This article is produced by The Economist Intelligence Unit
Indonesia’s economy has been growing and is very likely to continue at a steady pace, as its consumer market remains one of the region’s largest. An expanding urban population and rising numbers of high-net-worth individuals settling in Indonesian cities should further translate into a bigger market for high-end consumer goods.
Besides free trade agreements (FTAs) signed as a member of the Association of Southeast Asian Nations (ASEAN), Indonesia has independent bilateral agreements with Pakistan, Japan and Chile; the last will be the most recent to come into effect. It is also part of the Preferential Tariff Arrangement–Group of Eight Developing Countries which include Bangladesh, Egypt, Iran, Malaysia, Nigeria, Pakistan and Turkey.
The country’s business environment is improving, as highlighted in the latest EIU Business Environment Rankings, owing in part to a significant progress in the political sphere. Jokowi embarking on a second five-year term bodes well, in terms of both political stability and effectiveness in the coming years, reflecting the impact of ongoing regulatory reforms and stronger economic fundamentals.
Indonesia has similarly improved its ranking in the EIU Technological Readiness Rankings, which assesses how well prepared 82 of the world’s largest economies are to address technological changes. The government has recently focused its attention on digitising the economy. Bank Indonesia announced plans to issue additional policy circulars to strengthen its 2017 regulatory framework which details establishing a National Payment Gateway, an online public-services payment platform. Consumers will thus be able to procure more essential services online, such as electricity and mobile phone data plans—all of which removes friction from economic activity and encourages growth.
Cybersecurity, however, may well remain an area of weakness for the country. Despite co-operating with regional neighbours and the Singapore government in particular¾to strengthen its cybersecurity agency, this problem poses a persistent challenge. Outdated and pirated software are largely to blame for the shortcoming and to help overcome such hurdles, the Ministry of Information and Technology has pledged to expand government programmes and foster more technology partnerships. These include both universities and local start-ups, which have been sources of innovation and economic growth in other nations such as the US and China.
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