Indonesia Offers Three Growth Industries for Australian Businesses

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Researched by Industrial Info Resources Australia (Perth, Australia)--Australian businesses have a strong opportunity to capitalize on Indonesia's evolution as a frontier Association of Southeast Asian Nations (ASEAN) economy by investing in its growing consumer market. A largely underdeveloped resource pool of rich oil, gas and mineral reserves is also attracting investment from the extractive industries, and commodities-exports are expected to be an engine of growth for its future.

Indonesia is Southeast Asia's largest market and one of the fastest-growing economies in the region. Home to more than 255 million inhabitants, it is the fourth-most populous nation in the world. Low labor costs and a young population remain a key driver for sustained market growth and opportunities abound for global investment into the emerging economy.

Since the election of President Joko Widodo in October 2014, the Indonesian government has encouraged a focus toward nationwide economic and social development. "Masterplan for Acceleration and Expansion of Indonesia's Economic Development," which was unveiled as a strategy by the previous presidential cabinet to turn Indonesia into one of the world's top 10 economies by 2025, has been adopted by Widodo and aligns with his vision for the country.

Power
The lack of quality infrastructure represents a major challenge to Indonesia's social and economic development, as well as to Australian business and investors. Infrastructure improvements and developments will be a necessity if economic activity continues to increase. The presence of power plants across the country is often a good indicator for forecasting the market size of infrastructure development, as major infrastructure often relies on available power requirements.

There are more than 172 operational power plants in Indonesia, but it is evident that this will nearly double within the decade. At least 271 known greenfield power plants are expected to become operational by 2020. These plants are concentrated primarily in Java and Sumatra, Indonesia's most densely populated islands, highlighting the priority the government has placed on social development in highly populated areas.

Total capital spending for the industry stands at $127.18 billion, but this is expected to rise with investment in the resource industries, taking into consideration that the largest planned power stations in terms of cost are primarily coal-fired.

Metals & Minerals (Mining)
Indonesia's raw mineral export ban remains solidly in place, but has not damaged the capital spending activities within the market. In addition to the 393 operational plants, 62 greenfield projects are scheduled for completion between now and January 2016. More than $92.79 billion already has been invested in the industry, with at least $29.11 billion of that total expected to reach fruition in the next two years.

This market will remain steady as the boom years in commodity prices pass by, but likely will not decline as Indonesia seeks to improve its domestic processing capabilities with the addition of large-scale capital projects, such as smelters.

Oil & Gas
The domestic Oil & Gas Industry is a vital part of the Indonesian economy. The government will seek to develop this industry to stimulate foreign investment, not only because it is relies on the vast revenues generated from the country's rich oil and gas reserves, but also because it hopes to accommodate rising domestic demand.

Economic growth, supportive demographics and a weak oil price will support domestic consumption and spur further investment. More than $57.5 billion of capital spending will boost the industry, and Industrial Info expects that development of offshore gas reserves will propel the industry forward.

Australians Take Note
China's economic slowdown has created opportunities in Southeast Asia, particularly Indonesia. Its demographics are promising, with a youthful labor force, and rich reserves of natural resources to attract foreign direct investment. The nation looks primed to become the region's leading energy producer, and improving the industry will be critical for meeting the government's ambition of long-term development and economic advancement.

The ASEAN Economic Community deadline is fast approaching and will allow for the free movement of goods, services and skilled labor throughout Southeast Asia. The trading bloc provides opportunities for strong economic progress over the medium term. Australian businesses and investors should take note of the rising frontier economy that is Indonesia.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.