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Billionaires club grows fastest in Indonesia

Publication Date : 28-09-2012

 

The billionaires club in Indonesia is set to welcome new members.

In its latest "Wealth Report: Asia", Julius Baer, a prominent Swiss private banking group, has identified Indonesia, alongside China and India, as the frontrunners of wealth creation in Asia.

The region is expected to witness the number of high net worth individuals, or HNWI, reach 3 million by 2015.

As many as 1.46 million of these HNWIs — defined as those with investable assets surpassing US$1 million, excluding primary residences — will come from China with a total stock wealth of around $9.3 trillion, and 420,000 from India with $2.6 trillion.

"The number of high net worth individuals in Indonesia will increase to around 104,000 individuals in 2015 from 33,000 in 2010," said Stefan Hofer, executive director of emerging markets strategy research at Julius Baer.

Based on the report, the wealth stock of these Indonesians could touch $518 billion by 2015.

"Indonesia exhibits the highest growth rate among HNWIs in all the countries we have looked at," Hofer said in an exclusive interview with The Jakarta Post yesterday.

According to Hofer, the number of high net worth individuals in Indonesia was growing at a rate of at least 25 per cent annually, owing to the booming domestic business environment.

While the economies in the US and Europe continued to languish, and as countries such as Brazil ran out of steam, Indonesia posted 6.4 per cent growth in gross domestic product (GDP) in the second quarter, slightly higher than the 6.3 per cent exhibited in the first quarter.

Noted senior economist Fauzi Ichsan said that wealth in Indonesia had also accrued due to improved property and stock prices.

"There are two sources of riches. First, the valuation effect of higher priced assets, including property and shares, which are currently owned by the rich," Ichsan said, adding that economic growth was the second source of riches.

With a total GDP of $846 billion last year, Indonesia is the world's 16th-largest economy according to data from the International Monetary Fund (IMF).

"The backbone of the Indonesian economy is consumer spending, which generates more than half the total GDP. Hence, stocks of companies catering to household consumption may continue to do well," he said.

Hofer added that "improvements in the business operating environment" had acted as a lubricant for businesses.

"Indonesia has made a lot of progress in the regulatory environment, making it easier for businesses to access credit, to register their businesses and so on," he noted.

Besides regulatory improvements, an ample supply of labour, the linchpin of a "virtuous cycle", bodes well for entrepreneurs.

Based on the report, 38.3 per cent of Indonesians are employed in agriculture, with 42.4 per cent and 19.3 per cent in the service and industrial sectors, respectively. Meanwhile, around 44 per cent of Indonesians are urbanised.

The rising consumption in Indonesia has become a springboard for wealth creation, especially for businesses within the service sector, although commodities, a “traditional” source of wealth for Indonesians, remained an essential driver in riches, Hofer said.

He also noted that "the long-term challenge or goal for Indonesia is to expand the manufacturing sector".

 

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