Research and analysis

Indonesia: Surabaya and Bandung - opportunities in second cities

Published 20 October 2014

This research and analysis was withdrawn on 1 August 2016

This publication was archived on 4 July 2016

This article is no longer current. Please refer to Overseas Business Risk -Indonesia

This publication was archived on 4 July 2016.

This article is no longer current. Please refer to Overseas Business Risk - Indonesia

Summary

UK plc is increasingly focussing on opportunities in Indonesia’s second cities, Surabaya and Bandung. The Embassy is working in close partnership with the British Council and British Chamber of Commerce to coordinate our efforts. Increasing the UK’s engagement with two of Indonesia’s biggest cities could unleash a wealth of commercial opportunities, including high value opportunities in the infrastructure sector.

Detail

Background

As in China and India, Indonesia’s ‘second cities’ are driving growth.. By 2030, the majority of Indonesia’s consuming class will live outside the capital. Some estimate this to be in excess of 80 million consumers. One of the Embassy’s priority objectives is to increase UK influence and understanding of Indonesia’s city administrations and economies, ultimately to facilitate greater (prosperity) opportunities for UK plc. . Having successfully started with the Jakarta City Government we have agreed with British Council and the British Chamber of Commerce, to collectively focus our resources on growing the UK brand in Surabaya and Bandung, Indonesia’s second and third largest cities.

Opportunity

Our targeted cities have a combined GDP of £25 billion (2012 data), roughly equivalent to the economy of Ghana or Serbia. Whilst the central government is based in the capital city of Jakarta and a majority of large businesses have their head offices in Jakarta, due to nearly 15 years of decentralization, these cities operate almost completely autonomously.. Funding decisions, including on high value infrastructure projects, are devolved down to the local level. Having good relationships with influencers, both in the city government and in the business world, is key to the UK taking advantage of commercial opportunities. These include potential opportunities in the infrastructure sector, particularly around improving transportation links.

We know that there is a demand for quality English language training. British Council are due to open a teaching centre in Surabaya in 2015 as part of a planned expansion of their presence in Indonesia. We are working with the British Chamber of Commerce, who currently only operate in Jakarta, to launch a British Business Champions network outside of the capital which will provide and develop opportunities for UK businesses. The combination of these initiatives should assist us to creatively boost the limited resources we have to engage more outside of Jakarta including through working on each other’s platforms.

Surabaya

Surabaya has a large diverse economy, one of Indonesia’s main trading ports and a thriving retail sector. The port is also home to a major naval base, where the three frigates recently purchased from Britain will soon be re-fitted. There are opportunities in infrastructure design, town planning, green cities and education. A particular target for the UK is the Surabaya Mass Rapid Transport project which has a total project value of £720 million. Our visits to Surabaya have revealed the breadth and depth of the ambitions of Surabaya’s leaders. Attracting foreign investment is a core objective for them, as is developing SMEs.

Bandung

Last week the Prime Minister’s Trade Envoy for Indonesia, Richard Graham, visited Bandung (city budget of approximately £7.1 billion) where there is a range of commercial opportunities for the UK including the proposed £500m Bandung light rail transit system; the Mayor’s plan to develop “Technolopolis”, a 1000 hectare new town in East Bandung which will be a centre for technological development; and opportunities in the biodiesel fuel sector and defence industry. Bandung may also be involved in the 2018 Asian Games.

Education and the creative industries are two of the city’s key sectors. Through prosperity funding and British Council activity we are already engaging in these areas. The British Council is working in particular in the fashion, film and design sectors and also working directly with the Bandung Creative City Forum on improving the city itself and helping with its ambition to be Indonesia’s city of culture. Bandung is also a key centre for learning with the Bandung Institute of Technology (ITB) ranked one of the top institutions in the country – and links to UK universities are growing.

Comment

The statistics and the scale of potential commercial opportunities speak for themselves as reasons to focus more attention on Indonesia’s regional centres. Our increased engagement is already opening up opportunities but we are still only at the beginning stages. Relationship building drives business here .

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report