Growth StrategyIndonesia

March 2013

The original version of the strategy is produced in Danish only. This unofficial version contains an abbreviated summary of the key points, which could be of particular interest to a non-Danish audience.

Unofficial, abridged English version

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Denmark in Indonesia A commitment to growthThis strategy forms part of the overall efforts of the Danish government to strengthen cooperation with 10 selected emerging and growing markets.1 In close cooperation with the Danish private sector, the government will work hard to increase the Danish engagement in these rapidly grow-ing economies, from where the bulk of global econo mic growth will come in the coming years.

Indonesia at the center of growthIndonesia enjoys a strategic location in one of the most dynamic regions of the world. In the coming years, 90 percent of global economic growth is expected to be gener-ated outside Europe, and by 2025 more than 60 percent is expected to come from Asia. The role of Asia – and Indone-sia in the centre of South East Asia – will continue to grow in the years to come.

Even at a time of global economic slowdown, Indonesia is experiencing sustained and stable high growth rates. Eco-nomic growth is not least driven by high domestic demand from a steadily growing Indonesian middle class. Today, the middle class in Indonesia is made up of almost 50 million people, and according to current projections, this number will grow with an extra 90 million during the next 15 years, making it one of the largest in Asia.

A number of other key factors point to Indonesia’s strategic importance and potential:

• The demographic composition. More than half the popu-lation is less than 29 years old, something that will en-sure growth in the workforce for at least the next 20 years.

• The domestic demand for goods and services ensures a high degree of stability in the Indonesian economy,

which explains much of the impressive and stable growth rates in Indonesia, even during the global crisis.

• Relatively low production costs. Foreign investors can benefit from Indonesia’s low level of prices on com-modities and labour, and direct foreign investments are sky rocketing.

• Indonesia’s vast natural resources can, if used responsi-bly, greatly contribute to additional growth.

Many years of impressive economic growth in Indonesia has not only resulted in enormous gains, but it has also led to new and rising challenges, e.g. a growing demand for energy, increasing pressure on natural resources, environ-mental degradation and infrastructure challenges. These developments have created a rising demand for smart, efficient and sustainable solutions to secure inclusive and sustainable economic growth for the present as well as future generations. Challenges, that Danish companies and institutions, expertise and technology are particularly well-equipped to address.

A long history togetherThe relationship between the Republic of Indonesia andDenmark is strong and dates back to the establishment ofofficial diplomatic relations soon after Indonesia gainedindependence.

Indonesia and Denmark have for the past 10-15 years enjoyed a strong partnership in areas such as good govern-ance, environment, energy and climate change, where the two countries have worked together both globally and bilat-erally. The two countries have a lot to offer each other, and both would benefit from an even stronger collaboration.

1 In Asia: China, India, Indonesia, South Korea and Vietnam

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The relationship between Denmark and Indonesia finds its expression through the EU-Indonesia relationship also. EU is Indonesia’s 4th biggest trading partner, and more than 10 percent of Indonesia’s total export goes to EU. Lately, Indonesia and EU have been discussing the scope for negotiations on a Comprehensive Economic Partnership Agreement that would further enhance the opportunities for commerce and investments to mutual benefit for eco-nomic growth and development in both Indonesia and EU.

Our bonds extend beyond commerce and trade. For several decades, Indonesia and Denmark have also enjoyed a friend ly rivalry in the game of ‘bulu tangkis’, also known as badminton. From Rudy Hartono and Svend Pri’s matches in the 70s, to Liem Swie Kong and Morten Frost Hansen in the 80s, and in recent years Taufik Hidayat and Peter Gade, badminton has more than any other sport defined our common cultural legacy.

A stronger Danish engagementSome Danish companies and institutions are already en-gaged in Indonesia, but the potential for a stronger Danish engagement in Indonesia and for Indonesian-Danish col-laboration is considerable. In 2011, Indonesia was only the 60th largest export destination for Denmark – and just the 11th largest in Asia. If Denmark was as successful as for

example Sweden and Germany in exporting goods to Indo-nesia, the export would be about three times as high.

With the Growth Strategy for Indonesia, the Danish gov-ernment intends to strengthen Danish engagement in Indonesia and sets itself the target of more than doubling Danish exports to Indonesia by 2016.

To achieve this, the government will work to support coop-eration and partnerships between Indonesian and Danish companies and institutions, to enhance the visibility of Denmark and Danish competences, technologies and prod-ucts in Indonesia, as well as assist Danish companies and institutions in getting a foothold in the Indonesian market – especially in areas where there is a demand for Danish expertise and know-how.

In addition to a number of concrete initiatives within the specific sectors and areas, the Danish government will strive to:

• Promote more high level visits to Indonesia, and at least one visit yearly by a Danish minister.

• Encourage more Indonesian companies, institutions and decision-makers to visit Denmark.

• Support collaboration and dialogue between Indone-sian and Danish business and industry organizations.

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• Continue to facilitate the mobility of Indonesian and Danish business people by ensuring an efficient and smooth administration of the Schengen visa regulation, resulting in rapid processing of visas to representatives from Indonesian and Danish companies.

• Increase the knowledge about Denmark in Indonesia, in coordination with private and public players.

Indonesia and Denmark already have close cooperation within a variety of programmes – e.g. the long-standing development cooperation within environment, energy and climate change, as well as the Danida Business Part-nerships and Danida Business Finance programmes. In the coming years, Denmark will explore synergies between these many different instruments to an even larger degree, with the purpose of supporting sustainable, green and in-clusive growth in Indonesia as well as furthering trade and investment in general between our countries.

