Indonesia has shown tremendous economic resilience to become one of the best performing Southeast Asian economies in 2009, a year where many economies continue to struggle to find their footing after being ripped apart by the devastating global economic slump.

During his presentation at the recent IE Partnership Seminar, Mr Lee Yee Fung, Centre Director for IE Singapore’s Jakarta Overseas Centre, said that Indonesia grew 4.5 per cent in 2009 and has “weathered severe economic pressures on its currencies and reserves”.

With unemployment improving and inflation indicators back to pre-2008 levels, he expects the Asian giant to continue on its road of economic recovery and grow by 5.2-5.6 per cent in 2010. He said Indonesia has the stable economic fundamentals that are required for continued growth, and highlighted that there will be an expected increase in discretionary expenditure due to urbanisation and higher disposable income.

He cited data from the Economist Intelligence Unit which showed that more than half of the country’s 240 million people currently live in cities across the vast archipelago, with the figures expected to hit 57.4 per cent by 2013.

Coupled with a strong economic team to steer the country’s massive economy back on track, and the proposed implementation of several positive trade policies, Mr Lee urged Singapore companies to consider Indonesia as one of their top destinations should they decide to expand overseas.

Among these positive polices include a review of the investment law for selected industries; the implementation of several Special Economic Zones; property ownership for foreigners; and also a review of its labour law.

Opportunities aplenty throughout the archipelago

Mr Lee also reminded those in attendance that Indonesia is a big country and thus offers plenty of varying opportunities across its different regions. Instead of just focusing on the capital Jakarta, companies should also consider setting up shop in various other locations throughout the country, as these regional cities present a plethora of new business opportunities.

Other alternatives to Jakarta include Surabaya, the country’s second largest city and a commercial trading centre; Medan, the busiest city in Sumatra; and Bandung, an education hub and a retail fashion destination.

Apart of these maturing cities, Singapore companies may also want to have a closer look at some of the emerging cities such as Makassar, Balikpapan and Palembang, which are blessed with abundant natural resources; and Denpasar and Yogyakarta, both of which are key tourism destinations.

Expanding further on Surabaya, Mr Lee said that the city, usually referred to as the centre of East Java, is one of two core manufacturing hubs in Indonesia and has the second largest consumer market in the country.

About 1.8 million residents there are above 17 years old, and close to 20 per cent of its 3.3 million people has a monthly household expenditure of more than IDR2 million. The city is also the second most popular destination for international brands after Jakarta.

In addition, the city government has a suite of development initiatives to continue to develop city for growth, including the Suramadu Bridge Development Zone and the Kalimas Riverfront Development. Among the opportunities available for Singapore companies are in the area of consumer and consumer market related services, which includes logistics; manufacturing related services such as engineering services; and urbanisation driven services in areas such as hospitality, infrastructure and utilities.

Resource-rich Balikpapan

Another potentially lucrative market is Balikpapan in resource-rich East Kalimantan, the largest province in Indonesia. With only a population of 1.8 million, of which 1.2 million are foreigners, in an area slightly smaller than Singapore, Balikpapan is a cosmopolitan city that is driven by the natural resource business.

There are plenty of opportunities available for agriculture, plantation, mining and marine, of which it has 1,185 kilometres of coast line, resulting in a high potential of seaweed, snapper, tuna, grouper and fish farming.

And to service the natural resource business, extensive downstream services have been developed including supply base activities; engineering services; and logistics services. The hospitality sector is also doing well, with business hotels and the food and beverage sector growing to cater to business travellers and those working on offshore platforms coming in to spend their weekends.

Opportunities in non-natural resources based industries may also arise as the city government is keen to diversify its economy. In the pipeline are several industrial zones and supporting infrastructure projects, including the Kariangal Industrial Estate, which is planned as a manufacturing and agri-processing park.