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 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:

BMI View: Indonesia's security environment is characterised by widespread organised crime and a considerable threat from terrorism. These issues are compounded by one of the most pervasive cultures of corruption among state authorities in the region, meaning that while the crime rates are reportedly low, these figures may not be entirely reliable. Overall, the costs to businesses are reasonably high, through the risks of loss and the security measures required to prevent against such. As a result, Indonesia receives a score of 49.5 out of 100 for its overall Crime and Security Risk, placing it in 19th position out of 35 Asia...

Indonesia Labour Market

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 therefore result in employers having to import foreign workers to meet the skills shortage, further increasing labour force inputs for businesses. Having said that, increasingly high numbers of university graduates are emerging from the tertiary education sector, and the huge size of the population offers a very wide pool of labour for recruitment. Indonesia's overall score in the BMI Labour Market Risk Index stands a...

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...

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

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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

BMI View:

BMI View: A stabilisation of the regional economic outlook and a forecast for a slightly stronger rupiah in 2016 resulted in a small upgrade to our consumer electronics device spending forecast for Indonesia. The market will return to USD growth in 2016, but it will be over the medium term that the market moves to a significantly stronger trajectory as economic growth accelerates and the rupiah strengthens, which will contribute to purchasing power gains for households that both deepens the market and increases higher value sales. This will be a marked contrast to the contraction in 2015, as we envisage a device spending CAGR of 9.7% over 2016-2020 in Indonesia.

Latest Updates & Industry Developments

  • Computer Hardware Sales: USD4.5.1bn in 2016 to USD7.6bn in 2020, compound annual growth rate (CAGR) of 10.2% 2016-2020....

Defence & Security

Indonesia Defence & Security

BMI View:

BMI View: Indonesia's armed forces remain heavily dependent on imports to meet equipment requirements as the domestic defence industry is still in a nascent stage. The sector has some technological capabilities for development of small arms and ammunition, armoured transport aircraft and patrol craft and frigates, but infrastructure and research capacity is restricted - the result of years of underinvestment. This will remain the case over much of our forecast period, as the government continues to focus on...

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 over the medium term. 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. Indonesia's aggressive approach towards strengthening its trade ties with Australia, Malaysia and the European Union are all positive signs that the country is set to achieve...

Information Technology

Indonesia Information Technology

BMI View:

BMI View: A combination of economic factors, including regional economic uncertainty and rupiah depreciation, and sector specific issues such as the increase in hardware import taxes, meant the Indonesian IT market slowed significantly in 2015. The market is expected to strengthen in 2016 as the hardware segment returns to growth, and over the medium term we expect IT spending to accelerate as economic conditions improve, a shift that will benefit retail hardware and enterprise software and services spending. We forecast Indonesian IT spending will grow at a CAGR of 11.9% over 2016-2020 to reach a total of IDR230.3trn in 2020.

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 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: Regulatory uncertainty and low oil prices will impede exploration in Indonesia. Though the refinery upgrade and newbuild projects draw interest from national oil companies, they are progressing slowly and Indonesia will remain a large importer of refined fuels.

Headline Forecasts (Indonesia 2014-2020)
2014 2015e 2016f 2017f


Indonesia Petrochemicals

BMI View:

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: 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: We maintain our generally positive outlook for the Indonesian telecommunications market in our latest Q4 2016 report update. Current and ongoing investments will help improve the national broadband infrastructure. Nevertheless, the geographical barriers to Indonesia's archipelagic nature and high development costs will pose a downside risk to the government's plan to develop the national fixed 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...


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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