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EU – Indonesia Business Network: “Your Gateway to Indonesia” 4th World’s Most Populous Country 2nd fastest growing Member State after China G20 250 17,508islands million Population (in 2013) 10 th World’s Largest Economy Biggest Archipelagic Nation 1 trillion USD GDP (PPP) IND ONESIA 4,876 USD GDP per capita (PPP) Agenda Market Potential Indonesia • Reasons to look into the Indonesian market Challenges Indonesian market • Obstacles in the Indonesia the market EU-Indonesia Business Network • Your partner for overcoming these obstacles Sector outlooks • Overview and examples of promising sectors Market Potential EU-Indonesia Business Network Challenges Sectors 1. Market Potential Indonesia Market Potential EU-Indonesia Business Network Challenges Sectors 1.a. Macroeconomic data Sustained GDP growth 5.1 % GDP Growth in 2014 Sustained high growth rates Market Potential Stable inflation rates 250 million inhabitants 10th largest economy in the world EU-Indonesia Business Network Challenges Sectors 1.a. Macroeconomic data (II) Stable macroeconomic environment BBBOutlook: Stable Baa3 Outlook: Stable BB+ Outlook: Stable Market Potential EU-Indonesia Business Network Challenges Sectors 1.a. Macroeconomic data (III) Large domestic consumption base… Structure Indonesian Economy (% of total GDP) Export of goods and services 19% Household Consumption Expenditure 46% Changes in Inventories 2% Government Final Consumption Expenditure 7% Gross Domestic Fixed Capital Formation 26% Market Potential EU-Indonesia Business Network Challenges Sectors Large domestic consumer base = Locomotive and guarantor of GDP growth 1.a. Macroeconomic data (IV) … that will grow even further 300 Population development prediction (in million inhabitants) 250 135 million people 200 150 100 Consuming class 50 Below Consuming class 0 2010 2020 Market Potential 2030 EU-Indonesia Business Network Challenges Sectors Consuming class defined as persons with a real net monthly income of US$ 300 or above 1.b. Economic activity by region 1.c. Political environment Stable political environment • Since 1998 thriving and stable democracy • Newly elected President: Joko Widodo (former governor of Jakarta) Market Potential Joko Widodo Dr Susilo Bambang Yudhoyono Governor of Jakarta 2012 – 2014 President 2004-2014 Presidential candidate 2014 EU-Indonesia Business Network Challenges Sectors 1.c. Political environment (II) Indonesia international • Political & economic key player regionally and globally • Free trade agreements with: – ASEAN – Japan – China – Soth Korea • Member of international organizations • Founding member and biggest economy of ASEAN Market Potential Association of Southeast Asian Nations • Political & economic organization • 10 Member states • 600 million inhabitants EU-Indonesia Business Network Challenges Sectors Sustained growth rates Macroeconomic and politically stable environment Indonesia Large & growing domestic consumption base Market Potential Key member ASEAN EU-Indonesia Business Network Challenges Sectors 2. Challenges in the Indonesia Market Market Potential EU-Indonesia Business Network Challenges Sectors Market access restrictions • Numerous protectionist laws in place • Obtaining licenses can still be cumbersome Legal uncertainties • Unclear and incoherent laws • Overlapping ministerial responsibilities • Insufficient IPR protection Market Potential EU-Indonesia Business Network Challenges Sectors Poor infrastructure • Bottlenecks & high costs of transport of goods and people • Economic Master plan 2011-2025 to tackle infrastructure shortcomings Corruption • Notorious, especially in public tenders • Political initiatives (e.g. KPK) are improving situation Market Potential EU-Indonesia Business Network Challenges Sectors Market access restrictions & excessive bureaucracy Legal Uncertainty & insufficient IPR protection Challenges Poor infrastructure Market Potential Corruption EU-Indonesia Business Network Challenges Sectors Challenges & difficulties to unleash this potential Large market potential Partner on the ground with expertise of the country advised Market Potential EU-Indonesia Business Network Challenges Sectors 3. Sector Potential Market Potential EU-Indonesia Business Network Challenges Sectors Sector Outlook Engineering Automobile Chemistry Construction & Infrastructure Electronics Information technology Environmental and sustainable technology Mining Healthcare sector Energy Food and beverage Sector overview •Growing economy •Large domestic market with expanding consuming class •Catch up demand for consumer goods demand for production machines of consumer goods •Investments in infrastructure through Economic Master plan (1) Food and beverage In 2013 the Food & Beverage sector recorded a growth of 8.2% contributing 7.42% to the country's GDP The sector is expected to keep on rising in the coming years , mainly due to rising incomes and increased spending on food by the growing middle class The food consumption growth in 2014 amounted 7,5% and is forecasted to grow 6,9% for 2017. For alcoholic drinks, the growth amounted 11,7% in 2014 and is forecasted to grow 8,4% in 2017. Soft drinks value sales’ growth in 2014 increased by 9,5% and by are expected to increase by 8,8% in 2017. The mass grocery retail value sales’ growth amounted to 11,7% in 2014 and is expected to amount 10,0% in 2017. Highest business potential: halal products, branded and specialty food products, food processing machinery, supply of food ingredients and packaging Market Potential