Indonesia is South East Asia’s largest economy and holds a number of investment opportunities. The manufacturing, oil and gas, and infrastructure sectors all represent attractive options, while portfolio investment has traditionally been a key source of capital inflows. Businesses are able to make use of Indonesia’s strategic location on major global shipping lanes, which keeps import and export costs low. However, investors cannot ignore the country’s challenging business environment.

We keep our clients informed of the latest market moves and political developments in Indonesia, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 23 of Indonesia’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you one step ahead, so you can operate with confidence in Indonesia.

Country Risk

Indonesia Country Risk

BMI View:

Core Views

  • Indonesia's economic activity will pick up pace (from the 4.9% y-o-y figure registered in Q116) over the coming quarters, supported by strong investment and public infrastructure drive (we forecast Indonesia's real GDP growth to come in at 5.2% in 2016). BI's accommodative monetary policy stance will also help to bolster investor and consumer confidence. That said, the weakening of the government's fiscal position poses downside risk to our rather constructive view.

  • Despite the proposed amendments to the 2016 State Budget, we maintain our forecast for Indonesia's fiscal deficit to come in at -2.7% of GDP, but note that risks are weighted to the downside. Importantly, the government has a history of missing its revenue targets, and the continuous delay in the proposed tax amnesty bill as well as the subdued oil price...

Indonesia Operational Risk Coverage (9)

Indonesia Operational Risk

BMI View:

BMI View: Indonesia performs poorly with regards to labour market risks, due primarily to low skill levels in the labour force and high employment costs. Historically poor secondary and tertiary educational enrolment rates have resulted in significant impediments to the development of a workforce capable of skilled, technical labour. The relatively small proportion of the workforce with more advanced skills may...

Indonesia Crime & Security

BMI View:

Foreign workers and expatriates in Indonesia face a higher risk from terrorism and criminal activity than in many other countries in the region. Foreigners are specifically targeted by terrorist groups and could fall victim to bombings, shootings and kidnappings. Although violent crime is not common, gangs retain some degree of power and influence, and foreign workers and businesses will be at risk from general crimes such as petty theft, robbery and credit card fraud. Consequently, Indonesia is ranked lowly in BMI's Crime and Security Risk Index for the Asia region, in 21 st place out of 30 states, with a score of 44.1 out of 100. The country's only main advantage in this regard is its large army, which improves its international security position.

Membership of the Association of South East Asian Nations (ASEAN), a history of successful bilateral dispute management and a powerful army mean that the risk of...

Indonesia Labour Market

BMI View:

Indonesia performs poorly with regards to Labour Market risks, with low basic skills levels and high costs of employment. Low secondary and tertiary educational enrolment rates are also significant impediments to the development of a workforce capable of skilled, technical labour, which may result in having to import skilled labour, incurring high employment costs. Indonesia's overall score for Labour Market Risk is 43.5 out of 100, putting it 20 th regionally, between Samoa and Myanmar (on 44.8 and 45.6 points respectively.

Availability of labour risks are high for Indonesia, and the worst implication stemming from this is the higher wages for potential employers, particularly in skilled professions. A large proportion of Indonesia's workforce lack the skills and literacy to offer investors seeking anything but the most basic manual work. This is reflected in the country's low score of 44.9 out of 100 for availability of labour....

Indonesia Logistics

BMI View:

BMI View: Indonesia's poorly developed logistics network is one of the major barriers to economic growth in the country. The difficulties in terms of constructing and maintaining infrastructure over a vast archipelago of 17,000 islands means that the transport and utilities network remains severely underdeveloped on most islands apart from Java. This will pose risks to business operations in the form of supply chain delays and utilities shortages, as growth in key industries such as mining and agriculture places a greater strain on the logistics network. On the other hand, maritime trade connectivity is improved due to the country's proximity to vital global shipping lanes, and major transhipment hubs in Malaysia and Singapore. This has significantly reduced the costs of importing and exporting. Consequently,...

Indonesia Trade & Investment

BMI View:

BMI View: Investors in Indonesia are faced with a variety of hurdles in the process of setting up a business. The operating environment is undermined by a range of restrictions on foreign direct investment, high levels of bureaucracy, numerous trade barriers, endemic corruption and poor enforcement of intellectual property laws. Having said that, BMI emphasises that Indonesia is South East Asia's largest economy, and there are therefore opportunities for foreign investment, particularly through the stock exchange and in targeted industries such as infrastructure, oil & gas and manufacturing. ...

