Indonesia’s economic potential is unquestioned. The nation of 265 million people has all the ingredients to be a major global player. Indonesia today is already the 16th largest economy in the world. It is the largest economy in ASEAN contributing over 3% of ASEAN GDP and over 40% of ASEAN population1. Analysts believe that Indonesia will continue to grow to become the 7th largest economy in the world, ten to fifteen years from now.
The majority of this growth comes from outside Jakarta, and Java. On the west part of the Country, Palembang is viewed as an economic hub for South Sumatra, being the second largest city after Medan, with manufacturing, trading, agriculture, construction and increase in bank lending.
However, converting the potential into business opportunities and success is not a straight path. Therefore HSBC is supporting Indonesia Economic Forum as the platform to build relationships, gain insights and recalibrate businesses’ strategy for building a successful enterprise. The Forum which will be held in five cities throughout the Country is connecting government, private businesses, financial institutions, state-owned companies and local communities to work together to realize their vision.
Last August in Palembang, the Forum discussed the city’s potentials with the Governor of South Sumatra Alex Noerdin and important industry players. Here are some key points from the discussion.
INFRASTRUCTURE - Driving Economic Growth
From toll roads to railway to the newly opened LRT, South Sumatra is experiencing a boost in infrastructure development. With Palembang being one of the host cities for the Asian Games 2018, President Joko Widodo’s government expects the transport network, especially in the large cities to push economic growth in the province and improve its competitiveness. The newly built transport infrastructure will also help accelerate the development of Special Economic Zones (SEZ) in Tanjung Api-Api and Tanjung Carat. The development of the SEZ’s will create new jobs and act as an economic driver for South Sumatra.
LOGISTICS - Improving Connectivity & Competitiveness
Given that South Sumatra is an emerging economic hub with strong agricultural, mining, plantation, fisheries and manufacturing sectors, improving the province’s logistics sector is critical for sustained and equitable economic growth.
Palembang has now more than 30 flights a day but it needs to upgrade its port and rail network which is now underway. Meanwhile, President Joko Widodo has emphasized that his administration is committed to lowering logistics costs to improve the country’s economic competitiveness.
AGRICULTURE - Raising Incomes & Equitable Growth
Agriculture plays a vital role in Indonesia’s economy, particularly in supporting rural household income. The sector is a major employer, accounting for nearly 32% of jobs in 20172. The agriculture sector is made up of primarily large-scale plantations owned by private and state-owned companies and smallholders using traditional farming methods. South Sumatra has the largest rubber plantations in the country, amounting to 838.7 thousand hectares3. The province however needs new investments in the agriculture sector, especially in the downstream processing industries.
PROPERTY - Building Smart Cities & Urban Centers
Palembang’s property sector is expected to receive a major boost as new investments, both foreign and domestic, are rising. The development of the Tanjung Api-Api Special Economic Zone has changed the entire economic outlook for South Sumatra.
The completion of the first phase of the Palembang LRT will also have a positive impact on the city’s property sector. Analysts have predicted that property prices could rise by as much as 20% per year4 for the next few years on the back of infrastructure development.
"We think what Indonesia is doing today is very important, because to us the 5.3% growth is not the most important aspect. The important aspect is that Indonesia is building for the future," said Sumit Dutta, President Director of PT Bank HSBC Indonesia in his remarks.
HSBC is open for business in Palembang, in South Sumatra, and across the whole of Indonesia. It is very keen to partner with the government, private sector and people wanting to use Palembang as a base for South Sumatra, to see what HSBC can do to make sure the economy of the region grows to its fullest potential.