EU-Indonesia Business Network Challenges Sectors (2) Healthcare Indonesians spending on healthcare is expected to grow close to 14% By 2019, an estimated 240-260 million Indonesians will be covered by newly implemented National Health Insurance program The National Health Insurance program will generate demand in a new population group, by providing access amongst those that never could have afforded it before, driving an increasing demand for clinics, hospitals and clinicians. Public hospitals alone will not be able to achieve the demand, therefore major private hospital groups are already expanding to address the gap in the healthcare infrastructure Hospital beds, medical devices, diagnostic tests, IT systems and skilled manpower demand will steeply raise. Market Potential EU-Indonesia Business Network Challenges Sectors (3) Clean technologies (I) Macro developments such as urbanization, rapid growth, climate change and exhaustion of resources is driving the need for investments in clean technologies in Indonesia. New clean industries are coming on board to drive the future growth for clean technologies. The highest industry potential: clean energy (geothermal, biomass, solar energy), green building and water and waste management These particular categories are relevant when discussing Indonesia’s current approach in regards to an environmental paradigm change in the country, as Indonesia has a national commitment to reduce carbon emissions by 26% in 2020. Market Potential EU-Indonesia Business Network Challenges Sectors (3) Clean technologies (II) Clean energy Fossil fuels dominate the country’s energy supply (> 95% from which 48% comes from oil) Fossil fuel reserves are exhausting meanwhile energy demand is growing by about 8-11% Government priority: utilization of new renewable energy and energy efficiencies The highest potential: geothermal, biomass and solar energy Green Building Rapid construction growth: 7-8% Jakarta Government regulation No. 38/2012: new and existing constructions to meet energy-efficient standards The highest potential: energy efficiency, water efficiency, indoor air quality, land and waste management (3) Clean technologies (III) Wastewater Rapid urbanization, industrial growth and increased standards of living are generating an increasing amount of wastewater The highest potential: development of new centralized treatments plants and networks improvement, expansion of the existing ones, new technologies for sewer installation Local governments are preparing City Sanitation Strategies Solid Waste Need to tackle MSW to keep pace with the growth of towns and to avert health and environmental disasters About 80,000 tons of solid waste is generated daily Market Potential The highest potential: recovering energy for electricity from waste EU-Indonesia Business Network Challenges Sectors Indonesia is emerging as a major ICT market (4) ICT It is now the world’s 2nd largest market for both Facebook and Smartphones, and has Twitter’s 3rd largest user base With 275million mobile phone users and 175million expected internet users by 2016. The Palapa Ring project will further boost the growth of the ICT market and the number of internet users. The Palapa Ring project Market Potential Some examples of high business potential: Finance IT, e-commerce, e-logistics and cloud computing EU-Indonesia Business Network Challenges Sectors (5) Maritime infrastructure Indonesia’s strategic location: over half of all international shipping goes through Indonesian waters Currently, inadequate port facilities impeding the country’s internal and external maritime commerce Lack of connectivity in between islands Government project: Pendulum Nusantara. Construction of minimum 6 inter-linked deep-water ports, building of another 22 ports compromising completely new ones and renovated ones. Indonesia to become a global maritime axis Market Potential EU-Indonesia Business Network Challenges The highest potential: development of roads, seaport construction and revitalization, shipbuilding (tankers and freighters) Sectors Increasing tourism, international trade and the development of regional economic centers is driving demand for aviation infrastructure (6) Aviation infrastructure Currently Indonesia is home to 237 airports 26 of which are commercial airports in big cities managed by state-run airport operators PT Angkasa Pura I (AP I) and PT Angkasa Pura II (AP II). The others fall under Transportation Ministry's technical management unit (UTP) The highest potential: building of new runways and terminals, hangars and equipment; and training of human resources Market Potential 62 new airport projects currently in the pipeline. Indonesia to have 299 airports by 2019 EU-Indonesia Business Network Challenges Sectors Indonesia – a country of contrasts Famous landmark Bundaran Hotel Indonesia 1970 - now Indonesia – a country of contrasts Street Vendor Mall Indonesia – a country of contrasts Industrial Park ( Tj. Priok) Unilever in Jababeka Indonesia – a country of contrasts Next Trade Missions to Indonesia Healthcare Jakarta, October 19 – 23, 2015 ICT Jakarta, November 23 – 27, 2015 • Medical devices • Healthcare IT systems • • • • Finance IT Cloud Computing E-Commerce E -Logistics Market Potential The programs include: Pre-Consultation and Registration Tailor-made search for potential partners Business roundtable, corporate seminar and B2B event Site visit Optional B2B service EU-Indonesia Business Network Challenges Sectors More information ? www.eibn.org [email protected] Thank you for your attention!