beyondbrics

When Indonesia’s export market collapsed in the 1997 Asian financial crisis, the country didn’t look like it would ever get back into the regional manufacturing race.

But the chairman of the investment coordination board, Gita Wirjawan, says Indonesia is poised to surpass Vietnam this year as the world’s second largest shoe manufacturer. It’s a sign of the country’s growing attraction as a low-cost hub in Southeast Asia. So is the $650bn economic tiger really rousing from slumber?

Around 300 million pairs of shoes, worth roughly $2bn-$2.5bn, will be produced in Indonesia in 2010, Wirjawan said. “That takes us back to the pre-crisis levels.”

Indonesia’s economy is growing at 6 per cent, outpacing its regional peers, and weathered the recent global crisis virtually unscathed. Sound fiscal policy and political stability in the emerging democracy of 240m people has prompted a series of ratings upgrades in recent months, and the market is drawing in billions in foreign capital. On Wednesday, the IDX – Jakarta’s main index of stocks – hit a record high at the close.

Mr. Wirjawan, who describes himself as an unflinching optimist, predicted the nation is on the brink of a true industrial boom.

“I see the commencement of a large scale industrialization over the next five years,” he said. “We are seeing the numbers. People are relocating factories from Vietnam, China, to Indonesia.”

To build on the momentum, Mr. Wirjawan is touring the globe to attract foreign investors, mainly into long-term infrastructure projects for railways, power generation and roads. He’s hoping to bring in major manufacturers, like automakers, and said tax incentives will be offered to the right candidates.

“If we can attract these guys the whole supply chain will come, so you’ve got to make it sexy,” he said.