RSM Global

Indonesia: the wind blows hot and cold

When Jim O’Neill coined the term ‘MINT’ for the economies of Mexico, Indonesia, Nigeria and Turkey, he stated that Indonesia, due to be ranked as the seventh largest GDP globally by 2050, had the potential to be “more compelling than Russia”, principally because of its growing population of young workers.

Indonesia is the world's fourth most populous country after China, India, and the USA and the world's third most populous democratic country after India and the USA. Indonesia’s youth is considered to be a key trump card because unlike other countries which have had to face the reality of having an ageing and shrinking population, half of Indonesia’s population is under 30 years old.

However, 2014 started badly for the country with reports that its economic growth had fallen to its slowest pace in five years, with GDP growing by only 5.2 per cent in the first quarter of 2014. This slump follows last year’s market tumble which led to Indonesia being dubbed as one of the ‘fragile five’ emerging nations.

The recent slowdown has exacerbated the ‘fragility’ of Indonesia and, in particular, drawn attention to its vast young population who, according to the Financial Times, make up a large percentage of the 240 million people living on less than $2 per day - the so-called ‘fragile middle’.

Forbes recently dismissed Indonesia as “the market darling of two years ago”, but then followed that with news that Japanese car maker Nissan, and Canadian telecoms company RIM, the parent of Blackberry, are launching their new, cheaper products in Indonesia – chosen for its fast-growing and geographically-concentrated consumer class. Hot on the heels of these stories was a statement by Nielsen, the market research company, saying that “Indonesia [is] set to become testing ground for global re-launches” on the back of the fact that consumer confidence in Indonesia is the highest in the world, and the purchasing group will rise from 45 million in 2014 to 145 million by 2030.

With 99 per cent of businesses in Indonesia being small enterprises, there is also now a huge focus on Indonesian outbound investment as those SMEs look to enter the global supply chain.

The first half of 2014 blew in some hot and cold winds for Indonesia and pundits have been quick to jump up with joy and fall down in despair with every new financial result or forecast about Indonesia’s fate. However, just as the BRICS continue to surprise, please and shock global observers, so too will Indonesia.

RSM International is represented in Indonesia by RSM AAJ Associates who have been providing professional value added services to their clients for over 29 years.

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Author

Jean M Stephens
Chief Executive Officer

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