Indonesia’s Economic Vision: A Global Force by 2045

Indonesia’s Economic Vision: A Global Force by 2045

PermataBank CEO Ibu Meliza Rusli outlines Indonesia’s growth drivers and pivotal global trade role, emphasising digitalisation and sustainability.

In an insightful conversation with the Bangkok Post, Meliza Rusli, President Director of PermataBank, highlights the key drivers poised to propel Indonesia into a leading global and regional trading power by 2045, including the nation’s vibrant startup ecosystem, burgeoning middle class, and strategic investments in sectors like digitalisation and renewable energy. In so doing, she sheds light on Indonesia’s ambitious journey towards becoming the 4th largest economy in the world.

What are the key drivers of Indonesia’s economy moving forward and what role do you see the country playing in global and regional trade?

We believe Indonesia will play an increasingly important role in both trade within Southeast Asia and with the region’s key trading partners. We are Southeast Asia’s largest economy with a clear vision to become the 4th largest single economy in the world within 2045, driven by factors such as positive demographics, a growing middle class, a vibrant startup scene and abundant natural resources. This puts us on a path to deliver consistent future growth and to offer great potential in the digitalisation, renewable energy, healthcare, supply chain and manufacturing sectors. New growth areas, such as electric vehicle (EV) production provide fertile ground for investment. These are some of the factors that led Bangkok Bank to acquire PermataBank in 2020, which was the largest intra-ASEAN banking acquisition in history. We celebrate the fourth anniversary of our acquisition in the coming May.

Our economy proved itself to be robust and resilient throughout the coronavirus pandemic, recovering faster than average compared to other countries. This helps create confidence in our position as a reliable, major producer of raw materials for other industries within the ASEAN region and beyond. Going forward, the development and economic integration of the greater Asian region, spanning from China and Japan, through ASEAN countries to Indonesia, will be a driving force for the economies of Southeast Asian nations. We are well placed to support development programmes such as the Belt and Road Initiative and the Indo-Pacific Economic Framework for Prosperity.

The region’s economic growth prospects remain relatively high, coupled with strong regional stability, making it attractive for investors. Moreover, with the trend of diversifying manufacturing value chains in addition to China, ASEAN countries are emerging as potential destinations for investors, offering relatively high growth, cost-effective production, and labour, and a consistently growing market.

How important is ASEAN to Indonesia’s growth?

ASEAN plays a highly significant role in our economy, both as a trade partner and a source of foreign direct investment. ASEAN is Indonesia’s second-largest trading partner after China, accounting for 21% of our total trade value in 2022. Trade between Indonesia and ASEAN is on an upward trend and reached US$111.4 billion in 2022.

By being part of ASEAN, Indonesia gains broader market access for our products, and similarly, ASEAN countries can market their products in Indonesia. With the increasingly integrated global manufacturing production chains, Indonesia and ASEAN countries can collaborate to enhance their roles in the global manufacturing production chain, which is already evident in the automotive industry.

A key driver of our ability to support such developments is Bangkok Bank Group’s Connecting ASEAN strategy, which focuses on building the partnerships and facilitating the trade and investment needed to deliver sustainable growth across the region. Bangkok Bank has been building its regional and international network since 1954 and this enables us to tap into unparalleled expertise, experience, and advice on how to help businesses invest and grow across the region.

We are working to help customers understand the importance of having a regionalisation strategy. Currently, most Indonesian companies are focused on our domestic market because it offers so much growth potential, a key factor in attracting investment from other ASEAN markets such as Thailand. However, we believe those local companies that develop a regionalisation strategy now will gain significant long-term advantages over those who decide to wait longer.

Connecting ASEAN goes beyond trade and investment to facilitating regional financial connectivity, interoperability, and cross border payment. We have worked with Bangkok Bank to achieve good successes through the use of QR code cross-border payment as well as trade finance.

What are you seeing in terms of trade and investment between Thailand and Indonesia?

