27.03.2012
Japanese companies are turning to Indonesia as a prime investment destination in Southeast Asia, according to the Boston Consulting Group, citing the nation’s rising middle class and political stability.
The international company invited executives from 35 Japanese businesses to Jakarta to discuss investment opportunities and to get an understanding of opportunities in Indonesia and elsewhere in Southeast Asia.
Companies such as diaper makers and those involved in information technology such as e-commerce are seeking to take advantage of the nation’s economic expansion to sell goods and services, BCG said.
As growth slows in developed nations such as the United States and in Europe, Indonesia’s government forecasts its economy expanding 6.5 percent this year, the same pace as in 2011.
In 2009, President Susilo Bambang Yudhoyono was elected to a second five-year term, the first time a sitting president has been re-elected since former authoritarian ruler Suharto stepped down in 1998.
“It’s a different kind of company than in the past,” Vincent Chin, a BCG partner and managing director based in Singapore, said in Jakarta on Monday.
In the past, it was heavy industrial companies that were typically looking to invest in Indonesia, he said. “They are no longer interested in Indonesia just as a production hub. They are also interested in Indonesia as a market. So they are coming here. They are selling consumer goods, and they are adding value to the economy in the downstream sense.”
Indonesia’s young population is also attractive, with the average age around 30, compared to 45 in Japan, said Hiroaki Sugita, a senior partner and managing director based in Tokyo for BCG.
Per capita income in Indonesia, a population of 240 million, had risen to $3,500 last year from around $3,000 in 2010. Japan, with a population of about 130 million, has per capita income at around $40,000.
Chin said one of the key issues in Indonesia’s economic development plan (MP3EI), which BCG had helped to draft, was for the government to improve its infrastructure to better facilitate the transportation of goods.
Japanese companies are also considering expansion into Indonesia and other Southeast Asian nations after a flood in Thailand halted production for many Japanese manufacturers including Honda Motor and undermined economic growth at home.
“There are problems still with Indonesia, but we need to fix it,” Chin said. “This is a golden opportunity. Let’s not waste it.”
Destry Damayanti, chief economist at Bank Mandiri, the country’s biggest lender by assets, said that Indonesia is “a great destination for investment,” particularly in direct investment where “the opportunity for growth is huge.”
Consumer-oriented businesses that would benefit are those in the telecommunication, logistics and transportation industries, she said.
“First of all you must be in the consumer sector, given the huge population that Indonesia has,” she said. “The other sector is infrastructure such as roads, ports, power plant. Given that there’s a lack of them in Indonesia, that means a lot of room to grow.”
Investment from Japan has been picking up in the past couple of years. Realized investment in Indonesia from Japan totaled $1.5 billion last year, up from $713 million the year before, according to data from the Investment Coordinating Board (BKPM).
Shigeki Ichii, a partner and managing director at BCG based in Tokyo, said he is more likely to spend more time in Indonesia and in Southeast Asia this year.
In 2011, he spent much of his time traveling to China, but Japanese companies were now looking beyond investing in China amid concerns that economic growth will slow and government policies favor local companies, Ichii said.
India, meanwhile, was problematic due to poor infrastructure and muddled regulations, he said.
“That all makes Japanese companies a bit hesitant to go straight from China to India,” Ichii said.
The group of executives visiting Indonesia was more than the 20 to 25 that had attended similar meetings in China and India recently, highlighting the shift of attention from two of the fastest-growing nations to Southeast Asia, the BCG managing directors said.
“Japanese companies used to look at Indonesia as one of the rich natural-resources countries, maybe back 10 or 20 years before and also as one of the most unstable countries in terms of politics, in terms of financials,” Ichii said.
“But now the perception has been very rapidly changing.”
The international company invited executives from 35 Japanese businesses to Jakarta to discuss investment opportunities and to get an understanding of opportunities in Indonesia and elsewhere in Southeast Asia.
Companies such as diaper makers and those involved in information technology such as e-commerce are seeking to take advantage of the nation’s economic expansion to sell goods and services, BCG said.
As growth slows in developed nations such as the United States and in Europe, Indonesia’s government forecasts its economy expanding 6.5 percent this year, the same pace as in 2011.
In 2009, President Susilo Bambang Yudhoyono was elected to a second five-year term, the first time a sitting president has been re-elected since former authoritarian ruler Suharto stepped down in 1998.
“It’s a different kind of company than in the past,” Vincent Chin, a BCG partner and managing director based in Singapore, said in Jakarta on Monday.
In the past, it was heavy industrial companies that were typically looking to invest in Indonesia, he said. “They are no longer interested in Indonesia just as a production hub. They are also interested in Indonesia as a market. So they are coming here. They are selling consumer goods, and they are adding value to the economy in the downstream sense.”
Indonesia’s young population is also attractive, with the average age around 30, compared to 45 in Japan, said Hiroaki Sugita, a senior partner and managing director based in Tokyo for BCG.
Per capita income in Indonesia, a population of 240 million, had risen to $3,500 last year from around $3,000 in 2010. Japan, with a population of about 130 million, has per capita income at around $40,000.
Chin said one of the key issues in Indonesia’s economic development plan (MP3EI), which BCG had helped to draft, was for the government to improve its infrastructure to better facilitate the transportation of goods.
Japanese companies are also considering expansion into Indonesia and other Southeast Asian nations after a flood in Thailand halted production for many Japanese manufacturers including Honda Motor and undermined economic growth at home.
“There are problems still with Indonesia, but we need to fix it,” Chin said. “This is a golden opportunity. Let’s not waste it.”
Destry Damayanti, chief economist at Bank Mandiri, the country’s biggest lender by assets, said that Indonesia is “a great destination for investment,” particularly in direct investment where “the opportunity for growth is huge.”
Consumer-oriented businesses that would benefit are those in the telecommunication, logistics and transportation industries, she said.
“First of all you must be in the consumer sector, given the huge population that Indonesia has,” she said. “The other sector is infrastructure such as roads, ports, power plant. Given that there’s a lack of them in Indonesia, that means a lot of room to grow.”
Investment from Japan has been picking up in the past couple of years. Realized investment in Indonesia from Japan totaled $1.5 billion last year, up from $713 million the year before, according to data from the Investment Coordinating Board (BKPM).
Shigeki Ichii, a partner and managing director at BCG based in Tokyo, said he is more likely to spend more time in Indonesia and in Southeast Asia this year.
In 2011, he spent much of his time traveling to China, but Japanese companies were now looking beyond investing in China amid concerns that economic growth will slow and government policies favor local companies, Ichii said.
India, meanwhile, was problematic due to poor infrastructure and muddled regulations, he said.
“That all makes Japanese companies a bit hesitant to go straight from China to India,” Ichii said.
The group of executives visiting Indonesia was more than the 20 to 25 that had attended similar meetings in China and India recently, highlighting the shift of attention from two of the fastest-growing nations to Southeast Asia, the BCG managing directors said.
“Japanese companies used to look at Indonesia as one of the rich natural-resources countries, maybe back 10 or 20 years before and also as one of the most unstable countries in terms of politics, in terms of financials,” Ichii said.
“But now the perception has been very rapidly changing.”
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