Indonesia Industry Coverage (23)


Indonesia Agribusiness

BMI View:

BMI View: Indonesia's agriculture holds a great amount of promise and sub-sectors such as livestock, sugar and palm oil will experience significant growth opportunities. However, the country's goal to become self-sufficient in a large number of commodities is overly ambitious in light of the robust outlook for food and drink consumption. Agricultural production will struggle to expand in the coming years amidst scarce agricultural land, the lack of proper infrastructure and the existence of a large number of low-technology, small-scale farmers. While we believe that Indonesia will be able to reduce its dependence on rice imports in the coming years, sugar, corn and beef self-sufficiency are far-fetched...


Indonesia Autos

BMI View:

BMI View: The overall vehicle market will return to positive growth in 2016, but will remain below its 2013 highs in volume terms. Rate cuts will be required to kick-start the credit-dependent market.

Passenger Car and Light Commercial Vehicle Sales
f = BMI forecast. Source: Gaikindo, BMI
Key Views
  • It will be 2018 before total sales volumes surpass the 2013 record.

Commercial Banking

Indonesia Commercial Banking

BMI View:

Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

Indonesia Consumer Electronics

BMI View:

BMI View: We expect a second successive year of US dollar contraction for Indonesia consumer electronics device spending in 2016, but with a forecast contraction of just 0.1%, performance will be a considerable improvement over 2015. The medium term outlook is much stronger, with economic development driving up incomes, and a significant boost to our forecast across the board from rupiah appreciation against the USD envisaged for 2018-2020. We forecast a CAGR of 8.9% for 2016-2020 as a whole, to total spending of USD19.7bn in 2020. Underpinning our view for improved performance later in the forecast is pent-up demand from 2015 and 2016, which will be unlocked as economic growth strengthens and the household income profile resisters a considerable improvement. Other factors making a positive contribution to the consumer spending growth story will include ...

Defence & Security

Indonesia Defence & Security

BMI View:

BMI View: Indonesia's domestic defence sector is large but needs the current modernization and reorganization efforts underway to realize its potential. The defence industry is largely state-owned, stifling innovation and preventing independent expansion. Current President Jokowi is not likely to prioritize the defence industry as much as previous President Yudhoyono, but as the government is already taking steps to improve procurement procedures and boost local industry by modernizing and re-structuring, the industry is nevertheless likely to slowly improve over the next few years. Efforts are especially being made in the Navy and Air force, and with foreign partnerships coming into place, the industry will likely have a boost regardless of the realization of the ambitious budget increase to 1.5% of GDP before 2020.

The economy is still under pressure, with a slower growth than...

Food & Drink

Indonesia Food & Drink

BMI View:

BMI View: Over the coming months, consumer headwinds - high interest rates, elevated inflation and currency weaknesses - will limit expansion of household purchasing power. Over the longer term, we hold a positive outlook for the Indonesian consumer, translating into rapid growth in the food and drink sector. Rising incomes, urbanisation and high levels of investment will fuel sales of packaged food and soft drinks. The food retail sector will also formalise at a rapid pace, although retailers' margins remain under threat from further hikes in the minimum wage.

Headline Industry Data

  • Food consumption (local currency) forecast growth in 2015 = +9.2%; compound annual growth rate (CAGR) forecast 2014 to 2019= +8.9%.

  • Alcoholic drinks value sales growth (local currency) in 2015 = +10.5%; CAGR forecast...

Freight Transport

Indonesia Freight Transport

BMI View:

BMI View: In 2016 the air freight mode will see the most significant growth in Indonesia, as trade in Asia is set to rebalance after stalling in 2015 and key sectors such as the pharmaceutical market will see a boost in growth. In our medium-term forecast to 2019, BMI believes the rail and air freight modes will see higher growth than road freight transport, as a result of state and external investment in upgrading rail networks and higher growth in key air freight indicators. Road freight will continue to be hampered by poor road infrastructure and competitiveness.

BMI is optimistic about Indonesia's domestic and trade growth in the coming years. 2016 will mark a return to positive real trade growth (with both positive import and export growth) of 1.75%, up from an estimated -2.32% in 2015. In addition, we forecast real GDP growth of 5.6% in 2016, which should...

Indonesia Freight Transport

BMI View:

BMI View: After a slowdown in Asian trade in 2015, Indonesia's trade sector is set to return to growth in 2016 and will strengthen beyond this over the medium term. Indeed, all major commodities exports and imports are expected to return to positive growth and with it, Indonesia's freight transport modes will benefit. Rail and air freight will, in particular, see marked growth as a result of state and external investment in upgrading infrastructure. Although Indonesia's ports will also continue to experience stable growth, their still-poor capacity and efficiency will hinder its growth potential.

Latest Updates & Key Forecasts

  • Road freight growth is forecast to grow by 3.7% in 2016, at 1.38bn tonnes.

  • Rail freight volumes are forecast to rise by 4.2% in...

