Safely ensconced in Hong Kong, where he was on vacation, an Indonesian-Chinese retailer named Djoko Susanto could have sat tight. Instead, he flew home to defend his four supermarkets from the mob. As he transited Singapore, where planes were arriving from Indonesia full and returning empty, the airline’s crew stared at him in disbelief.
“There were five people on my flight,” Susanto recalls. “And I was the only Chinese.”
While he couldn’t save his stores -- all four were looted to the last light bulb -- Susanto was on hand to seize an opportunity that would make him a billionaire, Bloomberg Markets reports in its June issue.
More than 1,100 people died in the 1998 riots, and the economy contracted 13 percent that year. Doomsayers predicted that the world’s fourth-most-populous nation, a former Dutch colony spanning 17,500 disparate islands, would fragment.
Susanto -- who as a child had slept under a mosquito net on the dirt floor beside his impoverished parents’ market stall -- bet that Indonesia would survive and that its vast mineral and agricultural resources would enrich many of its 238 million citizens, creating a dynamic consumption-driven economy.
6,000 Stores
When that happened, Susanto reasoned, many Indonesians would prefer to shop locally in air-conditioned minimarts rather than at traditional roadside shacks, or warungs.
In October 1999, barely a year after the riots, Susanto opened the first of what’s now a chain of 6,000 stores called Alfamarts.
The investment proved prescient. From 1999 through the end of 2011, Indonesia’s annual growth surged from zero to 6.5 percent, swelling the number of middle-class consumers by 50 million to more than 130 million, according to the World Bank.
During the same period, the average wealth per adult jumped fivefold to more than $12,000, Credit Suisse Group AG reported in October.
While some other fast-developing countries such as China struggle to switch from an export-led to a consumption-based growth model, Indonesia is ahead of the game: Consumer spendingaccounted for 55 percent of gross domestic product in 2011; the comparable figure for China in 2010 was 35 percent.
‘Consumption Engine’
“Indonesia is being driven by this huge consumption engine,” says Pong Ho Yin, a Hong Kong-based fund manager at Allianz Global Investors, which oversees 279 billion euros ($370 billion) worldwide. “The opportunity that is coming from this phenomenon is going to be enormous.”
Pong, who runs Munich-based Allianz’s Indonesia fund, says he believes that the country with the world’s biggest Muslim population could soon be ranked alongside the emerging BRIC giants: Brazil, Russia, India and China.
In the last quarter of 2011, Indonesia’s GDP growth, while lagging China’s 8.9 percent, exceeded India’s 6.1 percent, Russia’s 4.8 percent and Brazil’s 1.4 percent, according to data compiled by Bloomberg.
In the future, Indonesia, with a median population age of 27, may reach a growth rate of 8 percent, Pong says. China’s one-child policy has left behind an aging workforce.
“I can’t imagine Indonesia won’t catch up,” he says.
In this economic environment, Susanto has thrived. In 2009, he sold 10 percent of the shares in his company, PT Sumber Alfaria Trijaya (AMRT), on the Indonesia Stock Exchange, raising 135 billion rupiah ($15 million).
Consumer Power
As of May 1, the stock had climbed more than 13-fold compared with a threefold increase in the Jakarta Composite Index. On May 1, Susanto’s 56 percent stake was worth about 11.4 trillion rupiah, or $1.24 billion.
Not bad for an entrepreneur who left school at 16 because his parents couldn’t afford the fee demanded by the government to change his Chinese name, Kwok Kwie Fo, to an Indonesian one, as required by law.
Susanto says his bet on Indonesia stemmed from his experiences in the 1998 riots as well as his conviction in the potential economic power of the Indonesian consumer.
Though a victim of anti-Chinese policies under then- dictator Suharto, who had closed Chinese schools and banned the language, Susanto discovered that not all Indonesians were antagonistic to the Chinese minority.
Rocketing Numbers
Some of his customers actually tried to protect his stores and were grateful when he reopened for business after just two weeks to provide them with essential supplies, according to his daughter Feny Djoko Susanto, 35, who’s chief executive officer of Sumber Alfaria.
Other companies have cashed in on Indonesian consumerism almost as spectacularly as Susanto’s.
