Indonesia

As Indonesia handed over its chairmanship of the Association of South-east Nations (ASEAN) late last year to another member, it could look back on a year of diplomatic and economic gains.

In spite of the economic uncertainty that characterised much of 2011, Indonesia’s strong growth has solidified its reputation as one of the world’s most important emerging economies.

As hydrocarbons production in maturing blocks has declined and domestic energy consumption has increased, the Indonesian government has been looking for ways to boost investment in the country’s upstream oil and gas sector. Some of the measures the government has undertaken have proved effective at attracting investors, including increased incentives and a more flexible production sharing contract (PSC) framework introduced in 2008. However, regulations that were implemented in early January 2011 may have the opposite effect.

Plans are in place to develop Indonesia’s nuclear power capacity to overcome the country’s shortage of electricity and ease its dependence on hydrocarbons. However, some concerns remain as to the safety of atomic energy in a quake-prone region so soon after the disaster in Japan, with opponents to the scheme pushing alternative energy as the answer to Indonesia’s power needs.

Local business leaders and foreign investors alike are expressing confidence in the outlook for Indonesia’s insurance sector. Continued economic growth, low levels of penetration and strong performances from leading firms this year are all upside indicators. The market is a competitive one, and insurers are actively examining new strategies for capitalising on its considerable potential.

Indonesia is confident it can ride out any waves whipped up by the storm affecting much of the global economy, thanks in part to its low dependence on exports and booming domestic demand. There are some concerns, however, that reduced interest rates and high consumer spending could reignite inflation.