Direct investment and trade value from Thailand into Indonesia has been steadily increasing over the past 20 years. Foreign direct investment (FDI) from Thailand to Indonesia has grown from $16 million in 2003 to $186 million in 2023. Moreover, total trade value between Thailand and Indonesia also rose significantly, from $3.1 billion in 2003 to $19.2 billion in 2022.

PermataBank, Indonesia’s 8th largest bank by assets, can support companies wanting to invest or expand into Indonesia by providing a full range of corporate banking services. We can also support the investors’ and their employees’ deposit and wealth banking needs served through our digital platform and 216 domestic branches.

We are also concentrating on facilitating business matching to help PermataBank and Bangkok Bank customers find the right partner to expand their endeavours. At the same time, we are striving to provide cross-selling synergy to both banks’ customers and accelerate cross-border trade through the support of ASEAN member governments.

We are also working with Bangkok Bank Group customers in Thailand. Recently PermataBank collaborated with The Mall Group in Thailand to deliver real value to PermataBank credit card customers who can access discounts and special prices when using their PermataBank cards at The Mall Group outlets in Thailand.

How are Indonesia’s government, regulators and businesses doing in terms of adopting ESG and transitioning to net zero? What are the key challenges they are facing?

Indonesia is taking sustainability very seriously. We have a diverse ecosystem, abundant natural resources, and a fast-growing population, so it is critical that we develop sustainably to safeguard the future for generations to come.

President Jokowi’s government committed to achieving net zero within 2060. To support this, the Financial Services Authority (OJK) developed the Sustainable Finance Roadmap 2021-2025 and published the Green Taxonomy in 2022. These initiatives help provide a regulatory ESG framework for finance which can help attract both domestic and foreign investment to help the country to achieve its sustainability objectives.

This relatively new focus on sustainability and sustainable finance has been received positively in Indonesia. More green financing products such as green bonds, sustainability bonds, sustainability-linked loans, social impact bonds, and SME loans, as well as sustainable investment funds, are being developed. There’s also increasing focus on the social aspect of ESG in terms of expanding financial inclusion to unbanked and underbanked people.

While Indonesia has started its sustainability journey, we know we will face challenges along the way. We are the world’s fourth-largest emitter of greenhouse gases and Southeast Asia relies on fossil fuels for about 80% of the region’s energy production. It is important that we help facilitate a just transition which balances the demand for an affordable, reliable supply of electricity to households with the pace of decarbonisation.

Initiatives, such as Indonesia’s Just Energy Transition Partnership, are already in place to mitigate such challenges. The partnership will mobilise $20 billion in public and private financing to decarbonise Indonesia’s energy sector through decarbonisation of coal power plants, expanding renewable energy capacity and infrastructure, and developing a green ecosystem. While this is a good start, it falls well short of the investment that will be required.

Transition requires funds and innovation, and this will also lead to new opportunities for investment and job creation in the sustainability space, such as green infrastructure, electric vehicles, environmentally friendly transportation, renewable energy, waste management, sustainable buildings, and sustainable tourism.

As part of Bangkok Bank Group, PermataBank is able to draw on the group’s experience and expertise both in terms of providing transition finance as well as advising corporate customers on how they can seek new opportunities in the sustainability space, identify and manage ESG-related risks and adapt their business models to comply with increasingly stringent ESG regulations. Bangkok Bank is a leading financier of green/renewable energy and transition finance in ASEAN as well as the leading underwriter of green and ESG bonds in Thailand.

What impact do you think the recent elections will have on Indonesia’s economic strategy and direction? (This interview was conducted before the official result of the election was announced)

The official results will be released by 20 March, so we do not have confirmation of the winner yet. We are the world’s third largest democracy with more than 200 million eligible voters and the elections for more than 20,000 seats across more than 17,000 islands were conducted in a free and fair way. Whoever is officially declared the winner, we expect key economic and sustainability policies and commitments to remain largely intact. While the different presidential candidates proposed different policies, in terms of the business and economic environment, we expect continuity in the approach to creating a transparent and welcoming investment environment. We are all committed to helping Indonesia grow in an equitable and sustainable manner.

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