There are different kinds of investors
looking for different kinds of opportunities.
One
size doesn’t fit all. Whether you are an Indonesian looking to invest overseas
or an overseas investor considering what suits you best in Asia, pause, and
have another look at the pros and cons of the two heavyweights: China and
India, versus middleweight Indonesia. You could be in for a pleasant surprise.
The
sheer size of the billion-plus populations of China and India are huge
attractions, literally speaking. If 240 million isn’t big enough for you, then
you know where you must go. But if the size of Indonesia is attractive,
consider the many advantages it offers over its two bigger
Asian
neighbors. Both the giants have large populations, but they also have major
chinks in their armor. Large populations need even more jobs, more essential
services, more infrastructure every year. Most economists would agree that both
China and India need at least 6 percent annual growth in GDP to keep the
economy moving forward. Without that 6 percent, critical indicators for
poverty, healthcare, education and employment would slide.
With
the breakup of the eurozone looming large, China’s export-driven
factory-to-the-world could be in more pain than it already is in. From that
perspective, India’s inward-looking and self-reliant consumer economy is in
safer waters, even when global tradewinds go awry. But a further slowdown in
foreign investments consequent to a euro meltdown would push India’s growth
rate down even harder. If we add the unpredictable nature of Mother Nature into
the mix, a bad monsoon on top of a euro gone bad could bring India to below the
minimally required 6 percent GDP growth trajectory. Such a possibility is well
within the realms of imagination.
For
Indonesia, in sharp contrast, one or even a cocktail of both elements would
have little impact. If you’re shaking your head in disagreement, let’s make it
easier to agree. Such a turn of events would have much less impact on
Indonesia, than it would have on China or India. That’s because Indonesia’s domestic
economy is working well, producing and consuming with a voracious appetite much
like India. But history proves that the Global Financial Crisis of 2008 caused
hardly a ripple, except on the floor of the IDX. The vagaries of an annual
monsoon aren’t an issue. Even a tsunami the size of 2004 did little damage, the
quick recovery adequate testimony to Indonesia’s resilience.
Indonesia
with 240 million people has fewer challenges in comparison to China and India.
It is under far less pressure on critical areas such as poverty and employment.
At 5 to 6 percent annual growth in GDP,
Indonesia
registers comfortable progress on vital fronts. At that pace, the country’s
middle-class has grown from 28 percent of households to 45 percent in just the
last five years. This isn’t the government’s propaganda machine at work, but
Roy Morgan Research interviewing robust samples around the country week after
week, year after year. Even if similar data were available in China and India
to facilitate an identical definition of “middle class”, it is most unlikely
that either would have numbers similar to Indonesia. My educated guess, based
on piecing different sets of information together, would be less than 20
percent for India and 40 percent at best for China. The biggest external threat
for the Indonesian economy is the price of oil. Even that threat, as witnessed
in 2007, led to a slowdown in consumption for just six months with a full and
equal recovery in the next six. On the other hand, much of Indonesia’s exports are
natural resources, essentials not luxuries.
Another
fuel price hike would hurt Indonesia temporarily, but the degree of pain for
the average citizen would be far greater for China and India. The primary
difference is that this country is more blessed by nature than the two giants.
Their natural resources are scarce, in comparison to Indonesia’s wealth. Their
demographic challenges are far greater as well. As I’ve said before, this is a
rich country with poor people. Nobody would say that about the two bigger Asian
neighbors. They have to work much harder to solve their major problems.
Unlike
those two countries, the demand for consumer goods and services remains strong
across the archipelago. Despite all the news of gloom and doom from far and
near, the KADIN-Roy Morgan Consumer Confidence index remains at world-beating
levels. Across the spectrum, demand for consumer goods and services remain
healthy. The appetite for just about everything, from shampoo to edible oil,
mobile phones to motorcycles, bank accounts to air travel, all indicators are
still sailing strong. Graphics like the chart accompanying today’s column have
started telling new stories, visualizing the transitions that have already
started. 3/4 of Indonesians 14 years of age and older already have a mobile
phone but that isn’t worrying the manufacturers of handsets. Quite simply, the
replacement market has overtaken the market for new entrants. Similarly,
convenience stores are mushrooming everywhere, not just in the big cities. If
some of the old mom-and-pop stores are converting to franchises of the big
chains, business will be good for all.
Could
Indonesia do even better than it is? Endemic corruption, with all its
accompaniments, is the primary impediment to greater progress. But businesses
and consumers are simply getting on with their lives, they’ve learned to ignore
the ineptitude of the powers-that-be. That’s good news too. If the government
can run on autopilot, so can the economy. As long as the governor of Bank
Indonesia has his hand on the wheel, Indonesia will cruise along.
These
opinions are influenced by Roy Morgan Single Source, the country’s largest
syndicated survey. More than 26,000 respondents are interviewed every year,
week after week. The data is projected to reflect 87 percent of the population
14 years of age and over.
Debnath
Guharoy, Roy Morgan
Business & Investment Opportunities
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