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DBS points to digital economy, EVs, infrastructure as 2021 growth drivers
A DBS conference on economic insights has highlighted that the economic drivers for Indonesia in 2021 will be these three sectors, propelled by pandemic-induced shifts over the past year.
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he digital economy, electric vehicles (EVs) and infrastructure are this year’s prominent sectors according to an economist at Singapore’s DBS Bank, who has made the projection based on accelerated digitalization and the government’s investment focus during the pandemic.
DBS Economics and Macro Strategy senior vice president Radhika Rao said the recent shift in consumers to e-commerce platforms, the government’s partnership with EV manufacturers and the recently established Indonesian Investment Authority (INA) would be key economic drivers for 2021.
“Everything has now moved online, so that the digital economy has really taken off,” Rao said at the DBS Indonesia Asian Insights Conference 2021 titled "Reimagining the Future of Indonesia", held virtually on Monday.
“And because of that, if you have seen product lines like consumer electronics, regarding semiconductors, particularly inputs that go into computers, PCs, mobile phones, all of that, those industries have done very well. So there [were] a lot of investments that went into that space,” she said.
According to the e-Conomy SEA 2020 Report by Google, Temasek and Bain & Company, with the COVID-19 pandemic quickening the pace of digitalization in the country, investments in the internet sector doubled to US$2.8 billion in the first half of 2020 from $1.4 billion in the first half of 2019.
The report also found that 37 percent of all digital consumers in the country were new, with an overwhelming majority planning to continue at least one digital service post-pandemic.
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The government also pursued talks with American EV manufacturer Tesla, seeking to capitalize on the country’s nickel reserves, a key component in electric vehicle batteries (EVBs).
It also wooed Contemporary Amperex Technology Co. Limited (CATL), a Chinese battery manufacturer, and South Korean electronics giant LG. Indonesian Investment Coordinating Board (BKPM) chairman Bahlil Lahadalia said that CATL had committed to a $5.2 billion investment and LG $9.8 billion.
“I think this time around, the government will be more eager to make sure it does not just stop at the commodity game so it does follow through,” said Rao. “There are a lot more downstream activities based on the commodity, so they would look at bringing the foreign companies to manufacturing companies to come onshore.”
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Rao also said infrastructure was expected to be a driver this year, as the sovereign wealth funds of other countries had expressed interest in the INA.
INA CEO Ridha Wirakusumah said the sovereign wealth fund had infrastructure projects worth $9.5 billion in the pipeline, and that it planned to focus on toll road projects before moving on to other major projects such as airports and seaports.
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“As the year wears on, I think it will become less and less about the pandemic and more and more about the medium-term push, and these are the few sectors, apart from health care, which we think will become quite prominent in the country,” said Rao.
