Emerging Markets – Opportunities & Threats: Indonesia

by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling

Indonesia boasts one of the largest economies of Southeast Asia and has been growing at a rate of roughly 6% annually on average since 2007, dipping only slightly to just below 5% following the global financial crisis of 2008. The country has also maintained steady GDP per capita growth of just over 4.5% and healthy population growth, which are resulting in a growing middle class. Indonesia is the largest Muslim country in the world and is also one of the most secular and moderate. This put the country in a position to increase business relations with countries in the Middle East while also bridging the gap between those countries and countries in other regions. Indonesia has yet to use this to its advantage to increase growth even further.

Indonesia is facing many infrastructure challenges and though logistics accounts for roughly 24% of the country’s GDP, there many roads in need of development, the cost of fuel is high, and there rural areas are hard to access. Also, the country is still a growing democracy, and will continue to face challenges as it stabilizes and matures. Many industries are state-onwed, which may deter investment; however, with the political reforms and developments, there are also economic reforms and developments, which are projected to result in a more open market.

Indonesia’s economy is growing quickly and has the potential to grow even more with improvements to infrastructure and transportation logistics. Not only is Indonesia becoming an attractive market for investors due to the growing middle class, growing political / economic openness, and potential business relations with the large, emerging markets of the Middle East, it is also an attractive market for providers of material handling and supply chain solutions due to the country’s strong manufacturing sectors and the country’s need for improvements in transportation logistics.

More information on supply chain trends, recommended strategy, and innovations that drive supply chains are available in the 2014 MHI Annual Industry Report which can be downloaded at www.mhi.org.