AMC Report: Indonesia

Indonesia

Worth a Second Look

2016.08.28.  AMC

Having been overlooked during the last decade by other countries such as India and China, Indonesia is once again a major destination for foreign direct investment.

Indonesia’s economic outlook remains solid, with ongoing reforms by the government expected to help GDP growth of around 5 percent in 2016, the International Monetary Fund says.

The government has done its part, cutting the processing time for licenses in order to simplify business processes in Indonesia - it now can take just a matter of hours to obtain the necessary business licenses.

Besides simplifying permit procedures, the government also lowered interest rates on loans and made them easier to access. More importantly, the government also has given electricity tariff discounts, and cut fuel prices.

With Myanmar and Cambodia and more recently even Vietnam beginning to experience electricity cuts, power in the entire SE and S Asian region is a growing issue.  Indonesia's President Joko Widodo has announced an ambitious plan to build more than 100 new power stations within five years. The total plan calls for about 43GW of new generating capacity to be added to the grid.

Although Indonesia’s response to joining the TPP partnership had been lukewarm in the past, Indonesian Trade Minister Gita Wirjawan announced that Indonesia will join the negotiations at long last. And, Jokowi (as President Joko Widodo is affectionately known here) has told US President Barack Obama during a visit to Washington, DC, in October 2015 that Indonesia would open talks on TPP negotiations after Japan and major Asean members such as Singapore, Malaysia and Vietnam, join the trade pact.

Given the turmoil the entire apparel industry is faced with recently, Indonesia has been receiving significant renewed interest as an integrated textile manufacturing base, and has seen the return of investment in the sector, with brands coming back to the market after having experienced supply and quality issues in lower cost markets such as Cambodia, Myanmar, and Bangladesh.

The USA remains Indonesia’s largest market for garments and textiles accounting for 36% of total exports followed by the EU with 16% and Japan with 5%.

The expansion of the apparel sector and the growth in investment signifies growing global confidence in the Indonesian apparel industry as numerous textile manufacturers have come to select Indonesia as an alternative manufacturing and sourcing base to China. 

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Contact: Mark Singer, Managing Director. AMC.

This is a Reprint of an apple News article.