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By Ruben van den Boer

The APEC 2013 summit held on Bali underpinned what we have already known: Asia’s future challenge is to transit its economy to a more urban-oriented and domestic-led growth. Change becomes more urgent and critical after declining growth estimations for the region. However, this is not merely a regional issue: The world economy is at stake.

Despite disappointing growth rates and financial warnings, China remains the center of Asia’s future economy. But who comes second? During a recent survey (PwC) among 478 APEC CEO’s, the majority (19%) favored Indonesia as the next “black horse” of the region: The country that will surprise and exceed growth expectations within the next 5 years. In the last decade, the West has often undermined Indonesia’s rapid growth as it was overshadowed by China and other emerging markets. But these are the facts:
  • Indonesia is the biggest economy in South East Asia (GDP). It is expected that the country will exceed Germany and the UK by 2050. The average year on year growth rate till 2050 is calculated to be 7.3% of GDP ($), just behind India and slightly ahead of China.
  • Indonesia counts 240 million inhabitants. Over 60% of the population resides on Java, an island covering just 7% of Indonesia’s total surface. Java is the world’s most populated island.
  • Indonesia has a labor force of 121 million workers. The low wages and relatively stable political situation attracts foreign investments.
  • Indonesia’s economy is still import-oriented. Trade deficit has led to a weakening of the local currency. A marginal trade surplus was recorded in August, the first in five months.
  •  Japan is Indonesia’s largest trading partner, followed by China. However, China is going for gold and is strengthening its ties with the country.
  •   Traffic in Jakarta is worse than in Beijing and Shanghai (can you believe it?).
Still many challenges remain for Indonesia before it is able to develop following the example of the Asian tigers and China. In addition, one must not forget surrounding economies such as Bangladesh and the Philippines with similar demographic advantages. However, Western powers are advised to predict beyond China and prepare for the next emerging (not Westernized) Asian giant. It might turn out to be another culture shock.