Indonesia: The Next Economic Superpower

In 2014, Indonesia was the 10th largest economy in the world in terms of GDP (gross domestic product) in constant prices and at purchasing power parity (PPP) of $2.52 trillion. In 2027, Indonesia stands to become the sixth-largest economy in the world, reaching $4.571 trillion and overtaking giants such as Brazil, France, and the UK in the process. Read more to find out how.

An exclusive from the Financial Times with Indonesia’s president, Joko Widodo (fondly known as Jokowi) shed light on the vast economic growth and development in his tenure. Since his first election victory in 2014, the Indonesia’s GDP has grown at about 5% annually, excluding the year affected by the global COVID-19 pandemic. This growth is also reflected on the domestic level, as the GDP of small cities on and around Java Island set to grow by more than 7% by 2030. There are many factors at play for this spurt, one of them being Indonesia’s emergence as the world’s largest producer of nickel, which is commonly used in new technology in sustainable energy, such as electric vehicles and their batteries. With China and the USA as Indonesia’s biggest trading partners and export destinations, having the world’s two largest economies as customers has boosted Indonesia’s international economic standing. 

The high investments in improving infrastructure have paved the way for foreign investment, as international companies took advantage of new roads and airports to have a direct presence for easier access. After the ban on exports of nickel ore in 2020, major companies such as LG (South Korea), Tsingshan (China), and Vale (Brazil) set up factories for access to the mines, a trend which has continued as more companies incorporate Indonesia in their supply chain.

This has seen a growth in other markets, such as the Courier, Express, and Parcel (CEP) market and the ecommerce industry. FedEx declared new services such as reducing transit time between Indonesia and Singapore, an important trading partner, to just one day, and a warehouse with new global capabilities to support local businesses. Meanwhile, DHL also announced expansion of warehouses and the construction of a Green Logistics Facility of 40 thousand square meters.  The CEP market is expected to grow with a compound annual growth rat (CAGR) of 8.96% from today until 2028, reaching a valuation of 8.15 billions USD. Similarly, improving infrastructure and technology has led to an ecommerce market revenue of 54.2 billions USD, which constitutes more than half of the entire ASEAN ecommerce market revenue. 

Sustainable development has become a priority in the country’s economic growth, as a domestic electric vehicle and battery supply chain has emerged in a look for the future. This remains in line with President Windowo’s stance on sustainability, such as can be seen in the emphasis on the size of green areas in his efforts to establish a new capital. He boldly predicts that the new generation of young Indonesians will enjoy the equatorial city, citing zero carbon as a major attractive point. 

As such, Indonesia is well positioned to welcome the strong developments in the national economy, foreign investments leading to market growth, and sustainability, and it is not a surprise that it could very well become the next economic superpower in the world. Mail Boxes Etc. is looking forward to joining this economic growth and take advantage of the booming CEP and ecommerce market. 

(Photo: iStock)

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