economic relationships. Foreign
direct investment might as well have been another topic on Mr. Abbott's
agenda during his discussions with Mr. Yudhoyono, with a recent DFAT report
revealing Australian businesses invested only $6.8bn into the rapidly
developing Indonesian economy in 2012 (1.33 per cent of our total outward FDI),
compared to $55.9bn with the United States in 2011.
Paul Keating made clear that Indonesia is Australia’s most important
relationship. John Howard demonstrated our credentials as a neighbour with
Australia’s tsunami assistance and aid. While the Abbott government and our
political leaders are very aware of the strategic importance of the
Australia-Indonesia relationship, the question remains: Why don’t Australian
investors see Indonesia in the same strategic way as our political leaders?
Where are our super funds and institutional investors? Despite notable exceptions
such as banks like ANZ and CBA, why are Australian businesses and investors
still reluctant to invest in this waking giant in our midst?
A young country like Australia, Indonesia gained independence from the
Netherlands in 1949 following a four-year struggle. Being a neighbour, what
happens in Indonesian politics is noticed by Australia’s business leaders and
investors. It is an election year in Indonesia and political events in
Indonesia have helped shape Australian investment thinking. Attitudes and
perceptions have built up over decades and the two neighbours have very
different histories.
Perhaps it is time for investors to rethink these perceptions. Australians
followed Indonesian independence and watched founding President Sukarno deposed
in a 1967 military coup led by General Suharto who ruled over a time of rapid
yet uneven economic growth. Popular dissent led to Suharto’s downfall and the
birth of Indonesian democracy in May 1998. Stories of corruption and
geopolitical crises in West Papua in 1970 and East Timor in 1975 entrenched
some negative views towards Indonesia.
That’s a long time ago. Knowing the importance of Indonesia and against the
prevailing trends of the time, Paul Keating actively courted Suharto towards
the end of his reign, laying the groundwork for APEC and the East Asia Summit,
which endure to this day.
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INDONESIA BY NUMBERS
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||
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2013/14
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2022
|
|
|
Population
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253,609,643 (4th)
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272,911,000 (5th)
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Middle Class Consumers
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74,000,000
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140,000,000 (2020)
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GDP
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$894,000,000,000 (16th)
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$2,568,000,000,000 (10th)
|
|
GDP Per Capita (PPP)
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USD $4,271
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USD $15,500 (2025 Goal)
|
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GDP Growth (Per Annum)
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5.78% (2013)
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6.3% (2015-19)
|
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Foreign Direct Investment
|
$6,800,000,000 (2012)
|
-
|
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AUS-Indo Bilateral Trade
|
$14,600,000,000 (2012)
|
-
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A consumer driven destiny:
Why Indonesia’s growing middle class means business for Australian investors
The immense opportunities the rapid economic rise this nation of 253
million presents for Australian business and investors are significant.
Our competitors are already beating us in the FDI game. Firstly, with
demographics being destiny, Indonesia has the vast population it requires to
sustain a growing economy and build a formidable consumer class. While the
capital city Jakarta (population 10.1m) is the centre of economic activity, the
nation’s second cities such as Surabaya (population 2.8m) have been growing at
an even faster rate -- with a McKinsey report predicting an additional 72m
Indonesians will be urbanised by 2030. This presents a tremendous opportunity
for institutional infrastructure investment, especially for Australia’s $1.5
trillion Superannuation sector. It presents opportunities to invest in
leading companies on the Jakarta Stock Exchange.
Secondly, Indonesia now has in place the framework of democratic
institutions and the public policy required for sustained growth to flourish.
Flourishing it is, having risen by an average 6 per cent per annum over the
past decade, despite the Global Financial Crisis. The world’s sixteenth largest
economy today (GDP $894bn), it is expected to leap-frog into tenth place by
2022 (GDP $2,568 trillion) and fourth place by 2040 when its GDP will be 3 to 4
times larger than Australia’s.
Thirdly, and perhaps most promisingly, Indonesia’s rapid economic growth
has given rise to a large consumer class whose incomes are rising steadily from
an average per capita figure of $US4,000 today. Numbering 74m as of July 2012,
and expected to double to 120m by 2020, Indonesia’s consumer class are
responsible for a staggering 65 per cent of all GDP growth, compared to
Thailand’s 29 per cent and Malaysia’s 6 per cent.
This middle-income population is rising by an average 7m a year.
With an awakening giant on our doorstep, Indonesia our neighbor is also
undoubtedly our greatest opportunity. What are we waiting for?
John Donovan is the Managing Director of AFM
Investment Partners, representing Mandiri Investasi in Australia, the
investment arm of Indonesia’s largest bank, Bank Mandiri. John is the founder
of the annual Investing in Asia conference held by the Australian Centre for
Financial Studies to promote dialogue between Australian institutional
investors and regulators and Asian investment managers and regulators. In
April, John is hosting the Indonesian Pension Fund Association’s first visit to
Australia.
Sumber :
http://www.businessspectator.com.au/article/2014/4/1/economy/wake-indonesias-investment-potential
