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Home to a growing base of consumers, Indonesia has seen the rising purchasing power of its fast-expanding middle class drive the retail industry to new highs in recent years. Foreign and domestic retailers alike are investing heavily in new construction and expansion projects that will see traditional retail models increasingly supplanted by modern franchises and chains. Although retail could be set for a volatile year, with the rupiah’s depreciation expected to cut into purchasing power and increase pressure on retailers, lower inflation and rising wages should help offset this. The market remains highly attractive to foreign investors despite its stringent regulatory environment, and growth is expected in 2015 as a result of rising domestic consumption and e-commerce expansion. While retail space in Jakarta will remain limited in the medium term, rising rents will help spread industry growth across the nation. This will keep the sector robust and dynamic into 2016, as well as present lucrative opportunities to foreign and local investors. This chapter contains an interview with Irwan Danny Mussry, President and CEO, Time International.

Industrial development is perhaps the most important pillar of Indonesia’s long-term economic expansion strategy, and the nation has made significant economic strides in recent years as a result of its fast-expanding industrial sector. The country is now poised to outpace Thailand and Malaysia as a major regional manufacturing and export hub, and investors are increasingly choosing Indonesia over China, Thailand and Malaysia, drawn in by the country’s relative stability, sizeable low-cost labour pool and large domestic market. While it will make Indonesian exports more attractive to the global market, many of Indonesia’s major industries remain import-dependent, and rising input costs represent the most significant challenge facing operators. Industry and manufacturing are nonetheless poised to continue on an upwards trajectory, with major sectors – including pharmaceuticals, automotive manufacturing, textiles and metals – all projected to expand on the back of solid macroeconomic fundamentals. This chapter contains interviews with Suryo Sulisto, Chairman, Indonesian Chamber of Commerce and Industry; Sudirman MR, Chairman, Association of Indonesian Automotive Industries; Eddy K Logam, Chairman, Indonesia Ship Building and Offshore Association; and Iwan S Lukminto, President, Sri Rejeki Isman.

With the new administration under Joko Widodo committed to spending a greater share of the budget on improving the nation’s transport infrastructure and moves under way to provide an enhanced organisational and administrative framework for the sector, there is a new sense of energy with regards to transport in Indonesia. Indeed, with logistics costs equivalent to around 27% of GDP, efforts to reduce this by boosting the efficiency of the transport sector could make a real difference to the country’s economic growth, in turn translating into increases in per capita incomes. Much remains to be done and greater private involvement will be needed, but there is significant optimism about current sector plans. This chapter contains an interview with Djarwo Surjanto, President-Director, Pelindo III.

In its first year in power, Indonesia’s new government has launched a major drive to boost the nation’s transport, power and water infrastructure. The administration in Jakarta is taking a leading role in helping to overcome the challenges facing the industry, and the private sector has been given a clearer, more efficient legal and administrative framework within which to operate. Many of the projects on the agenda are in the midst of securing financing, while others are still being planned or debated. The new public-private partnership (PPP) unit is expected to publish a PPP book during 2015 that will outline the projects that are open to investment and their expected timelines. This will create significant opportunities for private investors to get involved in the early stages of the country’s massive infrastructure overhaul. This chapter contains an interview with Adrinof Chaniago, Minister of the National Development Planning Agency.

After years of treading water, Indonesia’s energy sector is finding new optimism in the fresh faces being appointed to key government positions by the new president, Joko Widodo, with the hope that they will be able to renew investor interest in the industry and spur a wave of development. The changes at the top come at a critical time, as myriad factors continue to buffet the sector in Indonesia, which ranked among the world’s top-five liquid natural gas (LNG) exporters in 2013 and remains Asia’s second-largest natural gas producer despite continuing production declines. After years of halting progress in the power sector, the new energy strategy has the potential to add much-needed capacity to the domestic market, provided that policymakers can avoid some of the pitfalls that have affected similar rapid development programmes in the past. A concentration on building coal-fired power plants, designed to run on inexpensive, domestically produced coal, should help smooth out the process. In the meantime, the strategy’s emphasis on boosting efficiency and reducing Indonesia’s high energy intensity levels should also help to rein in the country’s domestic consumption. This chapter contains an interview with Dwi Soetjipto, President-Director, Pertamina; and an Energy roundtable with Lukman Mahfoedz, President-Director and CEO, PT Medco Energi Internasional; Roberto Lorato, President, Premier Oil Indonesia; Craig Stewart, President, Indonesian Petroleum Association and President, Salamander Energy; and Hardy Pramono, President-Director, Total E&P Indonesia.

Given Indonesia’s large population of nearly 220m – which is expanding by more than 1% per annum – its growing middle class and a GDP rising at about 6% a year, the insurance sector stands to benefit from these fundamentals in the years ahead. Overall insurance company assets increased by 14.5% in 2014, according to preliminary statistics from the Financial Services Authority (OJK), and total assets have more than doubled in the five years to 2014. However, even as insurers garner more business, there will be challenges for the OJK, as it works to achieve the right balance of regulation to ensure long-term sustainability without limiting growth or worrying investors. This chapter contains an interview with Rinaldi Mudahar, President-Director, Prudential Indonesia.