Take a young population, mix in a steadily growing middle class and combine it with a growing appetite and infrastructure for e-commerce, and you have United Parcel Service Inc.‘s recipe for emerging-market growth.
That’s what Indonesia has to offer, along with a healthy base of small and medium-sized enterprises that are increasingly looking to export, said Imad Nusheiwat, head of UPS International‘s government and postal development group.
Already the world’s fourth most populous country with 240 million people, the Southeast Asian nation’s consuming class is expected to grow by 90 million by 2030, he said at an Indonesian business forum in Atlanta March 27.
And it’s not just that Indonesia is large; more than half of its people are under 30, and basically everyone in the country has a mobile phone (or two). Of those, a majority are Internet-connected smartphones, helping make the country No. 3 in the world in number of Facebook users, a fact pointed out by trade officials in presentations at the Atlanta Marriott Marquis.
“When you have growth in Internet commerce, you have growth in the movement of parcels,” Mr. Nusheiwat said.
But it’s than just statistics, he added.
Indonesia also has an attractive story, having gone through a reform process just 15 years ago that transformed it from an authoritarian state hit hard by the Asian financial crisis of the late 1990s to a “stable, optimistic” democracy today.
“In two and a half decades we have seen the worst and the best of the realities of a developing country,” Mr. Nusheiwat said, who added that UPS has 280 employees there, with seven facilities and 13 weekly flights serving the country.
Dino Patti Djalal, Indonesia’s ambassador to the United States and the forum’s keynote speaker, said his country’s “economic miracle” has proven wrong regimes that believe democratic reforms come at the expense of growth.
“It was difficult for us to get the balance right. The first three years were chaos, and our economy could not pick up,” he told Global Atlanta. “But the key was when we were able to connect our democracy with the governance part. For three years democracy just proceeded, but no one knew how to govern.”
Even today, the country has to work hard to change the minds of investors wary of Indonesia’s legacy of corruption and faulty legal system. Trade officials at the Atlanta forum pointed out that these considerations didn’t deter General Electric Co., which recently announced a $300 million investment to develop new products in energy and rural health care in Indonesia.
But there are also negative perceptions of security in the 95 percent Muslim country. Mr. Djalal says it has become a model of diversity and tolerance, setting an example for other countries, especially those in the Middle East and North Africa that are ironing out new forms of government in the wake of the Arab Spring.
Still, terrorist attacks over the past decade by Islamists and separatists in certain Indonesian regions, sometimes targeted at foreigners, loom as a specter to investors.
Wayne Forrest, president of the New York-based American Indonesian Chamber of Commerce, admitted that some anti-American sentiment exists, but he urged businesspeople to refrain from forming opinions solely based on CNN reports.
“Don’t worry about the travel warnings; those are from the past,” he said.
He said he had to convince the board of a prospective chamber member looking at Indonesia to manufacture wooden wine racks that “Indonesia was not a terrorist country.”
Instead, it’s a beautiful place with huge energy potential and manufacturing capabilities that are often overshadowed by China and Vietnam.
“When you travel to Indonesia, you can’t help but be impressed by what you see,” Mr. Forrest said.
If you buy rattan furniture, contact lenses, toilet paper or hardwood plywood, chances are they came from Indonesia, he said. Also, your morning cup of “java” (named for the island) and the rubber for the tires that carry you to work were likely sourced there.
To maintain its 6.2 percent growth, Indonesia will have to handle the problem of moving these products around an archipelago with 17,500 islands stretching thousands of miles from east to west along the equator.
Indonesian President Susilo Bambang Yudhoyono has said the country will continue to invest in ports, roads and airports. UPS has found an interim solution: working with Pos Indonesia, the national postal service, to distribute goods within the country, while allowing access to the UPS global network for outbound shipments.
Georgia Institute of Technology international business Professor Jim Hoadley said 25 students saw similar value in partnerships during a recent trip to Indonesia as part of an elective course that focuses on real-world business problems.
Observing the negotiating tactics in the antique markets was a lesson in itself, but they also learned that business partners in developing nations might not think in the same linear fashion as Americans.
“What you think is going to happen going may not be what is going to happen,” Mr. Hoadley said, noting that he will definitely be taking students again.
Mr. Djalal, the ambassador, is a youth advocate who has more than 136,000 followers on Twitter. He said Indonesia is looking to increase student exchanges after a stark decline following 9/11.
Georgia State University‘s Andrew Young School of Policy Studies has a partnership with the Indonesian Ministry of Finance that grants its budding leaders master’s degrees in economics.
Luky Alfirman, head of the ministry’s Center for Macroeconomic Policy, was one of the main speakers at the business seminar.
The Consulate General of Indonesia in Houston, headed by Consul General Al Busyra Basnur, organized the event in Atlanta.