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Latest Reports Middle Class
The middle class plays an important role in the economic development of Indonesia. Typically, nations with large middles class grow faster for a combination of reasons. And so, if Indonesia wants to achieve its ambition of becoming a developed country by 2045, then a significant percentage of its population (preferably over 70 percent) needs to join the middle class in the next two decades.
On Friday 4 October 2024 Indonesia Investments released the September 2024 edition of its monthly report. The report discusses a range of economic, political and social topics to assess the state of the Indonesian economy.
Passenger car sales in Indonesia are estimated to rise 11.5 percent per year in the 2017-2021 period supported by Indonesia's expanding middle class. This conclusion originates from research that was conducted by London-based BMI Research. Meanwhile, business consulting firm Frost and Sullivan sees Indonesian car sales rise 5 percent (y/y) to 1.11 million vehicles in 2017 supported by the popular low cost green cars and multipurpose vehicles.
Eric Sugandi, Chief Economist at SKHA Institute for Global Competitiveness (SIGC), believes household consumption will remain the main engine of economic growth in Indonesia in 2017, followed by the other engines, namely direct investment and government spending. Regarding household consumption, Sugandi says the middle class contributes significantly to economic growth of Southeast Asia's largest economy due to their robust consumption. Traditionally, household consumption accounts for between 55 and 58 percent of Indonesia's gross domestic product (GDP).
Investors in Asian markets should not be overly concerned about slowing economic growth in China or bullish US dollar momentum ahead of higher US interest rates as economic growth rates in this region are still significantly higher than in other parts of the world. Thanks to a burgeoning middle class segment (which constitutes a strong consumer force), Asia has great prospects for the long-term. This is the message conveyed in the words of Christophe Palumbo, Senior Business Development Manager at Aberdeen Asset Management.
Turnover in Indonesia’s processed food and beverage industry is expected to grow 4 to 5 percent year-on-year (y/y) in the first quarter of 2015 from the same period last year. Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI), said that factors have been hampering this industry are the winding down of fuel subsidies, the country’s sluggish export sector, the industry’s dependence on imports of raw materials, people’s weakening purchasing power amid low commodity prices, and a weak rupiah.
eBay Inc, a US-based global commerce platform and digital payments leader, plans to raise its stake in Indonesian e-commerce firm Metra Plasa from 40 percent to 49 percent. Currently, 60 percent of Metra Plasa is owned by Indonesia's largest telecommunication and network provider Telekomunikasi Indonesia (Telkom). Telkom’s stake will thus decline to 51 percent. In 2012, eBay and Telkom (through Telkom’s subsidiary Multimedia Nusantara) established a joint venture to operate Metra Plasa.
Indonesian presidential candidate Joko Widodo, more popularly known as Jokowi, intends to increase the government’s tax revenue by allowing foreigners to buy luxury apartments, worth at least IDR 2.5 billion (approximately USD $211,864), in the larger cities of Indonesia and on the island of Bali (a popular tourist destination). Currently, foreigners cannot buy property in Indonesia. However, indirect structures, such as the use of their Indonesian wife’s name or an agent are common, meaning that the state loses out on luxury tax income.
According to Bank Indonesia's consumer confidence survey, Indonesian consumers were more optimistic in May 2014 compared to the previous month. Consumer confidence in Southeast Asia's largest economy increased to 116.90 in May 2014 from 113.90 in April. The increase indicates that Indonesian consumers are more optimistic about the current condition of the Indonesian economy as well as conditions in the coming six months. The result in May 2014 was also higher than in the same month in 2013 (112.8).
Indonesian listed retail and consumer goods companies continued to record good corporate earnings in the first quarter of 2014. Amid robust economic growth - although having slowed to 5.21 percent in Q1-2014 - Indonesians' purchasing power is growing and the middle class is expanding rapidly. Not too long ago, the World Bank said that per year seven million people are added to Indonesia's middle class. With more money to spend, these people consume more and more consumer goods such as food, clothes and electronics.
