Just back from Jakarta after briefing a group of high-net worth investors on global supply chain opportunities, as well as visiting factories in Tangerang. West Java’s manufacturing base has so far captured only niche global export opportunities. However, that will change as US-China trade tensions grow and local infrastructure gradually improves.
My 5 takeaways:
1) US-China trade tensions will motivate global buyers to rethink their sourcing opportunities in Indonesia, despite port bottlenecks and policy uncertainty.
2) Indonesia is nevertheless a niche alternative to China’s manufacturing base, rather than a substitute. Manufacturing for the domestic market may offer a bigger opportunity.
3) The China-backed high-speed rail link between Jakarta and Bandung is progressing slowly. But it will be a driver for attracting growing Chinese investment in West Java.
4) And yet Japan still invests twice as much in Indonesia as compared to China. Japanese funding and contractors are critical to Jakarta’s metro projects and other infrastructure development.
5) Improved infrastructure will see commercial growth in Jakarta’s outlying suburbs to the east and west, as well in Bandung once the high-speed line is completed.