Foreign companies in Indonesia work under social and en-vironmental framework conditions which differ a lot across sectors and are dependent on the choice of local partners. The high level of awareness of and practice with responsi-ble behaviour and CSR displayed by Danish companies will make them attractive as business partners for local compa-nies and authorities that wish to be a part of a modern and more international business environment.

With Indonesia’s rapidly growing middle class, we also see changing consumption and life style patterns. This results in an increasing demand for high quality consumer, design and fashion goods. Changing life style patterns and increasing income levels are also expected to raise the demand for high quality health services and new products and solutions within the healthcare sector in general.

Apart from the cross-cutting measures, Denmark will work proactively to strengthen collaboration and engagement in a number of specific sectors and thematic areas, where the rapid development of Indonesia and the resulting oppor-tunities and challenges seem particularly well matched by Danish competences, technologies and experiences:

• Cleantech, i.e. green and clean technologies• Food stuffs, food production and food technologies• Infrastructure • Education

• Design, luxury and consumer goods• Healthcare

These areas are briefly outlined below.

Key sectors and focus areas• Cleantech – environment, green growth, renewable

energy and energy efficiency Indonesia is increasingly focusing on environmental, energy- and climate change-related issues. The Danish government will continue to support the Indonesian government in addressing these issues and will work to further strengthen cooperation between the two countries in these areas; also with a view to enabling Danish and Indonesian companies and institutions to establish partnerships and working relationship in areas where Danish companies and institutions are truly world leaders.

• Food industry and technology The growing Indonesian population and the growing middle class necessitate higher productivity in food production and lead to an increase in the demand for high quality food products. The Danish government will actively encourage Danish companies to focus on Indonesia to promote high efficiency production methods and high quality food products and will work to reduce market barriers.

• Infrastructure The Indonesian government has planned extensive investments in Indonesian harbours, improvements of road systems and supply of water and electricity over the coming years. Such investments are needed to re-solve key infrastructural ‘bottleneck’ challenges and to further spur economic growth. In many areas, Danish companies have cutting edge solutions and consider-able experience from large infrastructure develop-ments home and abroad. These could be of particular relevance as Indonesia looks to increase efficiency and sustainability of investments in and management of infrastructure in the coming years.

• Education The Indonesian educational system has undergone massive improvements, which is also leading to further

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demand for higher level and higher quality education , especially with regard to science and engineering. Dan-ish institutions, with an increasing international focus, can contribute to meeting this demand in cooperation with Indonesian institutions.

• Design, luxury and consumer goods The growing number of middle class consumers and the economic growth in general have resulted in an increasing demand for high quality brands, luxury and design goods in Indonesia. The increasingly sophisti-cated Indonesian market holds considerable potential for Danish luxury, high quality, design and architecture products, which have won world wide recognition.

• Healthcare The Indonesian government has set an ambitious target of universal healthcare, and the health care system has undergone a massive decentralization process. Danish experiences and systems as well as Danish products could play a significant role in contributing to reaching this goal – and in meeting the rising demand for high quality medication to prevent and treat lifestyle dis-eases in Indonesia.

Programs of particular interest to Indonesian stakeholders:

Environmental Support Programme (ESP3)Implementation of the 3rd phase of Danida’s Environmen-tal Support Programme in Indonesia, ESP3, will begin in 2013 with 270 million DKK (app USD 50 million) during the period 2013-2017. The ESP3 programme provides strategic support to the Indonesian government’s development ob-jectives within the thematic areas of Environment, Energy and Climate/Forestry and has provisions for pilot and dem-onstration projects within the area of energy and environ-ment. The objective is to promote inclusive and sustainable growth through improved environmental management and climate change mitigation and adaptation.

For more information visit: http://indonesien.um.dk/en/danida-en/environmental-support-program/

Danida Business Partnership (DBP)The purpose of DBP is to support sustainable partnerships between Indonesian and Danish companies, with a view to advance sustainable development and contributing to pov-erty reduction. Via transfer of knowledge and technology from Danish companies to their Indonesian partners, the programme aims to promote local businesses and thereby create growth and employment in Indonesia.

For more information visit: http://indonesien.um.dk/en/danida-en/menu-2/

Danida Business Finance (DBF)DBF increases access to long-term financing through invol-vement of commercial actors for investments in important infrastructure, which will lay the groundwork for economic growth. DBF also aims at assisting minor industrial projects that have a potential for creating more jobs, which cannot be financed by normal market conditions. DBF targets key infrastructure sectors where investment improves the climate for economic development, in particular for the private sector. The main sectors are transportation, energy, water supply and sanitation. In all areas, climate-friendly and cleaner technology is a top priority.

For more information visit: http://um.dk/en/danida-en/ activities/business/finance/

Investment Fund for Developing Countries (IFU) IFU invests on a commercial basis by committing equity capital or by providing loans or guarantees to project com-panies, the purpose being to promote development in host countries. IFU has together with Danish companies coin-vested in 750 companies in 85 developing countries. Com-mitted investments in a total of more than 100 billion, of which IFU has contributed about DKK 9 billion. IFU invest-ments have contributed to creating around 350,000 jobs in the host countries.

For more information visit: http://www.ifu.dk/en/About+IFU

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Embassy of DenmarkMenara Rajawali 25th Floor, Kawasan Mega Kuningan Lot 5.1, Jakarta 12950Phone: 21 576-1478Fax: 21 576-1535Webpage: http://indonesien.um.dk/en.aspxE-mail: jktamb@um.dk Facebook: www.facebook.com/DenmarkInIndonesiaTwitter: www.twitter.com/DkinIndonesiaLinkedin: www.linkedin.com/company/danish-embassy-in-indonesia

Ministry of Foreign Affairs of DenmarkWebpage: http://um.dk/en

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