Indonesia Pulls Through
Source: Breakbulk Magazine, January/February 2010 Issue – Indonesia fared better than many of its Asian neighbors during the recession because less than 20 percent of its GDP comes from exports, says Aaron Chen, managing director of BDP Indonesia and senior adviser for BDP Project Logistics.
Asian markets that depend on the U.S. and the EU to buy their exports — China, Singapore, Vietnam, Thailand and Malaysia — were hit much harder. “Indonesia’s market is driven by its own domestic consumption. As a result, it was able to weather the recessionary storm,” he said.
In addition, Chen said, Indonesians learned a hard lesson from the Asian recession of the late ’90s, when a highly leveraged economy came crashing down. “Since then, Indonesian businesses and people have steered clear of leverage . . . They learned their lesson,” Chen said.
In fact, economists estimate Indonesia grew 4 percent during 2009, and it is expected to grow even faster during 2010, said Simona Mocuta, a senior economist with IHS Global Insight.
After many years of less than transparent regulations, Indonesia has approved new mining laws that are expected to clarify the industry playing field and pique investor interest, Mocuta said. Last September, the World Bank said that Indonesia is the most aggressive reformer in Asia. “It’s a big positive,” she said, and key since Indonesia has suffered from a lack of capital for development. For example, although traditionally one of Asia’s largest energy exporters, the country’s refinery capacity has actually diminished due to a lack of investment, she said. Once the leader of OPEC, Indonesia has pulled out of the organization and is no longer a net oil exporter. “Natural gas has overtaken petroleum,” Mocuta said.
Like Australia and some African nations, Indonesia is a large exporter of natural resources such as natural gas, coal, silver, gold, copper and iron ore, as well as agricultural and soft commodities such as coffee, cocoa, pepper and spices. Developers are chiefly interested in natural gas, but development of coal projects is also strong, dominated by Australian and mainland Chinese interests. “The Chinese are the most aggressive; they are the biggest importers of coal from Indonesia,” Chen said.
Biofuels may also become part of the Indonesian energy picture. Palm oil is used as a biofuel as well as in consumer products, and developed countries earn carbon credits by burning a by-product, palm kernel expeller, that was simply thrown away 15 years ago, Chen said.
Sugar is another potential source of biofuel. However, investment in biofuels production is small compared to traditional energy sources.
Because China has moved its focus to coal-fired power generation plants, Chen said, they are getting rid of older power plants running on less efficient liquid fuels. Thus, one recent shipment of power equipment out of China became an add-on to an existing power generation plant in Sulawesi, Indonesia.
The Chinese are building on a huge scale, driven by their population of well over a billion people and what amounts to “blue sky,” government-backed funding that countries such as Indonesia don’t have, Chen said. However, while Indonesia’s population of roughly 250 million people is dwarfed by China’s, it is still larger than its immediate neighbors’, one reason for its growing economy and healthy domestic consumption.
By: Janet Nodar
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