Thursday, August 11, 2022

Indonesia – Great for holidays, great for business

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DIPLOMAT MAGAZINE “For diplomats, by diplomats” Reaching out the world from the European Union First diplomatic publication based in The Netherlands Founded by members of the diplomatic corps on June 19th, 2013. Diplomat Magazine is inspiring diplomats, civil servants and academics to contribute to a free flow of ideas through an extremely rich diplomatic life, full of exclusive events and cultural exchanges, as well as by exposing profound ideas and political debates in our printed and online editions.

By H.E. Arif Havas Oegroseno, Indonesian Ambassador to Germany.

In December 1994, the then Indonesian Minister for Research and Technology, Bacharuddin. J. Habibie, met with Gerhard Schröder who was the Minister President of Lower Saxony to talk about the preparation for Indonesia’s participation in the Hannover Messe 1995 with a special status as a partner country.

In April 1995, President Soeharto had the honor of giving a speech at the Hannover Messe opening ceremony next to Chancellor Helmut Kohl who praised Indonesia’s involvement as the first Asian partner for this leading industrial trade fair. 

Habibie and Schröder also spoke about improving economic cooperation and talked about the mutual exchange of scientists between Indonesia and Germany. “The two partners are trying to develop ways of working together. We are talking about a joint venture between private shipbuilding companies to build passenger and cargo ships,” said Habibie. At that time, more than a dozen passenger ships have already been built by the Meyer shipyard in Lower Saxony for the Indonesian state-owned shipping company PELNI. 

Industrial knowledge and skills were acquired after decades-long investment on human resources. Since late 1950s, hundreds of thousands Indonesian students were sent to Germany to study engineering, aeronautics, shipping, railways, and other technology. Indonesia now has all what it takes to not only build its own passenger and cargo ships as Habibie and Schröder had envisioned in 1994, but it is now also capable of manufacturing and engineering frigates, locomotives, battle tanks, and various types of sea vessels and aircrafts. 

Shooting forward 25 years later, I followed Habibie’s trail. I met with the Minister President of Lower Saxony, Stephan Weil, in December 2019 to talk about the preparation of Hannover Messe in April 2020 of which Indonesia will, again, be the partner country. We also discussed the upcoming visit of President Joko Widodo to Hannover and spoke about Volkswagen’s investment in Indonesia. But one may ask what is so different between 1995 and 2020 that Indonesia is keen to be the partner country of Hannover Messe for the second time?   

To begin with, Indonesian GDP in 1995 was USD 200 billion and the country was on the brink of recession heading to the 1998 financial crisis when the GDP plummeted to only USD 100 billion. But since the crisis hit, the nation was able to push through adversity and managed to make a continuous average 5% annual growth, keeping the inflation below 3% and unemployment checked under 5%. The GDP grew exponentially to over USD 1 trillion and making it the highest GDP in ASEAN. 

In 1995 Indonesia was proud to be an agricultural country with just a small number of industrial sectors contributing to the total economic output. But now, among Indonesia’s economic sectors, agriculture contributes only about 14% to GDP while industry and services add approximately 43% each to its output. Foreign investment also keeps on pouring in and Moody’s gave Indonesia a Baa2 rating in 2020 for its stable economic growth, low government debt, consistent fiscal discipline and macroeconomic stability. 

Indonesia’s greatest strength lies in its young and productive people. It is the fourth most populous country and 70% of the population belongs to the working age of 18 – 60, thus benefitting in terms of labour market as well as consumer market. This young population embraces the internet like none other, and this became a stimulus to Indonesia’s rapid transformation towards the Fourth Industrial Revolution. The internet of things now manifested in Indonesian industries, for example we no longer make clothing and other apparels manually, we let computer and robots do that for us. 

Digital economy is growing rapidly towards a solid digital community. Digital services such as e-commerce, FinTech and the increasingly growing e-sports also helps in paving the way to the country’s industrial transformation. Estimated at USD 40 billion in 2019, Indonesia’s internet economy is well on track to cross the USD 130 billion mark by 2025 according to a report prepared by Google and Temasek.

Also, figures published by the World Bank in 2017 shows that Indonesia’s manufacturing industry accounts for 20,5% of the total economy. In comparison, manufacturing industry in China accounts for 28%, 27% in South Korea, 21% in Japan, and 20.6 % in Germany. These figures show that Indonesia is only a few steps away to become in the same league with those industrial countries. 

However, this is a less-known fact. Indonesia has long been known as a perfect paradise for tourism. Most people see it as a country with a string of more than 17.000 islands that is renowned for its natural beauty. Its long stretches of white sandy beaches and the range of majestic mountains is a home for diverse flora and fauna and people of different ethnicities and rich cultures. Indonesia is indeed a magnet for holiday-goers. But less realizes the fact that it is also a thriving economy and is in the list of 20 largest economies in the world that enables it to be admitted into the exclusive grouping of G-20 countries. 

The appointment of Indonesia as the partner country of Hannover Messe for the second time serves as an attestation to Indonesia’s economic and industrial achievement. The partner country status enables Indonesian industries to showcase to the world their rapid transformation and big leap towards the Fourth Industrial Revolution, or Industry 4.0. Policy wise, making Indonesian industries to transform to 4.0 has been a national strategy for the last 5 years for the purpose of accelerating the Government’s ambitious target to put Indonesia in the list of 10 biggest economy by 2030.

H.E. Arif Havas Oegroseno Indonesian Ambassador to Germany.

Making Indonesia 4.0” thus becomes the theme of Indonesia’s partnership with Hannover Messe in 2020 that acclaims huge opportunities for business and investment in industrial sectors, supported by Indonesia’s huge market, productive and talented population, plentiful natural resources and space, and political stability.

Indonesia’s main industrial sectors are apparel, food and beverage, automotive -motorcycles to a large extent-, as well as electronics and chemical industries. Some industries are already implementing 4.0 technology. Textile production is an example. Indonesia has 4.0 factories that produce uniforms from high-tech materials for the use of military personnel and fire brigades across the world, including in Europe. The national industrial transformation is underway and spreading to various sectors supported by a strong digital economy with its many start-ups companies, programmers, software developers, etc.

At Hannover Messe in April 2020, Indonesia will showcase its industrial accomplishments and its Industry 4.0 champions to attract partnerships across three dimensions: Investments, Technology, and Capacity Building. Indonesia also cares about its emerging start-up ecosystem and will bring a number of start-up companies along to Hannover for the much-needed international exposures. So far, Indonesia has 4 unicorns and 1 decacorn that is valued above USD 10 billion. Their presence at Hannover Messe will hopefully be a gateway for them to penetrate German and EU market. 

More than 170 Indonesian exhibitors will occupy an exhibition area of more than 4.000 m². They will not only show what they have achieved with 4.0 technology, but also offering worth-grabbing business opportunities. I believe that strong cooperation and connections between supply and value chain providers will further accelerate the world’s economic growth. This is exactly the viewpoint that Indonesia brings to Hannover Messe 2020 under the tagline “Connect to Accelerate”. Indonesia will present itself as a country that is ready to take an important part in the global supply and value chains. Indonesia stands ready to cooperate with global industries in the form of investment, transfer of technology as well as human resource development. 

In short, the message that we have for the world in Hannover Messe is that Indonesia is not only great for holidays, it is also great for business!    

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