Did you know that Indonesia is expected to add about 8 million people to the middle class each year between now and 2020? That means changing consumption habits, new supply chains and a whole lot of opportunities for Canadian companies. But the time to act is now.
Canadian exports to Indonesia have risen more steeply in recent years, than to nearly any other country. Looking at the latest government data, the value of Canadian exports to Indonesia grew an average of 11 per cent annually between 2007 to 2012, compared to a mere 0.2 per cent worldwide. Over the same period, Canadian direct investment stock in Indonesia jumped more than 50 per cent overall to $3.2 billion.
Besides strong resource exports, such as potash and wheat, Canada’s aerospace sector exports stand out. They’re valued at well over $400 million today, compared to some $10 million just six years ago. As for Canada’s investment in Indonesia, the bulk is in energy, mining and related infrastructure development. Four other sectors are prime targets for Canadian equipment and services, namely land transportation, agrifood, cleantech and healthcare.
Like China and India, Indonesia offers a fast-growing middle class among a population of nearly 250 million. Its labour force is the fourth largest in the world and one of the youngest. “Nearly half of the people are under 25 years old, industrious and eager to be trained,” says Chia Wan Liew, EDC’s chief representative for Southeast Asia.
From Air to Land Projects
Roughly half the world’s air traffic growth in the next two decades will be driven by the Asia-Pacific region, notes the Canadian Trade Commissioner Service (TCS). Indonesia is among the region’s biggest markets, offering unprecedented opportunities to the whole Canadian aerospace supply chain.
Bombardier’s single largest CRJ1000 fleet sale outside North America, for example, was in Indonesia. Besides thousands of new aircraft, the country needs related parts, maintenance, repair and overhaul services — a sector that is 1,100-strong in Canada. In February, for example, Flying Colours Corp. of Ontario was contracted to do interior work on all Bombardier business jets at the aerospace giant’s new service centre in Singapore, which will serve clients in Indonesia and across Asia Pacific.
In infrastructure, Indonesia plans to build 20,000 kilometres of roads, since its road density is one of the lowest in Southeast Asia. It is also developing its railway system, will add some 15,000 megawatts of power, and will spend double on ports and airports.
Last November the Province of Ontario, along with the TCS in Jakarta, CCC and EDC, led an airport infrastructure mission to Jakarta and Bali. The mission arranged for six Canadian companies in the sector’s value chain, such as design, engineering, airport management, security and equipment suppliers, to meet with Indonesian airport operators and local government agencies to explore their plans and requirements.
“These projects tend to have long gestation periods. The good news is that some companies submitted preliminary proposals for consideration by the relevant Indonesian authorities,” says Liew Another big plus: the country is part of the 10-nation Southeast Asian free-trading block (ASEAN). “This offers exceptional supply chain access, meaning relatively easy movement of goods, labour and services between those markets, plus inroads to Indonesia’s single top trading partner—China,” says Liew. He adds that 95 per cent of ASEAN market products get into China with little or no tariffs.