Unleashing Indonesia Potential Full Report

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September 2012

The archipelago
economy: Unleashing
Indonesia’s potential

T he McKinsey Global Institute
The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of business leaders. Our micro-to-macro methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. Current research focuses on six themes: productivity and growth, financial markets, technology and innovation, urbanisation, labour markets, and natural resources. Recent research has assessed the diminishing role of equities, progress on debt and deleveraging, resource productivity, cities of the future, the future of work in advanced economies, the economic impact of the Internet, and the role of social technology.

MGI is led by three McKinsey & Company directors: Richard Dobbs, James Manyika, and Charles Roxburgh. Susan Lund serves as director of research. Project teams are led by a group of senior fellows and include consultants from McKinsey’s offices around the world. These teams draw on McKinsey’s global network of partners and industry and management experts. In addition, leading economists, including Nobel laureates, act as research advisers.

The partners of McKinsey & Company fund MGI’s research; it is not commissioned by any business, government, or other institution. For further information about MGI and to download reports, please visit www.mckinsey.com/mgi.

McKinsey & Company in Indonesia
McKinsey & Company is a global management consulting firm that helps many of the world’s leading organisations address their strategic challenges, from reorganising for long-term growth to improving business performance and maximising revenue. With consultants deployed in more than 50 countries across the globe, McKinsey advises on strategic, operational, organisational, and technological issues. For more than eight decades, the firm’s primary objective has been to serve as an organisation’s most trusted external adviser on critical issues facing senior management. McKinsey started serving clients in Indonesia in 1988 and established an office in Jakarta in 1995 with a team of global and local professionals. Today, the office employs more than 60 Indonesian staff and serves private local companies, state-owned enterprises, and the public sector in Indonesia, as well as multinational corporations across industries interested in building their presence in the country.

Copyright © McKinsey & Company 2012

McKinsey Global Institute

September 2012

The archipelago
economy: Unleashing
Indonesia’s potential

Raoul Oberman
Richard Dobbs
Arief Budiman
Fraser Thompson
Morten Rossé

Preface

Indonesia is in the throes of a rapid transformation, swept along by its position at the heart of the world’s most dynamic economic region, rapid urbanisation, and rising incomes that will propel an additional 90 million Indonesian people into the world’s consuming class by 2030. Over the past decade, the economy has grown more strongly and been more stable; today it is more diversified than many outsiders realise. On current trends, Indonesia is on course to become the seventh-largest economy in the world in 2030 from the 16th largest today. If Indonesia can meet a range of constraints on growth, it can fully leverage today’s positive economic trends and offer businesses and investors a lucrative market opportunity.

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