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Indonesia looking to expand exports with gadgets

Just a decade ago, Indonesia was considered the weak link in Asia, but with a lot of hard work, the country is proving itself to South Korea and the world as a haven for foreign direct investment.

There are several reasons why the world’s fourth most populous country is attractive to companies like POSCO, Hankook Tires and small and medium-sized companies who invested about $10 billion last year.

First and foremost, Indonesia is politically stable. Second, it is the biggest market in Southeast Asia with a growing middle class and a plethora of natural resources.

“It’s a great market. It’s youthful, the demographics are fantastic, there are many countries that are aging and will be aging in the near future but we are going to be hitting a sweet spot everyday for the next 15 years,” Indonesia Investment Coordinating Board Chairman Gita Wirjawan told The Korea Herald.

The sweet spot Wirjawan is talking about is that close to 60 percent of Indonesia’s population will be younger than 39 years old for the next 15 years.

“It can’t be that bad for anybody who wants to be in business in Indonesia,” he said. “This generation belongs to the internet generation, they get the 21st century.”
Indonesia Investment Coordinating Board Chairman Gita Wirjawan (Wasito Achmad)
Indonesia Investment Coordinating Board Chairman Gita Wirjawan (Wasito Achmad)

The archipelago’s consumer market is estimated at $40 billion, with forecasts of about $90-100 billon in 3-4 years time. The middle class has grown to 30 million plus and will hit 50 million in the same amount of time.

“Our GDP per capita of $6,000-$7,000 means that these guys are going to be purchasing a lot of stuff that can be produced by many Korean companies,” Wirjawan noted.

Wirjawan was in Korea last week to touch base with current investors and drum up new investments that would move Indonesia away from its traditional exports to a country that produces value added products that can be sold globally.

“We want to move the pendulum from a domestic consumption centric economy to a really broad based export centric economy, not just a country that keeps sending coal, oil and gas overseas,” he said.

In short, Indonesia wants to start producing and exporting gadgets like radios, electronics and automobiles and motorcycles within the next two decades.

Wirjawan was also amazed by Korea’s high-speed train system and believes that Indonesians would love to have it in Indonesia. “I think Koreans can do that,” he said.

Corruption has always been a concern for many businesspeople while considering Indonesia as an investment option.

Indonesia ranks 110 out of 182 countries in the Worldwide Corruption Perceptions ranking published by Transparency International.

The country has slowly been working to weed out corruption. About eight years ago, Indonesia was at the bottom of the list.

“It took Hong Kong 30 years to get rid of corruption,” he said. “We’ve put more than 550 people in jail for corruption and that includes businessmen, governors, mayors, generals, police officers, regency heads, ministers and parliamentarians.”

Indonesia’s anti-corruption agency arrested 19 former and sitting parliamentarians for allegedly accepting bribes of up to $160,000.

“This doesn’t make headlines on the front-page of international newspapers but it is happening,” he said. “Now there is a growing number of people from the private sector that takes ownership of what’s important for the future of Indonesia.”

Wirjawan believes that it could take up to 20 years before a difference can be noticed.

“Companies that build factories do take a 10-20 year view,” he said.

(yoav@heraldcorp.com)
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