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Indonesia: a new business frontier with untapped potential

A young and growing nation with still untapped potential and a firm desire to attract foreign investments in order to develop all sectors of its economy. Strategically nestled between Southeast Asia and Australia, the Indonesian archipelago has increasingly embraced that economic growth for which the term “Asian tigers” was coined a few years back. The country still has a long way to go; but, even despite the economic downturn, it has held steady as a dynamic new frontier for European and Italian business interests. And precisely for that reason a system mission to Jakarta was organised by the internationalisation panel, whose participants included representatives of Italian businesses, banks and professional associations.

Investments in Indonesia +27% in first quarter of 2013

With investments up more than 27% in 2013 over 2012, Indonesia is more than ever in the top line-up of “new targets” for business internationalisation. Added to that is a high and steady growth rate and a rapidly growing middle class (half the population is under 29 years of age). Prominent among the opportunities in the energy and infrastructure sector are the divisions of coal, food industry (palm oil, rubber), forestry and food processing (algae and cocoa).

Italian system mission led by MFA and Ministry of Economic Development

These were precisely the concerns confronted by the Italian mission, made up of approximately 60 firms, 11 banks and 9 professional associations. Leading the delegation of the Ministries of Foreign Affairs and of Economic Development. The Ministries of Foreign Affairs and of Economic Development, which led the delegation, were represented respectively by Director General for Country Promotion Andrea Meloni and Deputy Director General for Internationalisation Policies and Trade Promotion Patrizia Giarratana

Also attending were ICE Agency President Riccardo Monti and representatives of the professional associations Confindustria, ABI, Unioncamere and Rete Imprese Italia. The calendar of meetings was full: an inaugural forum, opened by chairman of the Agency for Investments in Indonesia (Bkpm) Chatib Basri, was followed by a session of meetings arranged by the ICE Agency that involved 230 Indonesian businesses and 57 Italian firms and associations. More in general, the mission also offered an opportunity for various B2B meetings in the construction sector that saw the participation of central and local government representatives heavily engaged in large-scale transportation modernisation programmes.

Italo-Indonesian trade of nearly 4 billion USD in 2012

Director General Meloni’s meeting with Director General of the Indonesian Ministry of Industry Panggah Susanto concerned the status of collaboration between Rome and Jakarta. Trade in 2012 approached 4 billion USD and Italy is the country’s third-ranked European partner, after Germany and Holland. Italian investments in the Asian archipelago, however, lag behind: of the 34.8 billion USD invested in Indonesia last year, 23 billion came from foreign investors, amongst which Italy holds a marginal position (operations involving Pirelli Pneumatici, Saipem, Tenaris are the only salient examples). For its part, Jakarta has explored collaboration opportunities in the area of technical training in textiles and shoe manufacturing, showing interest in countering Chinese competition by upgrading with equipment and technical skills from Italy.

Private Equity Fund being considered to facilitate firms’ entry into Indonesia

Prominent among the mission’s achievements is the emergence of a possible Italo-Indonesian investment fund to facilitate the entry of our firms into the Asian market, along the lines of the Italo-Chinese Mandarin Fund. Also attractive on the horizon is the automotive sector, where Gaikindo, a professional association for Indonesian sector firms, displayed its intention to create a major regional parts-manufacturing hub, relying also on the collaboration of Italian sector leaders.