Latest Columns Middle Class
Indonesia, with a population of approximately 267 million, is the largest market for the Food Service Industry in the ASEAN region. With rising incomes amongst the growing middle class and changes in lifestyles, the Food Service Industry in Indonesia is expected to show a compounded annual growth rate (CAGR) between 2018 and 2023 of 7.06 percent.
The Coca Cola Company (TCCC) and its Australia-based subsidiary Coca Cola Amatil (CCA) launched two new production lines at the Coca Cola Amatil Indonesia plant located in Bekasi (West Java) at the start of the week, part of a USD $500 million investment package that will materialize over the next 4 years. TCCC, the US-based multinational beverage manufacturer, is eager to expand its business activities in Indonesia as it considers Indonesia a dynamic and promising market as well as one of the growth engines to achieve its long-term targets.
Investment in Indonesia’s processed food and beverage industry is expected to grow at least ten percent to IDR 55 trillion (USD $4.6 billion) in 2015 from an estimated investment realization of IDR 50 trillion in 2014. Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI), said that investments in this sector have been solid due to rising consumption of food and beverages in Southeast Asia’s largest economy. Particularly foreign investments have been strong in 2014 and are expected to continue next year.
Today, Indonesian president-elect Joko Widodo (commonly referred to as Jokowi) and Facebook CEO Mark Zuckerberg met in Jakarta to discuss how Facebook can be utilized for the benefit of the people and how the social media network can support Indonesian micro businesses. With nearly 70 million, Indonesia contains the world’s fourth-largest Facebook community. With a total population that numbers about 250 million people, a burgeoning middle class and relatively low Internet penetration, there remains a large untapped potential.
Property stocks listed on the Indonesia Stock Exchange (IDX) have outperformed all other stocks between the first trading day of 2014 up to 29 August 2014. The IDX’ property sector category rose 37.6 percent in the indicated period, whereas the benchmark stock index (Jakarta Composite Index, abbreviated IHSG) - which involves all stocks traded on the IDX - climbed 18.7 percent over the same period. On the IDX, stocks are placed in ten sectoral categories. The second-best performing sectoral index was finance (+24.5 percent).
A total of twenty Japanese companies engaged in the food and beverage industry are exploring investment opportunities in Indonesia. According to research conducted by the Japan International Cooperation Agency (JICA), the food and beverage industry of Indonesia is regarded as a lucrative investment opportunity by these companies. If realized, these foreign direct investments could be worth between USD $400 million to USD $1 billion. However, JICA’s research did not mention any names of the Japanese companies.
The central bank of Indonesia (Bank Indonesia) expects Indonesia’s economy to grow by 5.3 percent in the second quarter of 2014. If realized, it means that gross domestic product (GDP) of Southeast Asia’s largest economy will accelerate from the disappointing GDP growth result recorded in the first quarter of 2014 (5.21 percent). Perry Warjiyo, Deputy Governor at Bank Indonesia, said that growth in Q2-2014 will be primarily supported by household consumption and investments which traditionally peak in the second quarter.
Although Indonesia is the world's largest archipelago, contains an abundance of commodities and has the world's fourth-largest population, the country's export and import figures are still small compared to the world's leading exporting and importing countries (see table below). There are many - and much smaller - countries that post much more impressive import and export data. In terms of exports, Indonesia is too dependent on commodities (accounting for around 60 percent of all exports) causing problems in times of price downswings.
Indonesia's residential property market has shown robust growth in recent years as demand from the country's rapidly expanding middle class for mid-level and luxury property increased steadily amid a low interest rate environment and robust national economic growth. Demand for property is also backed by high consumer confidence as a recent Nielsen survey shows that Indonesians are among the world's most confident consumers. Indonesians' consumer confidence was at a four-year high in the fourth quarter of 2013.
The mysterious disappearance of Malaysia Airlines flight MH370 on Saturday 7 March 2014 reminds us that flying does not go without risks. Although it is popularly said that flying in an airplane is safer than driving in a car - and despite the fact that Malaysia Airlines is a world-class airline - it is worth taking a closer look at the current state of aviation in the Asia Pacific, Indonesia in particular, as air traffic in the Asia Pacific has been booming (and budget airlines mushroomed) in recent years due to the expanding middle class.
