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In 2013 the agriculture sector accounted for 14.4% of total GDP. Food crops represented the largest segment, with more than half of the industry’s value. Tasked with providing sustenance for the country’s nearly 250m citizens while contributing a steady stream of export revenue, the Indonesian agriculture sector remains an indispensable industry with an influence that extends across a broad spectrum of the social, political and economic landscape. Rice, maize, and soybean are among the most widely grown crops and are cultivated primarily for domestic consumption. With a total output of 70.86 tonnes in 2013, rice is the dominant staple food. The government is focusing on food price volatility and increasing the contribution of domestic production to consumption in the country. Although the days of double-digit expansions for plantation crop acreage are now in all likelihood a thing of the past, continued demand should be enough to sustain profits for large agro-industrial exporters. This chapter contains interviews with Franky Oesman Widjaja, President Commissioner, Sinar Mas Agribusiness and Food; and Franciscus Welirang, Director, Indofood.

Boasting some of the world’s greatest biodiversity and dynamic landscapes, Indonesia has long been a popular destination amongst tourists. The development of an Islamic heritage niche has seen an increase in arrivals from Gulf countries. Arrivals from the UAE and Saudi Arabia increased 122.4% and 34.2%, respectively, in 2013. The number of air travellers to Indonesia rose 15% in 2012, reaching 72.6m. Projections for 2013 were high, with as many as 83.4m travellers forecast to fly through Indonesia’s airports. Once the ASEAN single market integration is complete in 2015, there will be a regional market to serve some 600m potential tourists. The government spent approximately $1.53m on international marketing efforts in 2013, focusing on events in new markets such as China, India and Turkey. Infrastructure hurdles and human resource recruitment remain the top challenges, but the government’s prioritisation of tourism as a key source of economic growth is a good sign. As the nation’s $43bn infrastructure investment budget continues to support projects, tourism is set to benefit from improved connectivity. This chapter contains an interview with Anthony Akili, President and CEO, Smailing Tours.

For an archipelago spread over more than 17,500 islands and spanning 5,000 km from west to east, the need for Indonesia to have an efficient transport network that seamlessly integrates sea, land and air transport systems is clear. The public sector manages 90% of total transport infrastructure, while private sector involvement is concentrated on a few tolled highway projects and private rail lines. By 2014 Soekarno-Hatta International Airport is expected to be able to handle 64m passengers annually; however, passenger demand is expected to soar to 87m by 2025. Indonesia has much to improve in the transport sector, which already comprises 40% of infrastructure investment. Deeper focus on development of the country’s transport networks is necessary for improving travel connectivity and reducing the cost of doing business throughout the archipelago. This chapter contains interviews with Emirsyah Satar, CEO, Garuda Indonesia; Sukmawati Syukur, President Director, Monorail; and Djarwo Surjanto, President Director, Pelindo III.

A result of decades of underinvestment, creaky infrastructure has long been the Achilles’ heel of the Indonesian economy. Around $6.8bn will be spent on power and some $29bn on water utilities and other services under the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development. The government is expected to fund 28% of the cost, with the rest coming from the private sector. The government aims to meet 2% of the country’s power demand from nuclear energy by 2017. In February 2014 it confirmed plans to build a 30-MW nuclear power plant in western Java. Although private sector involvement in water services remains limited to date, the government has envisaged that nearly 70% of water infrastructure investments between 2010 and 2014 will come through public-private partnerships, community participation and the private sector. Improving infrastructure will continue to be a priority with Indonesia’s sovereign rating upgraded to investment grade and its economy growing at a steady pace. This chapter contains interviews with Djoko Kirmanto, Minister for Public Works; Stuart Dean, CEO, General Electric ASEAN; and Bobby Umar, Chairman, Indonesian Engineers Association.

Increased government investment in infrastructure has helped unleash a boom in Indonesia’s construction sector. With rapidly growing demand for residential real estate, office buildings, industrial estates and other property across the archipelago, the construction sector is poised to see significant expansion. And, although the sector has declined since 2012, a new law that allows foreign nationals to purchase condominiums is likely to help drive up foreign direct investment for future construction projects. One of the main challenges for the sector in 2013 was the rupiah’s depreciation against the US dollar, which significantly increased the cost of building materials. The prices for asphalt and concrete, for instance, rose 21% and 20%, respectively. Dams, roads, and bridges account for the majority of government projects that are currently under way or planned to begin construction in the next few years. Toll roads and bridges will be the first investment areas as the government seeks to improve the nation’s transport links. Human capital development and a boost in industry standards are key for the sector to increase its overall GDP contribution. Though the sector may slow in the first part of 2014, it is expected to gain momentum once the new administration is given time to establish new regulations. If it favours infrastructure development with similar attention as the current administration, the sector will continue to benefit from increased government spending.

Indonesia has all the makings of an industrial powerhouse: a young and talented population, relatively cheap labour and a large domestic market. The country has the capacity to develop its industrial capacity, specifically in terms of export-oriented industries. Indeed, manufacturing is vital to the Indonesian economy. Without it the country would have a difficult time addressing its current account deficit, escaping the middle-income trap and taking the edge off the commodity cycle. Indonesia must look for advantageous terms in foreign trade agreements and ensure that it is able to remain competitive in terms of import and export trade balance. Though national and presidential elections in April and July 2014, respectively, may bring some uncertainty for investors, on the whole most indicators point to a year of expansion for the economy. The challenge for the sector at this point is to make sure that a lack of infrastructure and demands for increased wages do not derail the return and rise of Indonesian manufacturing. This chapter contains interviews with Irvan K Hakim, President Director and CEO, Krakatau Steel (Persero); Klaus Lesker, Member of the Executive Board, Ferrostaal; Hiroyuki Fukui, President Commissioner, Toyota Motor Manufacturing Indonesia; and VP Sharma, CEO, Mitra Adiperkasa.