Indonesia – the world’s third-largest democracy – is one of Australia’s most important trading partners.
The country’s trillion-dollar economy is forecast to become the world’s fourth-largest by 2050 – and comprises more than a third of ASEAN’s gross domestic product, according to data from the Department of Foreign Affairs and Trade. After India and China, it is the world’s fastest-growing consumer market.
“Indonesia is Australia’s 14th largest trading partner, with trade between the countries worth $12.8 billion in 2020. Australia sent $7.1 billion in exports to Indonesia and received $5.7 billion in imports from the country,” says Ms Penny Williams PSM, Australian Ambassador to Indonesia.
The bilateral relationship is underpinned by the 2018 Comprehensive Strategic Partnership and regular high-level meetings between the countries including the Indonesia-Australia Annual Leaders’ Meeting.
The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) entered into force on 5 July 2020, creating a framework for closer economic engagement, and opening new markets and opportunities for businesses, primary producers, service providers and investors.
In September 2021, a Blueprint for Trade and Investment with Indonesia was released to help Australian businesses maximise the opportunities arising out of IA-CEPA.
Ms Williams explains that Indonesia’s economic trajectory and its youthful, digitally savvy and increasingly affluent population make the market attractive to Australian goods and service providers.
“Key opportunities exist in agriculture and food; education, skills and training; health and aged care; and resources and energy services,” she says.
“Indonesia’s Government is also driving significant economic reforms to improve its trade and investment environment, including the introduction of an online business registration system.”
Ms Williams says that Indonesia’s growing population is young, increasingly wealthy, and rapidly urbanising, all of which changes the country’s patterns of future food demand, and the way Indonesians buy food.
“Australia’s reputation as a trusted and reliable source of premium and high-value food and produce gives Australian exporters a natural advantage, particularly after the pandemic forced countries around the world to focus more attention on food security.”
According to the Australian Bureau of Agricultural and Resource Economics, the consumption value of red meat, dairy, sugar and fruit in Indonesia is set to rise sharply over the coming decades. Prices for staples such as wheat and rice are also forecast to increase, but at a slower rate.
While Australia has long sold food to Indonesia, there is now a rising demand for pre-packaged, ready-to-eat-and-deliver products, marketed and ordered online.
Indonesia is shifting from basic mining to a more industrial economy with an emphasis on the production of more downstream, higher-value products.
This is creating opportunities in contract mining, vocational training, energy and engineering services, and mine site preparation services.
“In the mining equipment, technology and services (METs) space, Indonesia’s increasing focus on safety and standards, environmental management and operational performance – areas where Australian METs suppliers are well-placed to meet the demands of Indonesia’s mining sector,” continues Ms Williams.
“The recent opening of the Australian company GroundProbe Geotechnical Support Service (GSS) Centre in Balikpapan is a good example of the growing demand for innovative energy and engineering services across the Southeast Asia region, in particular in Indonesia.”
Indonesia has an ambitious target to lift the contribution that renewables make to its energy mix from 11 per cent to 23 per cent by 2025.
Australia has expertise in energy efficiency, technology solutions and specialised intellectual property for renewables.
“This is generating interest from Indonesia in learning from Australia’s experience in renewables technology, particularly in areas such as grid integration, smart grids and energy storage,” says Ms Williams.
“There have already been some significant investment announcements in this space from Australian companies including the Australia-Asia PowerLink Suncable consortium and Fortescue Future Industries.”
With the world’s largest nickel reserves, Indonesia is set to build its first electric vehicle (EV) battery plant and aims to begin production by 2023.
The country wants to increase production to reach a battery capacity of 140 GWh by 2030, with 50 GWh allocated for export.
The remainder will be used for Indonesia’s domestic EV industry — mainly for motorbikes rather than cars.
“With Indonesia looking to boost investment in its EV battery sector to US$33 billion by 2033, the country presents opportunities for foreign EV manufacturers.
“For Australia, there are potential opportunities in EV charging infrastructure and critical mineral supply.”
Ms Williams says that human capital development is Indonesia’s top priority to create employment opportunities and make the best use of its youthful population.
Achieving this will require more international education partnerships which Australia is well placed to participate in, due to longstanding education links and breakthroughs in IA-CEPA.
“There has been rising interest from Australian universities and VET providers in the international education partnership space,” she says.
“This was highlighted in the recent opening of Monash University’s new campus in Jakarta, the first foreign-owned campus to open in Indonesia following the relaxation of restrictions on foreign campuses agreed under IA-CEPA. Monash University Indonesia and online travel company Traveloka signed a Memorandum of Understanding (MoU) to work together to deliver digital capacity building academic training for university professionals.”
Demographic and social shifts are demanding more from Indonesia’s healthcare system, which creates potential opportunities for Australian businesses in aged care, training for the health workforce, digital health, medical technology and modernisation of healthcare facilities.
Basic universal healthcare is being expanded for the poor while wealthier people seek more premium services at home, rather than abroad.
Ms Williams says: “The COVID-19 pandemic has intensified the demand for innovative health solutions and technologies.
“There have been some notable announcements in this space, including a joint venture between Australian company Docta and the West Java Government to deliver 23 hospitals and 650 mobile clinics over the next 20 years.”
With a booming digital economy, many Indonesian tech firms are seeking to develop and upskill their digital talents as well as access skills and talent from across the region.
This is partly what drove Bukalapak, one of Indonesia’s tech giants, to establish a research and development ‘tech hub’ in Melbourne.
“Bukalapak is Indonesia’s first listed tech firm. Its online and offline platforms serve more than 100 million users,” she explains. “This hub is the company’s first international base, and it will focus on big data, the Internet of Things and artificial intelligence.”
Indonesia President Joko Widodo has made infrastructure development a national priority. In 2022, the Indonesian Government is expected to spend more than $36 billion on infrastructure development.
A signature project for President Widodo is the development of a new capital city located on the island of Borneo in East Kalimantan.
“Planning and civil works for the new capital, to be named Nusantara, have commenced and it is anticipated that the government’s administrative functions will begin moving to the new capital from 2024,” she continues. “It is estimated that the development of the new capital will cost IDR 466 trillion (nearly AUD $43 billion) and will continue through to 2045.
“Whilst still early days, there are likely to be future opportunities in urban design, smart city technologies and infrastructure.”
Ms Williams notes that private consumption growth has been robust over the past few years, contributing around half of total GDP growth. Indonesia has an expanding middle-class aspiring to a modern, international standard of living.
“Consumers in Indonesia – the world’s fourth most populous country – are expected to spend an additional US$1 trillion a year by 2030, according to projections.
“Also, with around half of Indonesia’s population below 30 years old, there is a growing demand for consumer goods, targeted education and training, and innovative knowledge-based services and technology.
“The increase in internet access and the rapid uptake in smartphone usage in Indonesia is enabling the government, business and consumers to take advantage of new digital services.”
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This post was aggregated from Dynamic Business (https://dynamicbusiness.com).