Indonesia

Indonesia is home to Southeast Asia’s largest economy and the fourth largest country in
terms of population and is poised to for a gradual growth after five years of decelerating
growth.
Private investment is key for the sustained economic recovery in Indonesia, according
to the latest report from World Bank released on 15 March 2016. Indonesia is currently
facing a slowdown in commodity prices and a weaker than expected revenue growth
and the Indonesian government would welcome investments from the private sector as
it will boost and diversify growth in the economy.
Officials announced they would open up 35 business sectors to 100% foreign
ownership, including toll roads, film production and distribution, tourism-related ventures
such as restaurants, and nontoxic waste management. Other sectors such as health
care and telecommunications will see an increase in allowable foreign stakes. Ventures
in online-marketplaces—a budding business in the nation of 250 million people—will be
fully opened to investments of more than 100 billion rupiah, or over $7.4 million
Over 50 percent of Indonesia’s population is under the age of 30 and Indonesia’s strong
economic growth has been primarily based on consumption. It has a young, steadily
growing, and literate population who are increasingly joining the middle-income
consuming class.
Therefore,

-check credit ratings

Indonesia’s credit rating outlook was changed to positive from stable by

Standard & Poor’s, with the possibility that the country may be raised to
investment grade within 12 months..
Greater policy effectiveness and predictability have resulted in expanded fiscal
and reserve buffers and improved Indonesia’s external resilience,” S&P said.
Moody’s Investors Service said Indonesia’s narrower current account deficit
and balance of payments surplus are credit positive because they lower annual
external financing requirements amid heightened volatility in external
financing flows.

Indonesia, Southeast Asia’s largest economy and the fourth largest country in terms of
population is poised to return to a gradual growth path after five years of decelerating
growth.
The Asian Development Bank (ADB) on Mar 30, projected it to grow by 5.2 per cent in
2016 - up from 4.8 per cent in 2015.
In its annual flagship report - the Asian Development Outlook - the ADB also forecasts
the Indonesian economy to strengthen further in 2017 - growing at 5.5 per cent.
He said: “We do see the Indonesian economy starting to recover. We think it bottomed
out in the third quarter of 2015 and is steadily coming back up. We see this year’s
growth to be about 5.2 per cent and while there are some downside risks, there are also
upside potentials.
“We see that there are a number of positive vicious cycles working their way through the
economy here - lower inflation, lower transportation costs, lower food prices which are
boosting consumers’ confidence, strong performance in government’s public
investments, infrastructure in particular. That and the 11th deregulation packages are
boosting investors’ confidence.
“Capital flows have been coming to Indonesia since the beginning of this year. And
Indonesia seems to be distinguished as one of the emerging economies with a strong
growth potential.”
The report pointed out that public and private investments in infrastructure would be key
to boost and diversify growth. Indonesia has to make up an estimated US$700 million
infrastructure deficit accumulated over the last 17 years following the Asian financial
crisis of 2007/08.
Until 2014, public and private investment made up just 3 per cent of its GDP -
insufficient to even replace the existing creaking infrastructure. But things are beginning
to turn around with growth in fixed investment saw a 5.1% increase in 2015.
President Joko Widodo’s government has also re-directed part of the fuel subsidy to
fund infrastructure projects such as power plants, roads, ports and airports.
“Key constraints going forward would be the ability of the government to fund public
infrastructure, the ability of state-owned enterprises to finance infrastructure spending
and the speed at which the government can mobilize private sector involvement in
infrastructure,” said Mr Tabor.
“There’s considerable potential to do so but improvements in the enabling environment
for the private sector and infrastructure - be it tariffs, be it access to land, be it permits
and regulatory compliance for infrastructure - merits further improvements.” 
Mr Tabor added in the long-term the Indonesian economy will do well to reduce its
dependence on commodities and instead diversify to expand the manufacturing sector
and focus on several high growth sectors such as tourism, e-commerce and marine
fisheries.