In welcoming the lunar Year of the Dog, on 23 February 2018 PT Bank HSBC Indonesia held the HSBC Economic Forum on Indonesia’s Economic Outlook 2018, taking the theme “Realising Indonesia’s Potentials”. The Economic Forum provided insights on Indonesia’s economic conditions in 2018 and possible opportunities for the growing economy, plus insights and perspectives from the Government sector. Keynote speeches were delivered by Bambang Brojonegoro, Minister of National Development Planning and Ngakan Timur Antara, Head of the Industrial Research and Development Board of the Ministry of Industry on behalf of Minister of Industry Airlangga Hartanto.
As host of the event, HSBC Indonesia’s President Director Sumit Dutta, opened the Forum and remarked that Indonesia is currently the largest economy in ASEAN, with 37% contribution to the region’s GDP. That is the reason why HSBC sees Indonesia as a strategic and important market. As a country with huge potentials, HSBC believes that Indonesia will become one of the world’s financial powers.
To provide insights on Indonesia’s industry overview and the Government’s strategy to boost the industrial sector while realising Indonesia’s potentials, on behalf of the Minister of Industry, Dr.Ngakan Timur Antara highlighted the current conditions of the Indonesian manufacturing industry, foreign investments in the industrial sector and Indonesia’s position. “There has been a shift of the world’s economic centre, where Asia now becomes a promising site of economic growth. Indonesia itself provides 2.5% contribution to the world’s GDP,” stated Antara.
The next keynote speech by Bambang Brojonegoro, Minister of National Development Planning focused on Indonesia’s economic prospects in a wider context and some future projection. Beginning the speech, he stated “A good news which has not been exposed much last year was that in 2017 Indonesia joined the Club of USD 1 Trillion Economy; the size of the Indonesian economy has now reached USD 1 trillion.” In spite of surpassing USD 1 trillion in GDP, Indonesia is still considered to be in the lower middle-income group to date. Assuming that the current 5% annual growth rate of the economy is maintained, Indonesia is projected to become a high-income country by the year 2038.
Indonesia is currently the 16th largest economy in the world, being among the Top-5 emerging markets with the best middle-class potentials, and being among the Top-3 destinations attracting investors in Asia. With the availability of abundant natural resources and the projected rise of the consuming class (135 million people by the year 2030), Indonesia is considered to be one of the world’s most potential countries – projected to be the 4th largest economy in the world by 2050 (PWC).
The rapidly growing and expanding digital technology is expected to play a key role in boosting the economic growth, particularly through increases in labour inputs and productivity level. However, regarding the current low level of skills of the majority of the manpower, Indonesia needs to give a greater attention to education and human resources capacity improvement. This is necessary to reduce the potential increase of unemployment level due to the shift to technology-intensive operations. A particular focus should be on the enhancement of capabilities related to Information Technology (IT). It is also necessary to develop an ecosystem which supports innovations, especially in relation to the shift of skills in research and development (R&D) and industrial design.
While Indonesia’s current investment growth rate is recorded at around 7%, a double-digit investment growth rate is deemed necessary to make it possible for higher than 5% economic growth rate. Export is another key-factor to ensure a higher rate of economic growth, hence it is important that Indonesia pays attention to the enhancement of its export capacity – which currently is still dominated by less-processed natural resources.
As the annual economic growth rate remains at 5%, Indonesia focuses on quality economic growth, aiming at reducing poverty, reducing inequality and reducing unemployment rate. The Indonesian economy has so far been growing with signs of improvements, with decreasing trends of poverty rate and unemployment rate during the past decade. The country also indicates improvements in the rank on Ease of Doing Business as well as in the Global Competitiveness Index and the Transport Infrastructure Index, leading to increases in both foreign and domestic investments in 2017.
Minister Bambang Brojonegoro added that the Indonesian Government has conducted necessary reforms to boost potential growth by improving the investment and business climate, as well as conducting fiscal reforms. To date, the Government has increased productive spending for infrastructural development and will focus on human capital development within the next two years. Current priority development sectors cover manufacturing industry and tourism. The National Industry Priority Policy covers the development of 14 industrial estates and clusters for natural resources industry nationwide, with priorities on labour-intensive and export-oriented industries. The policy also emphasizes on vocational development, industrial value chain and digital platform utilization. In addition, the Government’s regulation on one-stop services is expected to have positive effects on industrial and economic development. The emphasis given to the tourism sector is due to its multiplier effect and the prevailing potentials. Ten new tourism destinations in several parts of the country have been prioritized, including five Special Economic Zones and five strategic destinations.
Representing the private sector, also speaking at the event was Shinta Kamdani, Deputy Chairwoman of the Indonesian Employers Association (APINDO) and the Indonesian Chamber of Commerce (KADIN). She pointed out that in addition to the collaboration between the Government and the national private sector, the availability of foreign direct investment is also considered important for development projects, with particular focus on the infrastructural development. She also noted that with highlights of scheduled electoral campaigns for the forthcoming elections, the year 2018, which partly coincides with the lunar Year of the Dog has been seen as a year with possible uncertainties and instability, yet business players are advised to remain steadfast in pursuing business enhancement efforts while also be open to available opportunities, and to some extent, find ways to assist the Government.
Closing the Forum, Joseph Incalcaterra, Chief Economist ASEAN, Global Research, HSBC provided his insights on Indonesia as a dominant force in ASEAN and its potential economic growth in 2018.
The event which took place at the Ritz Carlton Pacific Place Grand Ballroom also provided a forum to connect clients and customers to opportunities as well as to reinforce HSBC’s position as the leading international bank.