Information Technology

Indonesia Information Technology

BMI View:

BMI View: As a market that is highly dependent on imported products and solutions, Indonesian IT demand was hit by regional economic uncertainty and rupiah depreciation in 2015, with the hardware segment worst-affected as import taxes added to the reduction in affordability. We expect conditions to begin to improve from 2016, and forecast Indonesian IT spending will grow at a CAGR of 12.2% over 2016-2020 to reach a total of IDR232.4trn in 2020. Rupiah stabilisation and then appreciation will help boost affordability, while rising household income and enterprise modernisation and economic development will support software and services demand growth.

Latest Updates & Industry Developments...


Indonesia Infrastructure

BMI View:

BMI View : Indonesia's construction and infrastructure sector will register steady growth over the next decade, driven by the residential and non-residential segment. Land acquisition and financing will remain the major impediments to the implementation of PPP projects.

Latest Updates And Structural Trends

  • We forecast Indonesia's construction sector to grow 7.2% and 7.3% in 2016 and 2017 respectively, and at annual average of 7.5% over our five year forecast period, with the residential and non-residential construction to post the strongest annual growth rates.

  • The Agrarian and Spatial Planning Ministry issued Regulation No. 13/2016 on Procedures on Residential Ownership Transfer for Foreign Citizens as a follow up to Government Regulation No....


Indonesia Insurance

BMI View:

BMI View: The insurance sector in Indonesia is one of the fastest growing in the Asia Pacific region and offers significant future growth potential. The country is home to a large population and while average household incomes in many areas are prohibitively low, the gradual expansion of the middles classes, growing income levels and development of more affordable insurance products including microinsurance all indicate a positive environment for the development of life and non-life insurance. As such we are seeing a growing number of global insurers take interest in the Indonesian market, entering either as new entrants or via local acquisitions in what is currently a relatively fragmented marketplace.

Headline Insurance Forecasts (Indonesia 2012-2019)

Medical Devices

Indonesia Medical Devices

BMI View:

BMI View: We expect Indonesia to remain one of the fastest growing medical device markets over the 2014-2019 period, expanding by a CAGR of 14.6%. A shift towards more advanced medical equipment in the country, the expansion of private healthcare providers, increased government spending on healthcare and infrastructure development projects will spearhead growth; however, financial sustainability of the national health insurance programme remains a concern.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) ...


Indonesia Mining

BMI View:

BMI View: Indonesia's mineral production growth will remain slow on the back of heightened environmental protection, slowdown in the Chinese economy and continued mineral price weakness. The impending ban moderation on the export of mineral ores will provide some respite to production, especially in the case of bauxite.

Indonesia - Mining Industry Value Forecast (2012-2020)
2012 2013 2014e 2015e ...

Oil & Gas

Indonesia Oil & Gas

BMI View:

BMI View: Economic growth, supportive demographics and a weak oil price environment will support consumption growth in Indonesia. However, a tough regulatory environment and weak oil prices will remain an impediment to hydrocarbon production over the next decade. More comprehensive reforms are required to turn Indonesia's upstream segment around.

Headline Forecasts (Indonesia 2013-2019)
2013 2014 2015f 2016f...


Indonesia Petrochemicals

BMI View:

BMI View: The overhaul of Indonesian petrochemicals producer Chandra Asri Petrochemicals' cracker in 2015 will boost the firm's revenues and output in 2016, and enable Indonesia to leverage the competitive advantages it enjoys in naphtha feedstock as well as the falling value of the rupiah. However, the market remains dependent on imports, and expansion is not happening at a pace fast enough to fulfil local demand. The development of a world-scale petrochemicals facility is still at least five years away, and in the meantime much of Indonesia's market growth will be served by imports.

Indonesia has a high level of import requirements and would need a world-scale petrochemicals complex to achieve self-sufficiency...

Pharmaceuticals & Healthcare

Indonesia Pharmaceuticals & Healthcare

BMI View:

BMI View: Foreign exchange pressures will be a key factor influencing the strategies of Indonesia drugmakers. In particular, the need to reduce their reliance on the import of pharmaceutical ingredients has been accentuated in 2015 as the depreciating rupiah erodes profit growth. Addressing this issue will see local firms move to develop their own capability in producing pharmaceutical ingredients or to source inputs from Indonesia-based manufacturers

Headline Expenditure Projections

  • Pharmaceuticals: IDR70,402bn (USD5.9bn) in 2014 to IDR77,644bn(USD5.6bn) in 2015; +10.3% growth in local currency terms and -4.7% in US dollar terms.

  • Healthcare: IDR311,131bn (USD26.2bn) in 2014 to IDR347,254bn (USD25bn) in 2015; +11.6% growth in local currency terms and -3.5% in US dollar terms....


