Unleashing Indonesias Potential: Executive summary

Unleashing Indonesias Potential:Executive summaryIndonesia16th largest economy in the world going to be 7th biggest by 2030Inflation decrease from 2 digit into 1 digitGovernments debt per GDP is lowerYoung populationFast urbanizingGrowth income90million additional consumersButtttFaces a productivity imperative need to boost productivity growth by 60% to meet target 7% annual GDP growth Uneven distribution of growth inequalityPoor infrastructure and limited resources

Action : consumer services, fishery and agriculture, resources

Decreased fr 20% to 8% comparable with mature economiesFallen by 70% over past decadeMisperconception: growth focus on jakarta medan, bandung, sby

Indonesia strategy: domestic consumption >> export and services >> manufacturing/resources

Indonesias productivity come from productivity improvements within sectors (wholesale & retail trade, transport equipment & apparatus manufacturing, transport & telecommunication)MisperconceptionIndonesian economy is relatively unstable Least valatility in economic growth2000-2010 annual gdp range fr 4-6%Ind macroeconomic management has improved

Misperconception2. Economic growth centres almost exclusive on jakartaJakarta is major contributor to ind economic output

Misperconception3. Indonesia follows the asian tigers export driven growth model

Manufacturing downCos poor infrastructureLabour problem underperformedMisperconception4. Resources are the economys main driver- Even ind is the worlds largest producer and exporter of palm oil, coal, cocoa, tin, nickel etc no longer drive the country economic development

Fluctuation in global resource prices could result in instability in indonesias currency and risk the stability of economy as a wholeMisperconception4. Growth has come largery from an expanding workforceMajority of indonesias productivity gain has come from productivity improvement within sectors (wholesale and retail trade, transport, telecommunication)

3.15 billion people in Asia as a global consuming class in 2025Urbanization, a main driver of rising income in AsiaA surge of demand for resources, commodities, tourism & export of manufactured goods1. Asias Renaissance Powered by Urbanization

Asias renaissance is fueling growth in Indonesias exports, particularly to China & IndiaPalm Oil & CoalRising demand for food Indonesias food producing trend change from domestic provider to international food hub1. Asias Renaissance Powered by Urbanization

GDP remain stable at 20%GDP growing at the fastest paceOutside Java IslandInvestment in infrastructure 4% of GDP1. Asias Renaissance Powered by Urbanization

Batam, Pekan baru, Makassar1. Asias Renaissance Powered by Urbanization2. Indonesias Young Population Growth Trend: IncreasingYoung population could boost the workforce > 40 Million in 2030152 million people are in working ageadd 2.4% to GDP64% woman labor forceadd 20 million skilled worker3. Global Technology Trend: Increasing Internet become mainstreamGrowth rate annually >20%Changing buyer behavior from offline buyer to online buyerChanging company behavior to e-commerceIndonesias broadband penetration only 1%WB: every 10% increase in broadband penetration accelerates economic growth by 1.4% more than in high income countriesInvesting on broadband coverage $20 billion will covered 20% of the most densely populated areas of IndonesiaGreen Technologies change the countrys resource markets Indonesia as the largest geothermal resources in the world4.The Expansion of a Consuming Class

Consuming class: consumers with enough income to purchase not only basic necessities but also discretionary goods & services Indonesia: country with the largest additional people in consuming classSo, what is major challenges to increase Indonesian GDP to 7% in 2030?If there is increasing in demand, there will be a change in supply! In this case, change will be in Indonesias natural and capital resourcesIndonesias Challenges and ActionChallenges: boosting productivity, ensuring inclusive growth, & meeting the challenge of soaring demand from its expanding consumer class

Need to tackle: excessive bureaucracy, corruption, access to capital, infrastructure bottlenecks

How?Transform consumer services

Financial services regulation is often a constraintPoor infrastructureGovernment as a vital player!

As households move up, the share of income they spend on discretionary goods and services increases and the share they devoted to basic necessities shrinks

How to boost?Access channels mobile payment systemsCredit information uptodate and not broadly covered datas3. Trust & understanding educate consumers about investment rather than doing business after retire4. Regulatory overlap relaxed regulatory systemsBaca kertas2. Boost productivity in agriculture and fisheries

Increasing numbers of affluent consumers raise demand for food and agricultural products significantly

But cities are expanding pressure on land resources

To meet domestic demand productivity need to increase >>60% (from 3 tons/crops/farmer to 5tons/crops/farmer)

Intensive production rather than extensive production deforestation, peat land degradation

Need to pursued: boosting yields, shifting production into high value crops, reducing post harvest, value chain waste large exporter

3. Build a resource-smart economy

Demand for energy, materials, water & other key resources increase rapidly

Maximazing energy supply from unconventional sources: biofuels, biogas, geothermal power

Game changing forms meet up 20% indonesias energy needs

4. Invest in skill building

Need new skill to support growth

Human capital major obstacle

Demand for semi skilled and skilled worker will increase >>100% shortfall of worker educated

How to fill the gap? need significant investment (3% of GDP/year not enough)Raise the standard of teaching significantlyDevelop a more demand driven curriculumCreate new, flexible education pathways

Concerned action in these 4 areas offer business a $1,8 T opportunityFor private sector!Consumer services: $1,1 T business opportunity the largest in financial servicesAgricultural and fisheries: revenue $250 B, downstream food and beverages industry $180B opportunity, upstream activities $20B a year west, east, central java and east nusa tenggaraResources: geothermal and biofuels >>10% ayear but the largest still come from oil, gas and coalHuman capital: private education opportunity demand increase 4x

Rethink: 1. shift toward middleweight cities and a new one2. Collaborate with local gov3. Develop local talent