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

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Core Views

  • Indonesia's budget deficit as a share of GDP will likely deepen further to 2.5% in 2016, from our forecast of 2.3% in 2015, due to higher developmental expenditures and lower-than-projected revenue realisation. This could potentially exert upside pressure on Indonesia's sovereign bond yields over the coming quarters as the government will have to tap on the bond market to finance its revenue shortfall.

  • Bank Indonesia will likely ease its monetary policy over the coming months once it has assessed the market's reaction to the Federal Fund Rate (FFR) hike and confirmed the downtrend in inflation. However, the central bank is likely to remain relatively cautious given ongoing volatility in the rupiah, and we expect a relatively shallow rate cutting cycle of 50bps.

  • We remain bearish on the Indonesian rupiah...

Indonesia Operational Risk Coverage (9)

Indonesia Operational Risk

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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

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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

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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

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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 location close 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 is placed in the middle of the pack...

Indonesia Trade & Investment

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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 (FDI), high levels of bureaucracy, numerous trade barriers, endemic corruption and poor enforcement of intellectual property (IP) 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 and gas, and manufacturing. Consequently, Indonesia...

Indonesia Industry Coverage (22)


Indonesia Agribusiness

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BMI View: We hold an optimistic outlook towards Indonesia's agriculture sector and see significant growth opportunities in sub-sectors such as livestock, sugar and palm oil. 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. More worryingly, we expect coffee and cocoa production to record very weak production growth in the coming years.



Indonesia Autos

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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

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

Consumer Electronics

Indonesia Consumer Electronics

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BMI View: Depreciation of the rupiah against the US dollar was a drag on consumer electronics spending growth in Indonesia in 2014 and 2015 - and we expect it will continue to erode the affordability of imported devices for Indonesian households in 2016. There is however a much stronger medium term outlook, with devices spending growth forecast to accelerate markedly from 2017 as economic growth strengthens and the rupiah appreciates significantly against the US dollar 2017-2019. Other factors making a positive contribution to the consumer spending growth story will include favourable demographic dynamics, rising levels of urbanisation, and declining device prices. Overall, market growth will see the market reach USD18.09bn in 2019, equal to a compound annual growth rate of 6.3% in US dollar terms 2015-2019.


Defence & Security

Indonesia Defence & Security

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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

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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

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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...

Information Technology

Indonesia Information Technology

BMI View:

BMI View: Indonesian IT spending was hit by regional economic uncertainty and rupiah depreciation, while the hardware segment was worst affected and contracted in local currency terms as import taxes acted as an additional drag. This does however mean there is pent-up demand and as the economic backdrop becomes more supportive we expect IT spending to move to a faster growth trajectory. We forecast Indonesian IT spending will grow at a CAGR of 10.9% 2016-2020 to reach a total of IDR232.4trn in 2020. We believe retail hardware will be a high growth market in the later years of our forecast as rupiah appreciation and broad-based...


Indonesia Infrastructure

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BMI View : A significant infrastructure deficit across all key sectors in Indonesia, including power, transport and residential, will ensure growth in the country's construction sector is maintained throughout our ten year forecast period. Public private partnerships (PPPs) will increasingly be utilised to plug the public funding gap and Indonesia will continue to receive significant infrastructure investment from regional giants Japan and China. We note, however, that substantial barriers to private investment remain and while Indonesia does have ambitious development plans in place, the construction sector suffers from a track record of delays and incomplete projects.

Latest Updates

  • Our forecasts for construction industry value growth over 2015 are on track according to the latest figures for Q3 growth and...


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 the Indonesian medical device market to remain one of the fastest growing, with growth averaging 15% per annum to 2019. The expansion of the health insurance programme, increased government spending on healthcare and infrastructure development projects will spearhead growth. This growth will however be tempered slightly in the short term due to currency weakness against the dollar but the medium term prospects remain strong.

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


Indonesia Mining

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BMI View: Indonesia's mineral production growth will slow on the back of the country's ban on mineral exports and continued mineral price weakness.

Indonesia - Mining Industry Value Forecast (2014-2019)
2014e 2015f 2016f 2017f 2018f ...

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

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In BMI's Asia Pacific Petrochemicals Risk/Reward Index, Indonesia ranks 10th out of 12 countries with a score of 52.0 out of 100, unchanged since the previous quarter. It sits 9.5 points behind Australia and 5.1 points ahead of the Philippines, indicating that its ranking is unlikely to change in the short term. Plans for capacity expansion, coupled with improved risk, could raise the country's rating, but BMI thinks it highly unlikely that it will close the gap with other Asian states

The Indonesian petrochemicals industry is witnessing continued investor interest with a surge of capacity over the next five years set to make it more self-sufficient. However, BMI's latest Indonesia Petrochemicals Report warns that the country's petrochemicals market is set to witness a downturn amid weaker growth, particularly as a result of a downturn in...

Pharmaceuticals & Healthcare

Indonesia Pharmaceuticals & Healthcare

BMI View:

BMI View: The challenges facing domestic pharmaceutical firms in Indonesia will continue. While efforts to alleviate the country's reliance on pharmaceutical raw material imports are underway, these are unlikely to have a substantial impact until 2017. Moreover, the ability of Indonesia's universal healthcare programme to facilitate sales will be constrained by the country's medical services infrastructure, and low commodity prices will weigh on the economy and household purchasing power.

Headline Expenditure Projections

  • Pharmaceuticals: IDR77,643bn (USD5.7bn) in 2015 to IDR85,550bn(USD5.9bn) in 2016; +10.2% growth in local currency terms and 3.2% in US dollar terms.

  • Healthcare: IDR347,253bn (USD25bn) in 2015 to IDR387,513bn (USD27bn) in 2016; +11.6%...


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: Indonesia will stay unabated by regional and global headwinds in the next four years. The world's fourth largest population will rapidly grow in affluence as the middle class expands by more than 11mn households before 2019. As a result, a wide range of markets will enjoy positive double-digit growth: from housing and transport to communications to education and health, as Indonesia's boom continues.

Indonesia's large domestic market and favourable demographic profile offer long-term potential to retail investors; however growth will initially be driven by the wealthiest proportion of the population. Currently 8.2% of all households earn above USD50,000 annually. The country possesses a rapidly emerging middle class and this will play an incredibly important role in creating a large and capable customer base that will welcome a variety of brands in most retail...


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: The government's announcement that it will focus on developing fixed broadband networks in 2016 with the aim to become ASEAN's second largest IT market by 2019 will lead to improved fixed broadband infrastructure. However, geographical barriers due to Indonesia's archipelagic nature and high rollout costs will pose downside risks to this. Efficiencies in 4G will be gained through network and infrastructure sharing that will boost LTE rollout speeds and reduce costs. However, we foresee downside risks to take-up as the new minimum local content requirements on LTE-enabled devices could have the effect of increasing production costs and, consequently, the price of smartphones.



Indonesia Tourism

BMI View:

BMI View: The tourism industry in Indonesia is growing rapidly, benefiting from proximity to major regional markets, an expanding luxury hotel sector and greater international air connectivity. Also supporting growth in the tourism sector is ongoing and widespread government led investment in transport infrastructure which is gradually improving accessibility across Indonesia's many islands. We expect international arrivals to increase steadily throughout our five year forecast period, though at present we do not expect more ambitious government targets to be realised by 2019.

Key Forecasts (Indonesia 2012-2019)
Indicator 2012 ...

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