Executive Briefings

Indonesia Is Very Attractive to Multinational Manufacturers and Investors

When Marcos Purty arrived here in 2011 as the chief of General Motors' Indonesian operations, he found a mothballed auto plant. Today, that plant is humming. About 700 people work in the facility, 16 miles east of Jakarta, compared with about 30 just 18 months ago. And next month, GM will start delivering its first Indonesian-built vehicle in years, the Chevrolet Spin.

Auto sales are surging in Indonesia "” up 17.8 percent in the first quarter from a year earlier "” rewarding GM for the $150m it recently invested in the country.

Other big multinational companies are racing to invest in factories and other operations to cash in on rising consumer demand in Indonesia, Southeast Asia's biggest economy and most populous nation, with an estimated 251 million people.

Despite investors' concerns about an unpredictable regulatory environment, a high level of corruption, inadequate infrastructure and rising labor costs, the money is gushing into Indonesia. The government recently reported that foreign direct investment rose 27 percent in the first quarter to a record 65.5tr rupiah, or nearly $7bn.

Indonesia has been on a roll since it emerged virtually untouched from the 2008 financial crisis. In 2009, it joined the Group of 20 large economies. It won its first investment-grade credit ratings in more than a decade in late 2011 and early 2012, and its gross domestic product has expanded at a steady rate of more than 6 percent for the last three years.

While overseas capital has long flowed into the resource-rich country's mining, oil and natural gas sectors, many of today's new foreign investors are focusing on the Indonesian consumer.

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Auto sales are surging in Indonesia "” up 17.8 percent in the first quarter from a year earlier "” rewarding GM for the $150m it recently invested in the country.

Other big multinational companies are racing to invest in factories and other operations to cash in on rising consumer demand in Indonesia, Southeast Asia's biggest economy and most populous nation, with an estimated 251 million people.

Despite investors' concerns about an unpredictable regulatory environment, a high level of corruption, inadequate infrastructure and rising labor costs, the money is gushing into Indonesia. The government recently reported that foreign direct investment rose 27 percent in the first quarter to a record 65.5tr rupiah, or nearly $7bn.

Indonesia has been on a roll since it emerged virtually untouched from the 2008 financial crisis. In 2009, it joined the Group of 20 large economies. It won its first investment-grade credit ratings in more than a decade in late 2011 and early 2012, and its gross domestic product has expanded at a steady rate of more than 6 percent for the last three years.

While overseas capital has long flowed into the resource-rich country's mining, oil and natural gas sectors, many of today's new foreign investors are focusing on the Indonesian consumer.

Read Full Article