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On 18th June 2014, the European Chamber of Commerce (EuroCham) hosted its latest installment of the Indonesia Quarterly Briefing Series – an initiative first launched in 2012 with the aim of promoting investment opportunities and providing both local and international members of the business community with the latest market insights. As is the case with each of EuroCham’s Quarterly Briefings, the event focused on a specific theme in its discussion of the service sector as a key driver for continued economic growth in Indonesia.
As a means of encouraging constructive dialogue between Indonesian stakeholders and policymakers, the Briefing featured a keynote speech from Mr Ir. Bambang Prijambodo, Advisor to the Minister of National State Planning/BAPPENAS, who spoke in detail about the government’s strategy to develop the service sector in Indonesia and move away from its present standing as a commodity based economy. As explained by Mr Prijambodo, at the centre of this strategy is the formal release of a five year plan that has already been drafted but is subject to approval from Indonesia’s new government.
Among the priorities laid out in the draft is the development of better infrastructure for transportation; a sign that the government looks set to heed the call for improved facilities for the logistics sector. “Developing better intercoastal connectivity at a lower cost with efficient logistics systems would increase competitiveness to grow both domestic trade and increase exports,” said Mr Muhammad Sofyan, General Manager of Indonesia Cluster Trade and Marketing at Maersk Line, during his overview of the transport & logistics sector in Indonesia. Mr Sofyan went on to explain that shipping between Indonesian islands can prove more expensive than shipping from Indonesia to neighbouring markets such as Australia. This can in part be attributed to the imbalance of trade between different regions of Indonesia, in that vessels transporting cargo from Jakarta to Papua, for example, often need to adjust prices to account for the lack of cargo going on the return trip.
Also presenting at EuroCham’s Quarterly Briefing were Mr Yose Rizal Damuri, Research Coordinator at the Indonesian Services Dialogue, and Mr Ali Setiawan, Head of Global Markets at HSBC Indonesia. In discussing their thoughts on the development of the local services sector and Indonesia’s present macro-economic environment, respectively, the speakers gave event attendees a better understanding of what is to be expected for business in Indonesia going forward. Of particular note was Mr Damuri’s interpretation of a substantial current account deficit posted in April 2014, which asserted that Indonesia should not be overly concerned with a rise in imported services, as research suggests that there exists a positive correlation between this trend and gains in the competitiveness of a country’s exports.
Tying the growing importance of the services sector to the involvement of international players, Mr Mark Magee, a member of EuroCham’s Executive Board, during his remarks said “Indonesia will benefit from implementing good industry-specific regulations in parallel with opening up its services sector to foreign investment”. Mr Magee later added that the government needs to address the present capacity constraints on local services providers, such as low skills and qualifications and inadequate access to reliable infrastructure.
During the event EuroCham also distributed its Indonesia Country Report for Q1 2014, which provided information pertaining to the country’s political environment and the most recent regulatory changes.
Eurocham - 2014
Contribution to GDP: 42% (2016)
Sector Growth: ICT 17%, Hospitality 4.53% (yoy, 2016)
Number Employed in the Sector: 54.9 million (February 2015)
Main Areas: Retail, Transportation, Media, Telecommunications, Finance, Hospitality, Tourism.
Government Bodies: Ministry of Trade, Ministry of Tourism, Ministry of Transportation, Ministry of Manpower.
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