Are you aware that Indonesia currently ranks number five worldwide in Export Success Stories?
And number one in Southeast Asia?
Wouldn't you like your company to share in that success?

Here's a few fact that you might not be aware of:

• Indonesia is the world's fourth largest country, with a population of over 230 million.
• Indonesia's GDP is growing at over 6% annually, and is expected to reach 6.8% this year.
• Indonesia has by far the largest economy in Southeast Asia.
• Indonesia is the world's third largest democracy, with a thriving open economy.

Isn't this a market your clients ought to consider?

BREAKING NEWS

Commercial travel and business opportunities in Indonesia are now easier and more accessible! On Friday, May 23, 2008, Ambassador Hume announced that the U.S. government's travel warning on Indonesia had been lifted - effective immediately.

This announcement will benefit commercial travel and will allow sales opportunities for American firms to increase. Ambassador Hume commended "the improvements made by Indonesia in its current security situation."

News Flash

As reported by the Economist magazine in May 2008, Indonesia is attracting tremendous attention from Asian firms as the Indonesian economy expands, its vibrant regional autonomy offers new avenues for investment access and sales opportunities, while locally produced commodity prices soar. The news reports that the queue of Asian companies in Indonesia “reads like a “Who's Who” of global industrialists.”

Indonesian internal growth continues to fuel consumer demand and the traffic lines leaving the airport passing in front of multiple US franchises such as A& W, Starbucks, Dunkin Donuts and advertisements for Serta underline the appeal of American products and services.

International news analysts report that it is imminent that American firms will shed their wariness and join the Asian firms converging on Indonesia to broaden their current American expansion in China and India.

Continuing progress in managing the high growth and increasing lifestyle demands has led to another year where the Indonesian stock market achieved record performance and finished the year as the number 3 top performer in Asian bourses, increasing domestic wealth and confidence.

On the social front, Indonesia was in the top 3 best performers worldwide on improving the business environment as measured by the Global Peace Index published on May 20, 2008. As Sir Moody Stuart, chair of Anglo American and the UN Global Compact Foundation explained, investment and business benefit from more peaceful environments. This year the report highlights the link between business and peace by analyzing the correlation between peaceful countries and business activity in the Industries that Prosper in Peace report released on May 20th alongside the Global Peace Index.

With growth and stability becoming the benchmarks to market opportunities and Indonesia’s steady and sharp progress, American firms can look to the most  populous market in Southeast Asia as a key part of expanding exports and participating in the growth of Asia as a key to successful American firms.

Recent Activities

On May 22, 2008, CS Jakarta and the Business Software Alliance (BSA) jointly organized a software copyright infringement seminar for Indonesian public prosecutors. About 50 public prosecutors from five Jakarta districts of the High District Attorney and Attorney General’s office attended the event, which was held in the CS Jakarta’s meeting room facility. The workshop was designated to train public prosecutors in order to encourage them to enforce laws against pirated software.

The full-day workshop was opened by U.S. Chargé d’Affaires John A. Heffern. “Piracy, counterfeiting and the theft of intellectual property assets pose a serious threat to researchers and creative industries in Indonesia, and throughout the world,” he said. “Protecting intellectual property is the key to building a vibrant creative community at home, and to protecting Indonesia’s reputation as a reliable supplier and serious market player.”  The workshop included a presentation from the BSA Country Manager Donny Sheyoputra and a demonstration of software piracy techniques. 

The event was widely promoted to the Indonesian media by the Embassy’s Public Affairs Section. Over 20 journalists attended, a press conference was held. The event generated numerous articles in Jakarta newspapers, highlighting the U.S. Commercial Service’s role in training Indonesian prosecutors to battle piracy. 

Market Overview

• In 2007 Indonesia’s GDP expanded at 6.3%, the fastest pace since the 1998 fiscal crisis.  A slowdown in the global economy is expected to cause Indonesia’s real GDP growth to slow slightly in 2008, to 6.1%, despite strong domestic demand.
• Economic reforms will slow as the 2009 parliamentary and presidential elections approach.  Although President Yudhoyono retains strong public support, his administration needs to speed up the decline in poverty and unemployment rates in order to establish a strong platform for reelection in 2009.
• After two years of debate, the Indonesian Parliament finally approved the new Investment Law in March 2007.  Compared to the previous law, the new legislation is friendlier to foreign investors, addressing key issues such as land rights.  The law's "negative list," however, restricts foreign ownership in a number of sectors.
• Realized direct foreign investment in Indonesia grew strongly in 2007, to over $9 billion in the year to October, up from $6 billion the previous year.  Major sectors for investment were transport, storage, communication, chemical and pharmaceutical, and food.  Major investor countries were Singapore, U.K., Japan, Taiwan and South Korea.
• Indonesia’s security situation has improved, with no terrorist bombings in the country in 2006 and 2007.  Although terrorist cells continue to operate, the government has made vigorous and effective efforts to eliminate them.

Market Challenges

• The new Negative Investment List announced in 2007 closed 23 types of business to both foreign and domestic investment, reserved 43 sectors for SME investment, 33 sectors for partnership, and opened 98 sectors to foreign investment.  In total, 11 sectors became more restrictive for foreign investment, including telecommunications and insurance.
• Although the current administration has taken steps to tackle corruption, it continues to be endemic.  Continuing allegations of high-level corruption, especially in the judiciary, point to the need for continued reform and implementation of good governance practices.  Far more effective mechanisms are needed to enforce commercial, criminal and administrative laws, which currently afford little actual protection to foreign investors.
• Indonesia’s infrastructure continues to be inadequate, as very little new investment has flowed into the sector.  Poor roads, ports, and power supplies continue to hamper growth.
• Although the Indonesian Government has steadily improved the regulatory and legal framework for the protection of intellectual property (IP) rights, poor enforcement of laws governing IP has continued. For example, U.S. industry maintains that over 90 percent of all CDs (audio, film, software) sold in Indonesia are pirated.

