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Business

A bumpy but lucrative road ahead for investors in Indonesia

Indonesia is hosting the World Economic Forum Asia. Its economy has been growing fast, and it now has the fourth-largest population in the world. Manuela Kasper-Claridge reports from Jakarta.

Luis Armstrong's "What a wonderful world" can be heard coming from the well-hidden loudspeakers of the Plaza Indonesia, a shopping mall in the center of Jakarta. A father and his son are trying out the seats in a new Audi A6. Dior, Louis Vuitton and Diane von Fürstenberg stores are welcoming shoppers, while outside cars are thundering by in temperatures reaching 30 degrees Centigrade.

Indonesia's 40 to 50 million middle class people are strong consumers. The World Bank reckons that by the end of 2025 their number could rise to 100 million on the back of an annual growth of 5 percent.

Two bucks a day

Local entrepreneur Veronica Colondam comes up with a very different number. "Over half of our population live on less than $2 a day," she says. Her Ycab Foundation enterprise employs 655 people and is busy helping school dropouts find a job as hairdressers, electricians or seamstresses. The company also grants micro credits to women hoping to get small businesses off the ground.

Income inequality in Indonesia is still a major issue. Miserable huts without water and electricity stand alongside impressive high-rise buildings in Jakarta. Already more people live in big cities than in rural areas, because the perception is that that's where fortunes are made. The larger Jakarta area is bursting at the seams with over 30 million people living there.

Those who can afford it buy at least one motor scooter. Eight million such scooters are newly registered here every year, plus some 1 million cars.

Chaotic traffic, unpredictable authorities

"There aren't many countries of this size

that boast such growth

," says Jan Rönnfeld, managing director of the German-Indonesian Chamber of Industry and Commerce.

"It's tough to do business here, but it's profitable," he adds. Rönnfeld has lived here for 17 years and has learned how to stay calm in the face of seemingly endless stop-and-go traffic. Patience is a must for anyone doing business here, also because of a lot of red tape.

Jakarta traffic

Traffic jams are part and parcel of life in Jakarta

The country is ruled by ministerial and presidential decrees rather than by law. "Decisions may change from day to day," Rönnfeld explains. "In the same ministry one person may make one decision today, while another person comes up with a different decision tomorrow, meaning you waste a lot of time dealing with red tape."

Nonetheless, more and more German firms have enquired abut investment opportunities in the country.

German investment

The German-Indonesian Chamber has some 500 members. Automotive parts supplier Robert Bosch is one of them. A new production facility for fuel injectors and other parts is currently being built in Bekasi, east of Jakarta. But things have not been going completely in line with Bosch's expectations.

Ralf von Bär, Vice President Indonesian Operations at Robert Bosch GmbH, says over the long haul his company might also export from here, but adds that there's still a bumpy road ahead.

"Indonesia is still trailing other nations in South-East Asia in terms of infrastructure, skilled labor, productivity levels and permission procedures," he says, with a hint of disappointment.

Qualification measures need improving

Bosch and the German-Indonesian Chamber are planning a dual education offensive, combining theory and on-the-job training, based on Germany's tried-and-tested model. It's meant to produce the sort of skilled workers in Indonesia that companies need most.

And there's one more problem, says Ralf van Bär. "It's extremely difficult to get work permits for foreigners, but we do need our experienced engineers to build up our production facilities here and to train Indonesian employees."

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