Indonesia Power

BMI View:

BMI View: The power sector in Indonesia is one of the fastest-growing in the Asia Pacific region. The government has committed to ambitious expansion plans and a huge volume of projects are in the pipeline, encompassing coal and gas fired thermal power plants alongside a large number of hydropower and non-hydropower renewable projects. The country is attracting considerable amounts of foreign investment and opportunities abound for a range of related industries, though we do note that some barriers to entry remain and corruption is an ongoing risk. Historically, projects have been subject to extensive delays, and while we do not expect government targets to be achieved within the stated timeframe, we do expect to see significant gains in terms of total capacity and generation over our forecast period to 2024.

Headline Power...

Real Estate

Indonesia Real Estate

BMI View:

BMI View:   Although we are forecasting no growth in rental rates in 2015 or 2016, we are optimistic on the Indonesian commercial real estate market's outlook for the longer term. Favourable demographic trends will boost demand within the country, driving development particularly in retail real estate. Meanwhile, the increasingly developed economy, international interest and closer integration with the rest of the Association of Southeast Asian Nations (ASEAN) will increase Indonesia's attractiveness to foreign investors.

We believe that Indonesia's economy will begin to pick up pace, with real GDP growth set to hit 6.0% in 2015, rising to 6.5% by the end of our forecast period in 2018. This growth will be supported by increasing consumer spending within the country, as well as an improving balance of payments situation. Although a strengthening...


Indonesia Renewables

BMI View:

BMI View: Growing international pressure on Indonesia to adopt a more stringent environmental policy will provide a boost to the country's renewable energy industry and facilitate greater inflows of investment from international financial institutions and governments. The country's underdeveloped geothermal sector will benefit significantly, and we maintain our view that Indonesia will emerge as Asia's largest geothermal market by the end of our forecast period in 2024.

Renewables Headline Forecasts (Indonesia 2014-2020)
2014e 2015f ...


Indonesia Retail

BMI View:

BMI View: Despite the multiple headwinds that have faced Indonesia's economy in recent quarters, we believe that the stabilisation of the rupiah and the central bank's accommodative monetary policy stance should be positive news for consumer confidence in the highly prospective Indonesian market. However, the country's economic recovery largely hinges on increased government spending levels, which could be compromised by the deteriorating country's fiscal position.

Headline Household Spending
e/f = BMI estimate/forecast....


Indonesia Shipping

BMI View:

BMI View: Both of Indonesia's main ports are set to experience positive growth in 2016. Consumer demand and economic growth are set to bolster the country's shipping services, although the ongoing slowdown in China's economy could hold Indonesia back from maximising its potential over the next couple of years.

Indonesia's economy is faring extremely well at present, with real GDP growth forecast to reach 5.6% in 2016, up from 4.8% (estimate) in 2015. Added to the country's overall growth is the high rate of per capita growth, which we estimate rose by 10.8% in 2015 and, despite contracting slightly to 9.4% in 2016, will remain steadily about 10% in our medium-term forecast to 2019. This high consumer demand led from favourable demographics, rising levels of urbanisation and greater household leverage all bode...


Indonesia Telecommunications

BMI View:

BMI View: Although current and ongoing investments are certainly helping to improve the country's fixed broadband infrastructure, geographical barriers due to Indonesia's archipelagic nature and high rollout costs will pose downside risks to the government's plans to develop the country's fixed broadband infrastructure. By engaging in 4G network and infrastructure sharing arrangements, Indonesia's mobile networks operators will benefit from efficiencies that will not only boost LTE rollout speeds, but also help the operators reduce costs. The proliferation of 4G mobile connections could have a dampening effect on demand for fixed broadband services. Having...


Indonesia Tourism

BMI View:

BMI View: Indonesia's tourism industry presents significant growth potential. The country's extensive and varied geography offers a broad range of attractions, and extensive government investment in transport infrastructure is improving regional and global connectivity. Wide-reaching marketing campaigns are raising awareness of the country's attractions outside of traditional regional source markets, including affluent markets in the Middle East. We expect to see steady increases in tourism arrivals over the forecast period between 2016 and 2020, though we do note some risks remain, including barriers to foreign investment and ongoing security concerns.

Key Forecasts (Indonesia 2013-2020)

Latest Indonesia Articles

  • The palm oil sector is on track to record a small improvement in performanc...

  • We view free and fair elections as ultimately beneficial for long-term econ...

  • Indonesia's power and renewables competitive landscape will remain dominate...

Latest Indonesia Blogs

Latest Indonesia Podcasts

  • With the controversy over Indonesia's recent presidential election fin...

  • Several Asian countries are set to see their telecoms industries exper...

  • One of the key drivers of high commodity prices in recent years has be...


Download PDF

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

Thank you for your interest

You will shortly receive your free executive summary by email.