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OTG: Indonesia – Sustaining Growth Momentum

By Standard Chartered Bank

Summary

On 11 February, the Indonesian government revised its investment-negative list, the list of sectors closed to foreign investment or partly open with specific requirements, to attract more foreign investment to the country. 84 industries are now open for foreign investment, even up to 100% ownership. In addition to creating jobs and financing economic development, the government aims to promote more competition in highly concentrated industries that have been keeping the price of goods high. The policy is likely to prepare domestic industries to compete globally by acquiring new technologies and adopting industry best practices. We think the policy will attract more foreign direct investment (FDI) as the government opens foreign access to Indonesia’s lucrative industries, such as health-care, services, and distribution and warehousing, which are the beneficiaries of the country’s growing middle-income class and government infrastructure projects.

The latest data suggests that growth momentum remained upbeat in January. Private consumption and investment performed well, as indicated by improved consumer confidence and strong growth in cement demand. We maintain our 2016 GDP growth forecast of 5.2%, up from 4.8% in 2015, on a strong boost to investment.

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