Economic overview
International investors are taking a new look at Indonesia as political turmoil and rising business costs cause some other developing markets in Asia to lose their luster. Indonesia’s foreign-direct investment rose 22% in 2013 and an estimated 27% last year, according to government figures. Indonesia tops of the list of most promising countries for Japanese business investment, according to a recent Japan Bank for International Cooperation survey. The Indonesia Investment Coordinating Board wants to build on the momentum; in February, it announced plans for a business-development tour of Japan, South Korea, China, the U.S. and Europe. But the group’s sales pitch will be complicated by economic results: Indonesia’s gross domestic product grew just 5.8% in 2013, less than in the previous four years. And this year’s growth also is expected to be modest.
Business travel industry insight
While most business travelers still head to the capital city of Jakarta, secondary cities of Batam, Bintan and Medan are drawing an increasing amount of business traffic. Air passenger volume, both business and leisure, hit 72 million passengers in 2012. Flying is a common way for business travelers to move around the country, made up of more than 17,000 islands, in part because infrastucture for railways, roads and ferries is underdeveloped.
Opportunities
- The government has reduced state debt, boosting the country’s credit rating.
- Indonesia benefits from a sizable labor force and strengthening consumer market, both of which are attractive to international investors.
- New rules easing some restrictions on foreign ownership may speed up needed infrastructure projects, such as new power plants.
Challenges
- Indonesian leaders have struggled to make infrastructure improvements to power plants, roads, bridges and ports.
- A recently imposed mineral export ban is causing turmoil in the country’s mining industry.
- Corruption is common.