FT : Indonesia Stirring

Friday, November 19, 2010

…..Indonesia [is] a young democracy of nearly 240m people and one of Asia’s fastest-growing economies…..In the coming decade, more than 60m low-income workers are poised to join in what will be the coming of age of Indonesia’s middle class. That projected boom will also make Indonesia – already a member of the Group of 20 nations and the largest south-east Asian economy – the fastest-growing consumer market after India and China. Big retailers, banks, carmakers, insurers and consumer goods producers are tapping the growth, posting record profits this year…..Euromonitor, the market research group, expects the number of Indonesian households with $5,000-$15,000 in annual disposable income – a rough gauge for middle income – to grow from 36 per cent of the population this year to more than 58 per cent by 2020.

…..Indonesia’s economic growth is restoring people’s prospects 12 years after the devastating 1997-1998 Asian financial crisis…..“In any developing country today, the most important sign of success in the economic policy is that you have a growing, strong and vibrant middle class,” Angel Gurría, the head of the Organisation for Economic Co-operation and Development told the Financial Times. “This really is the measure of the success.” Irma Estiningtyas, a spokeswoman for the Indonesian Life Insurance Association, which launched its first big television advertising campaign this year, said: “Growth in 2010 is really stunning.” With assets worth more than $16bn, the industry “is now one of the most active and productive investors in Indonesia’s stock and bond markets”. Signs of increased buying power are abundant in the dozens of malls dotted across Jakarta, Indonesia’s capital of nearly 10m, where foreign retail chains and luxury fashion outlets are adding locations. Optimism about consumer spending has been a driver of investor sentiment. So, too, has economic growth of about 6 per cent, tame inflation, high foreign currency reserves and financial reform.

The Jakarta stock exchange, which has attracted billions in foreign capital inflows, reached a record high this week. Shares in Astra International, Indonesia’s biggest carmaker, have risen 63 per cent this year. In the first three quarters, the company’s vehicle sales grew 60 per cent, with a larger share of profit being made on the islands of Sumatra, Sulawesi and Kalimantan. Prijono Sugiarto, Astra’s president, says Indonesia will probably pass Thailand this year as the region’s largest automotive hub, with output of 730,000 automobiles and 7.2m motorcycles. Astra, which is expanding factory capacity, cannot keep pace with demand. Growth is also shifting from urban centres on Java, the main island, to other parts of the archipelago, the Asian Development Bank wrote in an August study of Asia’s rising middle-income households. “Some poor people managed to move up the ladder to become new middle class, like in China,” said Guntur Sugiarto, an economist at the ADB. “There is poverty reduction in rural areas – much bigger than in the urban areas.”

Reference : The Financial Times, Nov 19th 2010.

One Response to “FT : Indonesia Stirring”

  1. excellent points altogether, you just received a brand new reader.
    What could you recommend about yur post that you made a few days in the past?
    Any sure?

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