Economy
From The Report: Indonesia 2019
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Indonesia is one of the world’s richest countries in terms of natural resources. With extensive oil, gas and solid mineral deposits, it is also one of the largest global economies. In 2017 the economy passed the $1trn mark, making it the 16th largest in the world. Its growing middle class, emphasis on industrialisation and services, and drive to improve infrastructure are laying the foundations for continued economic growth. Indonesia is also now home to four unicorns – start-ups valued at $1bn or above – highlighting its potential to develop the entrepreneurial and creative industries. The country is also working to attract both foreign and domestic funding by opening up and incentivising investment in additional sectors, as well as the development of infrastructure. This chapter also contains interviews with Perry Warjiyo, Governor, Bank Indonesia; Triawan Munaf, Chairman, Creative Economy Agency; and Wimboh Santoso, Chairman, Financial Services Authority.
Articles from this Chapter
Solid foundation: The 16th-largest economy in the world hopes to expand further by attracting domestic and foreign investment
Loosening the belt: A growing middle class boosts consumer spendingOBGplus
Despite the rupiah sinking to its lowest level in over two decades, consumer spending in Indonesia expanded. Retail sales grew by 3.7% in 2018 from 2.9% in 2017. Household consumption rose 5.5% in 2018, up from 4.9% the year before. Clothing sales were particularly robust, jumping 15.1% compared to 1% in 2017. Automotive sales also increased significantly, from 1.7% in 2017 to 11.3%. This trend of retail growth is expected to continue, with a projected growth rate of 4.5% in 2019. The growing…
Financially forward: Perry Warjiyo, Governor, Bank Indonesia (BI), on improving monetary policy and the regulatory frameworkOBGplus
Interview:Perry Warjiyo How can the regulatory framework be improved to ensure more sophisticated financial services? PERRY WARJIYO: BI has responded appropriately to rapid changes in the financial technology (fintech) sphere and its impact on the economy. The Financial Technology Office was established in 2016 to specialise in fintech developments. BI also issued a set of regulations on e-money activities, card-based payments and fund transfers. It also launched the National Payment Gateway…
Promising forecast: Increased domestic demand and policy initiatives to encourage investment herald continued economic growthOBGplus
The economy expanded by 5.2% in 2018, according to official figures from Statistics Indonesia, slightly above the previous year’s growth rate of 5.1%. This was driven by gains in major industries: construction grew by 6.3%, vehicle and retail trade by 5.1%, processing by 4.2% and agriculture by 3.9%. Strong performances were also seen in sectors such as ICT, which saw growth of 7.8%, and transport and storage, with 7.6%. These sectors benefitted from improved domestic demand, which, according…
New framework: Wimboh Santoso, Chairman, Financial Services Authority (OJK), on the future of the financial services sectorOBGplus
Interview:Wimboh Santoso How is the need for infrastructure project funding being addressed by the financial services sector? WIMBOH SANTOSO: The administration of President Joko Widodo has reallocated a portion of the budget that was previously for energy subsidies to infrastructure development. The budget also focuses on social services, education and universal health care. Long-term investment in infrastructure provides many economic and social benefits, yet only becomes commercially feasible…
On the up: The rupiah is making a comeback after a challenging 2018OBGplus
The Indonesian rupiah slumped for most of 2018, but with the currency enjoying a comeback against key global currencies such as the US dollar in early 2019, the authorities appear to have warded off a major threat to growth. The policy decisions of 2018, including monetary policy and import replacement, affirmed a sense of long-term economic progress in the country. Indonesia’s currency pressure came to a head in October 2018 when the rupiah fell to a 20-year low to rates last seen during…
Tax liabilities: Impacts of the trend towards lower corporate tax rates on developed and developing economiesOBGplus
Recent decades have seen a downward convergence in corporate tax regimes as advanced, emerging and developing economies moved to grab a bigger slice of the global investment pie. Headline corporate tax rates have fallen by 20 percentage points since the early 1980s. Alongside lower average rates, special tax incentives aimed at capturing investment have emerged, further reducing the effective rates paid by transnational corporations. In the aftermath of the 2007-08 global financial crisis, many countries were compelled to slash spending and raise revenue in order to rein in precipitous budget deficits. Even as tax revenues as a share of…
Tax liabilities: Impacts of the trend towards lower corporate tax rates on developed and developing economiesOBGplus
Recent decades have seen a downward convergence in corporate tax regimes as advanced, emerging and developing economies moved to grab a bigger slice of the global investment pie. Headline corporate tax rates have fallen by 20 percentage points since the early 1980s. Alongside lower average rates, special tax incentives aimed at capturing investment have emerged, further reducing the effective rates paid by transnational corporations. In the aftermath of the 2007-08 global financial crisis, many countries were compelled to slash spending and raise revenue in order to rein in precipitous budget deficits. Even as tax revenues as a share of…
Cultural content: Triawan Munaf, Chairman, Creative Economy Agency (BEKRAF), on steps to bolster the creative industriesOBGplus
Interview:Triawan Munaf How can the creative economy be strengthened in order to reach foreign markets? TRIAWAN MUNAF: The creative economy is robust, contributing approximately 7.4 percentage points to GDP and employing around 25% of the total workforce. Regionally, Indonesia’s creative economy derives its strength from its vast population of 265m, with 60% of the population under the age of 40. Home to 17,000 islands, and more than 1300 ethnicities and over 700 spoken languages, Indonesia’s…
Talent map: Changing global migration patterns as a result of growing anti-migration sentimentOBGplus
As the world’s nations and businesses become increasingly interconnected, so too does the flow of global migration. According to the OECD’s “International Migration Outlook 2018”, in 2017 some 258m people resided in a country other than the one they were born in and more than 5m foreign-born persons settled in OECD countries. The flow of migration is believed to not only improve the lives of the migrants themselves, but also to contribute significantly to the economic opportunities of individual businesses and countries. Despite this, public opinion across the globe is turning against migration, much to the frustration of business…
Talent map: Changing global migration patterns as a result of growing anti-migration sentimentOBGplus
As the world’s nations and businesses become increasingly interconnected, so too does the flow of global migration. According to the OECD’s “International Migration Outlook 2018”, in 2017 some 258m people resided in a country other than the one they were born in and more than 5m foreign-born persons settled in OECD countries. The flow of migration is believed to not only improve the lives of the migrants themselves, but also to contribute significantly to the economic opportunities of individual businesses and countries. Despite this, public opinion across the globe is turning against migration, much to the frustration of business…