Key Economic Indicators for 2007

• Population: 237,512,355 (July 2008 est.)
• GDP (purchasing power parity): US$ 845.6 billion (est.2007)
• GDP (official exchange rate): US$ 410.3 billion (est.2007)
• GDP – real growth rate: US$ 6.1% (est.2007)
• GDP Percapita: US$ 3,400 (est.2007)
• Inflation (CPI): 6.3% (est.2007)
• Investment (gross fixed): 23.6% of GDP (est.2007)
• Unemployment: 9.7% (est.2007)

Market Opportunities

Security & Safety

• Strong Demand
• Imported Products $224.8 Million in 2007
• U.S. Market share: 10-15%
• Sizeable Police Budget:
   2006: $1.6 billion
   2007: $1.8 billion
   2008: $2.1 billion

Energy

• Power Shortage in 2007, demand increase 8%/year.
• Imported Products over $898 Million (estimated).
• 10,000 MW crash program projects by 2009 – investment will reach $5.4 billion.

Oil and Gas

• Investment $10.1 billion in 2007.
• U.S. Products $200 million in 2006.
• 26 New Blocks offered in 2008.

Telecommunication Equipment and Services

• Market size is estimated $5 billion in 2007
• U.S. Share of import market estimated at 15%
• Growth rate is forecasted at 30%
• Imports accounted for 90% of market
• Cellular operators invest $1.9 billion in 2007
• Best prospect: Cellular System, 3G Sofware, Network Management Systems, Cellular Handsets

Industrial Chemicals

• Dependence on imports of chemicals
  Total imports in 2007: $10.7 billion
  U.S. Market share: 5%
  2007: $1.7 billion in foreign and domestic direct investment 
• Major players: USA, Japan, Germany, China & South Korea
• Promising sub-sectors:
  Other chemical fertilizer (HS31)
  Essential oils and perfumes (HS33)

Environmental Technology

• The market for pollution control equipment and water resources equipment estimated at $180 million and projected to grow by 10% in 2007
• Major issues: Deforestation, Water Pollution, Sewage, Air Pollution, and Smoke and Haze from Forest Fires
• The U.S. is strong in pumps and water treatment chemicals
• U.S. exports to Indonesia = $29 million in 2006
• Main supplier are USA, Japan, China and Germany

Retail

• Opened to foreign investment in 1998
• Sales in 2007 predicted to reach $5.7 billion
• Most foreign investment is in the hypermarket sector
• Foreign retailers account only 8% of outlets, but capture 40% of the total retail sales
• U.S. retailers are strong in the specialty shop and minimarket sectors

Franchises

• Home to 255 foreign and 60 local franchises
• Best prospective sub-sectors: Food & Beverages, Education products and services (including children’s education), Retail and Business Services
• American franchises dominate, but strong competition come from Singapore, France, Australia, UK, Thailand and domestic franchises
• Estimated future growth around 5%

Food Supplements

• Estimated market was $303 million in 2007
• 2007 Imports estimate = $235 million (over 50% was from U.S.)
• Competitors: China, Taiwan and European Countries
• Best Prospects: Degenerative Prevention Products, Diet and Aesthetics Products, Products that improve sex life and stamina, Vitamins and Minerals.

Information Technology

• Market size is estimated $2 billion in 2007
• Growth rate is forecasted at 15%
• Imports accounted for 50-80%
• Best Prospects: PC’s+ High End Servers
• U.S. Share of import market estimated at 60-70%

Aviation

• 18 scheduled and 35 chartered airline companies
• Number of domestic passengers increase 6%, estimated at 28.3 million in 2008
• Imports of aircraft & part in 2007: $588 million
• U.S. products hold 35% market share
• Opportunities: leasing commercial aircraft, upgrading airports facilities, supplying spare parts, private jets.

Best Prospects

The best prospect sectors for U.S. export and investment for 2008 are:

· Aircraft and parts
· Education and training
· Electrical power systems
· Environmental technologies
· Franchises
· Health food supplements
· Industrial chemicals
· Medical Equipment and supplies
· Oil and gas equipment and services
· Retail
· Telecommunications equipment and services
· Cotton
· Soybeans
· Consumer ready to eat foods
· Wheat

Market Research on Indonesia

· Aircraft & Parts
· Automotive Industry
· Cellular Services
· Coal Mining Equipment
· Cosmetics Market Brief
· Courier Services
· Electrical Power Systems
· Health Food Supplements
· Heavy Equipment Market Brief
· Medical Equipment & Supplies
· Paper & Paperboard
· Retail
· Safety & Security Equipment
· Textile Yarn Industry
· U.S. Higher Education
· Water & Industrial Pumps

To access Market Research, visit http://www.export.gov/mrktresearch/index.asp.

Contact Us Now!

U.S. Commercial Service Indonesia
Wisma Metropolitan II, 3rd Floor
Jl. Jendral Sudirman Kav. 29-31
Jakarta 12920 - Indonesia
T. (62-21) 526 2850
F. (62-21) 526 2855 / 59
E. Jakarta.Office.Box@N0SPAM.mail.doc.gov
W. http://www.buyusa.gov/indonesia/en

Box 1, Unit 8129
FPO AP 96520-8129

To know more, download this Consider Indonesia brochure.