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New opportunities in Indonesia expected for Singapore firms

Market watchers say they expect Indonesia's new administration, to be led by Joko Widodo, to adopt a pragmatic, pro-business approach. Key sectors that are expected to benefit from proposed policy reforms include consumer and oil and gas.

SINGAPORE: Singapore businesses could see new opportunities in Southeast Asia's largest economy. Market watchers say they expect Indonesia's new administration to adopt a pragmatic, pro-business approach.

Key sectors that are expected to benefit from proposed policy reforms include consumer and oil and gas, where Singapore firms have expertise to share.

Jakarta governor Joko Widodo has been declared winner of the Indonesian presidential elections with 53 per cent of the votes. Experts say major tasks for the new president include energy reforms, infrastructure overhaul and eradicating poverty and they expect the new administration to take a pragmatic approach to the economy.

Gundy Cahyadi, economist and assistant vice president for Economic & Currency Research at DBS Bank, said: “I think Jokowi's administration will be pragmatic in the approach of the economy. We estimate at least US$35 billion to US$40 billion shortage in terms of infrastructure funding per year for the next five years, which is not going to be filled by domestic investors alone. So if Jokowi is really serious about upgrading infrastructure, which is the key aspect of his economic platform, he's going to be pro-business and pro-foreign investors."

Singapore was Indonesia's second largest investor last year, investing more than S$5.7 billion in Southeast Asia's biggest economy. Experts say with close bilateral ties, a stronger Indonesian economy will likely benefit Singapore firms.

Nirgunan Tiruchelvam, director for ASEAN Consumer, Global Equity Research at Standard Chartered Bank, said: “Indonesia has been open for foreign investment for the consumer sector, and we see great opportunities in the consumer sector. Singapore is a relatively advanced market in the Southeast Asian context. There are highly advanced retail operators, highly advanced convenience store operators who might be able to transfer their expertise into Indonesia. It's likely there will be a transfer of know-how, as well as financial resources."

Another sector that is likely to attract Singapore investment is oil and gas. Gundy Cahyadi said: “One of the key sectors we think is going to see a huge upgrade in Indonesia is the oil and gas sector, that's where Singapore companies have an expertise in the region. So they're going to benefit, they're going to see spillover from strong Indonesian growth in the future.”

But winning the presidential election is just the first step. Analysts say one of the greatest challenges facing the new administration is pushing reforms through a fragmented legislature.

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