Growth, Issues, and Infrastructure in Jakarta

With travel delays behind me, I arrived in Jakarta on Monday night in time to join my classmates for a family style Indonesian dinner before retiring to the single nicest hotel in which I have ever stayed. Well done, Mandarin Oriental, you’ve found yourselves a new brand advocate.

Seriously though, this view, with $40 massages.
Seriously though, this view, with $40 massages.
Fish head stew, sauteed beef, chicken, and all kinds of Indonesian goodness
Fish head stew, sauteed beef, chicken, and all kinds of Indonesian goodness

As we settled in for our days of meetings, we learned a little background on our host nation. Indonesia is the 4th largest country in the world by population, and actually is a G20 economy, but has seen uneven periods of growth over the years under different political regimes and macroeconomic conditions. Geographically, it consists of more than 17,000 islands, roughly 6,000 of which are occupied, that spread a wider range than the US coast to coast. About 10% of the population lives in Jakarta, a developed cosmopolitan city of skyscrapers.

This is not a small island nation
This is not a small island nation

Our roster of meetings in Jakarta had a wide range, from a public school, to public officials, to a social network and a state-owned bank. Yet across these many meetings, several recurring issues facing Indonesia as they posture for growth continually arose.

During our 3 days of visits we had the opportunity to meet with the following firms/officials

  • An elementary school
  • Saratoga Capital, a private equity firm
  • The Governor of Jakarta
  • Lippo group, a diversified conglomerate that has market leading entities in telecom, retail, and other industries
  • Mandiri Bank, the largest bank in Indonesia
  • Astra International, another large conglomerate in manufacturing, automotive, commodities and infrastructure
  • The Minister of Finance for Indonesia
  • Kaskus, a social network/tech startup of sorts with strong engagement among Indoesians
Taking selfies with Jakarta's governor
Taking selfies with Jakarta’s governor
Ok so the selfie stick was kind of a thing. This time with John Riady, Director of Lippo Group
Ok so the selfie stick was kind of a thing. This time with John Riady, Director of Lippo Group
Storytelling at an Indonesian elementary school
Storytelling at an Indonesian elementary school

While these officials and business leaders all offered their own perspectives on the country at large as well as their individual challenges, several overarching themes emerged. There is nearly universal agreement that Indonesia is an economy with tremendous potential that is currently unmet. Recent growth in the middle class and expanding internet penetration could help this country move its economic rankings closer to its population rankings. However, there are serious issues impeding this movement.

For one, corruption has historically been an issue, though the new regime seems intent on curbing it. Further, infrastructure is a tremendous challenge both in the capital and across the nation. Jakarta lacks effective public transport and its roads are a perpetual logjam of disorganized traffic. On the trip from the airport to the hotel, we saw a man walk up to the driver’s door of a public bus and take over for the driver, who walked across the street to the mall. No one on the bus seemed to find this unusual.

From a national infrastructure perspective, several companies with which we met saw ecommerce as an area of huge potential in Indonesia, yet no one appeared to have an answer for the logistical challenges of making deliveries to 6,000 islands in a country without reliable postal service. Nor did they have much of an answer for how domestic players could compete with the Alibabas and Amazons of the world if they chose to enter Indonesia.

Castrol did a study that found Jakarta's traffic worst in the world. After sitting in this, we believe it.
Castrol did a study that found Jakarta’s traffic worst in the world. After sitting in this, we believe it.

Our meetings in Jakarta were hugely educational and leave me with a tremendous interest in this high potential economy moving forward, yet the obstacles Indonesia must overcome are formidable, and many in our group question how they will be tackled. Nonetheless the public officials with which we met were undoubtedly charismatic and aware of their nation’s issues. As such, Indonesia will be an exciting economy to follow in the coming years.

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