With the ongoing economic reform, huge domestic market as well as a growing middle class, Indonesia has emerged as the hottest investment destination in Southeast Asia, analysts said.
Deloitte Asia Pacific CEO Chaly Mah said on Tuesday that Indonesia had all the ingredients to achieve sustainable economic growth of between 6 and 7 percent, thanks to its strong macro-economic fundamentals.
Indonesia’s strong economy is highlighted by its rising per capita GDP (nominal), which is expected to exceed US$3,600 by 2012, its richness in natural resources, and its population of almost 240 million, he said.
However, the economic reforms should be continued to ensure that in the future Indonesia would have a more efficient economy, free of red tape and corruption, he added.
“The government should focus more on improving efficiency and removing red tape in the public sector to make sure Indonesia will become a better place do businesses. I think these are the challenges,” Mah told a press conference on the sidelines of an investment seminar entitled “Exploring the investment outlook in Indonesia 2009-2014”.
The seminar was held to celebrate the 20th anniversary of Deloitte Indonesia.
A significant working class population is also one of Indonesia’s key strength points, he said, adding that the country’s 58 million–strong working class was also the lure of the investors to do business in the country.
“It’s a significant amount of working people directly needed to attract more investments, Moreover, today Indonesian labor wages are among the lowest in the region,” he said, while mentioning that it was lower than in China and India.
Chatib Basri, a political economist at University Indonesia, acknowledged that Indonesia had a strong macro economy as shown by, among others, its relatively low debt to GDP ratio of about 26 percent, thanks to a strong commitment to domestic reforms.
“Overall, I’m optimistic on the Indonesian macro economy,” he said.
However, he said, the government should show its commitment to improving infrastructure where there were barriers to economic development including among others, difficulties in getting access
Giving an example, Wisnu Wardhana, PT Indika Energy Tbk vice president, said that from 1998 to 2005, there were no independent power producer (IPP) projects developed by the private sector other than the one carried out by his company.
“It’s the only IPP handled by the private sector in the last 10 years,” he said.
In the future, he said, infrastructure development could not be handled only by the government. The private sector should participate more actively in developing infrastructure but is should be supported by legal certainty and land availability, he added.
Michael Tjoajadi, PT Schroder Investment Management Indonesia director, said that infrastructure development during the last five years had been far from ideal.
“Without adequate infrastructure, Indonesia’s economic growth would become stagnant,” he said.