Tapping Into Indonesia’s Global Economic Potential

Indonesia has a vast wealth that can potentially catapult its economic standing to the highest level of global economy joining the ranks of such European countries like the United Kingdom and Germany in a matter of a few decades. Today, Indonesia is ranked 16th on the world’s largest economy and the largest among Southeast Asian nations which indicates the rapid economic booming largely due to huge domestic consumption and growth in production. It was estimated by some economic experts that Indonesia would reach a ranking of 7th largest economy by the year 2030 surpassing other countries in Europe. Now that Indonesia is garnering more international investors it could do so much more to reach the highest economic growth potential.

In the past twenty years Indonesia has dramatically increased its labor productivity through effective improvements making a shift from agriculture sector to different sectors which is accounted for the country’s economic growth by 60%. The increased in productivity level and the creation of numerous jobs has been all time high in the past 35 years. Indonesian’s growth had been directly linked to domestic consumption and not through manufacturing and exports unlike other booming Asian economies.

Indonesia’s economy grew in 2011 in such speed while most European countries are experiencing huge debt crisis. With positive economic status Indonesia managed to get high credit ratings which positioned them to be more resilient to any external factors that can affect the economy. And now more international investors, finance experts and economists have taken interest in Indonesia’s economic progress.

Being the fourth most populated country in the world with almost 240 million in population the marginal gap between income levels of an individual is expected to close in as larger portion of the population will soon enter the middle class bracket bringing in increase buying power for more consumers which will definitely add to the dynamics of the economy. This will signify greater consumer market in terms of domestic consumption and will soon attract more foreign companies to join the bandwagon of dynamic commercialism. International retailers would take interest in acquiring some shares of the ever growing consumer market. This could translate to further expansions of foreign companies in the next years to come.

Indonesia’s reliance on exports is at all-time low than its competitors within the same region. While the outpouring of commodity prices made Indonesian exports an integral factor to its increase in economic growth and countries such as China and India can provide available market for Indonesian products. With its prime location in this region, Indonesia had established healthy trade relations with the South West Pacific region and other Asian nations.

The Indonesian government is on the right track of planning some huge infrastructure development that could positively attract more incoming foreign investments. The country’s development will surely stir some great interest among foreign investors in today’s present economic condition. Having some good policies could give good leverage and will gear towards the goal of achieving a GDP growth rating further beyond 7% than expected.
Indonesia’s economy strongest points are having a low debt profile and a smaller deficit in the budget which was only 1.1 % of the GDP last year. Having stronger revenues and income with lower expenditures on capital projects had offset higher government expenditures on subsidies. Having a good GDP increase, income from tax revenues is stronger than ever in this current year.

The economy of Indonesia has great potential for long term foreign investments that can expect higher returns in the Indonesian market scene. While private investments will also share the potential to increase in numbers making the economy grow further. This is very possible if Indonesia implements its legislative powers against red tape and corruption that will protect the interest of investors both foreign and local. With the solid determination of Indonesian to make its commercial market more conducive to foreign and private investments, the economic growth will definitely exceed beyond what is expected.

Source: McKinsey Global Institute

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