Indonesia Wants to be Included in BRIC Nations

BRIC Business

The economy of Indonesia could double over the next six years as the world’s largest exporter of power- station coal and biggest producer of palm oil taps growing demand from India and China.

China, India and Indonesia will generate close to $10 trillion of wealth for investors by 2015, Nicholas Cashmore, head of Indonesia research at CLSA Asia-Pacific Markets, said in a note titled “Chindonesia: Enter the Komodo,” a reference to the reptile found only in eastern Indonesia. The three economies are Asia’s “next growth triangle,” he said.

Taking care of the growing needs of the world’s two most-populated nations as demand from Western countries slows may aid President Susilo Bambang Yudhoyono meet his goal of increasing growth to 7 percent in his second term. Indonesia wants be included among the BRIC nations of Brazil, Russia, India and China.

India’s industrial production grew at the quickest pace in eight months in May. The South Asian nation, the biggest buyer of Indonesia’s palm oil and cashew, may overtake China next year as the world’s fastest growing major economy.

BRIC Membership

China’s economy will enlarge by 7.2 percent in 2009 from a year earlier. Indonesia’s exports to China grew 16 percent last year, compared with a 10.7 percent expansion in demand from the U.S., the second-largest buyer of Indonesian products.

Indonesia’s economic boost provides a case for its being considered among the BRIC economies.

The $433 billion economy can expand “significantly” more than 7 percent once Yudhoyono fixes the nation’s congested roads, neglected ports and ageing power plants.

Yudhoyono is set to win a second term after presidential elections this week, providing the 59-year-old former general with a mandate to double spending on roads and power to $140 billion by 2014.

Congested Roads

Fixing Indonesia’s congested roads, neglected ports and ageing power plants needs to be among Yudhoyono’s highest priorities for him to reach his goal of increasing growth and reducing povertys.

He also needs to improve transparency in Indonesia’s legal system and reduce corruption to attract global investors, a survey found.

In 2007, Tata Power Co., which is building a 4,000-megawatt plant in western India, acquired a 30 percent stake in two coal mining units owned by Indonesia’s PT Bumi Resources. The $4.14 billion plant will run on coal from the Indonesian mines.

India’s coal imports will more than double to 100 million tons by 2012 from 40 million tons, estimates Kaamil Fareed, a senior trading manager at the Coal & Oil Group, which supplies coal in India and Pakistan. That’s about 40 percent of Indonesia’s estimated coal production for 2009.

BRIC Business