From the beginning of 2009 to May 1, the Jakarta Composite was the world’s fifth-best-performing benchmark index out of 96 tracked by Bloomberg, returning 232 percent compared with a 70 percent rise in the MSCI BRIC Index. (JCI) Topping the list, with a 675 percent increase, is the Venezuela Stock Market Index, which lists only 14 companies and is illiquid.
The rocketing numbers make Indonesian stocks look expensive in the eyes of some investors, such as London-based Robert Davy, who helps manage $20.3 billion of emerging-marketsequities, including Indonesian shares, at Schroder Investment Management Ltd.
Largest Gold Mine
On May 1, the Jakarta index was trading at 14.3 times estimated earnings compared with an emerging-markets average of 10.6.
“In the longer term, Indonesia is clearly highly favorable,” Davy says. “But from the shorter-term perspective, it is one of the more expensive emerging markets.”
Indonesia is the world’s No. 1 exporter of power-station coal, tin and the palm oil that greases one-third of the world’s frying pans and woks.
It’s also home to the largest gold mine and the single biggest recoverable copper reserve and is the world’s second- biggest exporter of liquefied natural gas.
Foreign direct investment -- the biggest source being neighboring Singapore -- jumped 20 percent last year to a record $19.3 billion.
In the space of five weeks in December and January, both Fitch Ratings and Moody’s Investors Service raised Indonesia’s debt to investment grade.
Bankrupt Dictatorship
By contrast, Standard & Poor’s in January downgraded nine European nations, five months after stripping the U.S. of its AAA status.
“In the midst of downgrades, we have been upgrading,” says Indonesian Vice President Boediono, who has a Ph.D. in economics from the University of Pennsylvania’s Wharton School. (Like many Indonesians, Boediono has only one name.)
The ratings firms’ confidence reflects Indonesia’s ascent from bankrupt dictatorship to fiscally stable democracy. After declaring independence from the Dutch in 1945, the country had just two leaders during the next 53 years.
The second of them, Suharto, was president from 1967 until he was forced to step down during the 1998 turmoil sparked by an Asia-wide financial crisis that Indonesia survived only by accepting a $43 billion bailout from the International Monetary Fund.
Under Suharto, businesses in favor with the government exploited an economy reliant on crude oil exports. IMF crisis- management measures began to change that, forcing the breakup of some monopolies.
Western-Educated Technocrats
From 1998 to 2004, three more presidents came and went before the election of Susilo Bambang Yudhoyono, who was returned for a second, and final, five-year term in 2009.
When Yudhoyono, 62, a retired general who underwent some military training in the U.S., came to power, he sprinkled his administration with Western-educated technocrats such as Boediono, who ran the central bank before becoming vice president.
Yudhoyono pledged to attract more investment by cutting interest rates, fighting endemic corruption, raising living standards and fixing crumbling roads and power stations.
While much of that manifesto remains a work in progress, he’s delivered political stability and a fourfold increase in foreign direct investment.
Yudhoyono also declared war on Islamic militants; his forces arrested or killed scores of suspected terrorists, including the masterminds of the 2002 bombings on the resort island of Bali in which 202 people died.
‘Biggest Uncertainty’
Although ethnic and religious tensions remain in some parts of Indonesia, Yudhoyono has dismantled Suharto’s anti-Chinese policies. And Glodok, Jakarta’s Chinatown, has risen from the ashes -- brightly festooned with once-banned Chinese-language banners and signs.
Still, Allianz fund manager Pong says he’s worried about the post-Yudhoyono years.
“It’s the biggest uncertainty,” he says. “There has to be a reform-minded leader.”
“I don’t think we should be nervous,” Boediono says.
Sipping tea beneath a crystal chandelier in the vice presidential residence, a century-old Dutch-colonial-era mansion, Boediono, 69, says the stability of the past eight years will continue even though there’s no obvious successor to Yudhoyono.
“At the moment, people here are searching for good candidates, and I think we will find them,” he says. “Our public is quite smart.”
Car Jockeys
In the meantime, the government is tackling some of the world’s most dysfunctional infrastructure.
Related news
