Is Indonesia the next economic powerhouse?


A survey conducted by Nielsen in May reflected Indonesians have overtaken Indians as the most upbeat consumers. This was shortly after China overtook Japan as the world’s second largest economy. Christel Lee investigates.



The Nielsen Global Survey of Consumer Confidence and Spending Intentions polled 28,000 respondents across 56 markets throughout Asia Pacific, Europe, Latin America, the Middle East, Africa and North America via the internet. While India had been the world's most optimistic market for nine consecutive quarters according to Nielsen's survey, this time Indonesia reported the highest consumer confidence index. 


Apart from the apparent Euro crisis, which sent many known players into a panic, China’s economy suffered a slowdown – a direct implication of the crisis due to shrinking exports. The percentage of the slowdown fluctuated between 7.6% and 8.1%.


China’s Achilles’ heel


Incidentally, this came right after China officially overtook Japan as the second largest economy (which occurred last year). It’s now being reported that people’s confidence in the Republic is being threatened. Many investors pull out of China for “a variety of reasons”. They range from rising labour costs, logistics, raw materials and financing costs, as well as increasing energy, land and ecological constraints.


Unfortunately, quality remains an unaddressed, recurring issue that threatens the image of genuine Chinese manufacturers who produce good quality. While intellectual property theft has also been a ongoing issue, it has apparently taken on a whole new level – classes of counterfeiting standards!


One reporter from the China Daily documented her experience in trying to purchase a portable hard disk drive at a bargain price. The fact the retailer’s door had a one-bite-absent-apple sign was a dead giveaway. She spotted a branded hard drive going at RMB500, which is slightly cheaper in comparison to the same sold in the United States. 


The sale was completed and the reporter jokingly told the sales assistant she would return if she found out the serial number was counterfeit. The friendly service assistant did a 180-degree turn and became hostile, hurling the change in the customer’s face with the parting shot “Buy an original at that price in your dreams!”


The reporter added economists explain this market exists due to both supply and demand. That accounts for the thriving counterfeit markets in China despite government and business efforts to stamp them out. During the past decades, commodity prices in China are said to have become more international while household income stays local. 


The Bank of China and the Hurun Report, a wealth-research firm, rubbed more salt on China’s wounds after a study issued last October. The study found among survey subjects with assets worth at least 10 million yuan ($1.6 million),  HYPERLINK "" 14% had already emigrated or started on the paperwork. An additional 46% said they were considering it. In March, a Beijing newspaper said that the study  HYPERLINK "" probably underestimated the flight of Chinese wealth.


Power of a 243-million-population country


Both India and China are known for their massive populations and were touted to be dominant Asian economies a few years back. However, Indonesia has been gaining attention lately. 


Indonesia's economy reportedly grew at its fastest pace in 15 years in 2011, boosted by increased investment and growing domestic demand. It is said to have expanded by 6.5% in 2011, the highest rate since 1996. The country also regained its investment grade status last year as total domestic and foreign investment rose by almost 20% to $28 billion (£18 billion) – which got many analysts optimistic about growth. Further icing on the cake is that domestic consumption accounts for nearly 60% of Indonesia's economy.


Catherine Eddy, managing director, Nielsen Indonesia, commented: “In Indonesia, consumer optimism has been evident all year fuelled by investment rating upgrades from Moody's and Fitch. The market is very buoyant among consumers and investors right now and with a population of 240 million, Indonesia is possibly the next big bastion after China and India.”


Indonesia’s Foresty Minister, Zulkifli Hasan, was quoted as saying that the pulp and paper industry had attracted a US$16 billion investment as at January 2011. That translates to absorbing more than 240,000 workers and offers US$4 billion of foreign exchange to the country, or approximately 6.1% of the total production in the manufacturing sector. 


Hasan added the country is ranked 9th in the world’s pulp exporting list with an average annual export of 1.6 million tonnes. In the aspect of paper export, it ranks 12th with an annual export of 1.7 million tonnes.


IDC Asia Pacific’s study revealed a growth in the printer consumables market in the region (excluding Japan). The growth was 2.39% sequentially followed by 8.25% year-on-year to reach US$1,631.34 million in the third quarter of 2011. This is notwithstanding the painful decline our industry suffered, sending many business announcements along the lines of exiting or giving up certain portfolios.


Such numbers suggest a possibility – before Vietnam and Myanmar take centre stage – that Indonesia may become the next economic powerhouse.





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