Bernardo M. Villegas
Articles  >> more topics
Remarkable Indonesia

           Last October 19, DTI Undersecretary Cristino Panlilio, General Manager of the Board of Investments, led some fifteen top executives of the private sector in a business mission to Jakarta, Indonesia to explore investment and trade opportunities with their counterparts in the Indonesian business community.  Indonesian Ambassador to the Philippines Kristiarto Legowo and Philippine Ambassador to Indonesia Maria R. Aguinaldo also graced the occasion that was held at the JW Marriott Hotel in Jakarta.  The focus of the business encounter was on the high-growth industries in both countries, such as mining, energy, infrastructure, agribusiness, tourism, logistics, health and education.  Being the economist in the group, I counted at least ten potential deals that came out of the very good chemistry between the two nationality groups.  It helped that both countries, the Philippines and Indonesia, are among the emerging markets that will dominate the so-called Asian century.  The Filipino delegates were more than convinced that indeed, the country they were visiting--some for the first time--is "Remarkable Indonesia."

          The Indonesian officials and economists presented a very strong case for the leadership that Indonesia will exercise in the next ten years or so in the ASEAN region.  It is no small matter that Indonesia is the only country in Southeast Asia that forms part of the Group of 20 (G-20).  In a remarkable turnaround from the crisis-ridden country that it was in 1998, after the East Asian financial disaster and the subsequent ouster of former President Suharto, Indonesia today is the darling of investors and credit rating agencies.  The following sound economic fundamentals of the Indonesian economy were highlighted in the economic briefings that the Filipinos received:

·      At around US $550 billion in 2009, Indonesia is one of three of the world's larger economies (along with China and India) to have had significant economic growth amidst the global financial crisis.

·      Ranked No. 1 among Asia-Pacific sovereigns by Standard & Poors' for best fiscal balance.

·      In January 2010, Fitch Ratings upgraded Indonesia's credit rating to BB+ with a stable outlook, putting Indonesia only one notch below investment grade--an enormous vote of confidence for investments.

·      The Debt to GDP ratio was reduced from 83% in 2001 to only 29% by the end of 2009.

·      Listed as one of the top 10 most attractive destinations for FDIs according to UNCTAD World's Investment Prospects Survey.

·      Nominal per capita GDP is expected to quadruple by 2020 as per Standard Chartered.

          Countries are considered emerging markets in the 21st Century if they have huge domestic markets and are endowed with rich natural resources.  Indonesia has some of the richest and most diversified natural resources in the world:  minerals, petroleum, water, agricultural lands, forests, aquatic resources with its more than 17,000 islands.  Always cited by investors, both local and foreign, is its dynamic demographic base.  Of the 240 million people in the country, over 50% is under 29 years old.  Education spending accounts for 16% of total government expenditures, higher than any other sector, and university graduates are trained in technical fields.  Labor cost is relatively low, even when compared with demographic giants like India and China.  There is no question that a major reason for Indonesia's attractiveness to investors is its huge population, the fourth largest in the world.  For this reason, a leading Indonesian economic commentator, Stefan S. Handoyo, wrote in an article entitled "The Myth of Indonesian Population Boom," that appeared in local newspapers:  "There is nothing wrong with these diviners with their sad vision of the future, except that one gets a very uneasy feeling over their disregard for  the past.  At a time when the United States went past a GNP of one trillion dollars per year, with a population of more than 200 million people, one should not miss staring at its record:  its income rose fastest at a time when its population was rising most rapidly.  In one century alone, its population multiplied six times.  It was also in that century when the American economy flew off to its own stratospheric levels."  The U.S. population boomed during the American Century, which was the twentieth century.  In the present twenty first century, which is being called the Asian century, the growing populations of Asian emerging markets like Indonesia, India, the Philippines and Vietnam will also contribute to their economic success.

          A highlight of the economic briefings was the great importance given to the water business, not only in Indonesia, but in all the emerging markets.  It is a foregone conclusion that in the next twenty years, the most critical resource will no longer be petroleum.  It will be water and its corollary product, food.  Among the numerous testimonials from multinational corporations that were  presented in the publications we received, I was especially struck by that made by the Danone Group, one of the largest European food and beverage multinational companies:  "Danone Group made a strategic alliance in 1998 with the Utomo family, founder of AQUA Golden Mississippi, the pioneering bottled water company in Indonesia.  The history of the Aqua brand has spanned over 30 years, with its first factory in Bekasi.  Today, Danone Aqua has expanded into 14 factories throughout Indonesia, and we wish to build more to meet the growing demand for Aqua brand.  The success of this alliance has been such that Indonesia is considered by Danone as a priority country.   Our commitment to serving the people of Indonesia is reflected in our far-reaching services throughout the archipelago, available in more than 1,500,000 outlets. Similar words have been uttered by such equally omnipresent MNCS like Coca-Cola, Unilever, and Quatar Telecom and Indosat.  For comments, my email address is