Speaking with InvestorDaily, AFM managing director John Donovan said Indonesia’s middle class has grown by approximately 7 million people per year, from 80 million in 2003 to 132 million in 2010.
Despite this development, Mr Donovan said domestic investors are not taking advantage of the “growth story on Australia’s doorstep”.
“I think Australians must engage in our region and in our part of the world: Asia,” Mr Donovan said. “Australia knows about China and that’s understandable because China is our number one trading partner both inwards and outwards… but with Indonesia, it flies underneath the radar.
“In the next three to five years, Indonesia will loom large. [The country] is our neighbour, it’s on our doorstep and the opportunity is huge.”
Mr Donovan said Indonesia has a ‘demographic dividend’, meaning it has a younger working population relative to the rest of its population.
While other countries such as China and Korea will reach a turning point in their population dividend by 2015, Indonesia won’t see the same shift until 2020.
“Why it’s a great opportunity is that gross domestic product is highly leveraged to the domestic consumer [in Indonesia] and the domestic consumer has more money and is young,” Mr Donovan said. “So it’s not as leveraged to the international story as other economies.”
AFM is an investment management partner of Indonesian fund manager Mandiri Investasi Funds, a branch of Mandiri Bank.
Mr Donovan noted that chief economist of Mandiri Bank Destry Damayanti will be speaking at the Australian Super Investment conference in September as part of Indonesia’s evolving relationship with the Australian investment community.
“I think that’s tremendous because we’re looking to tell Australian investors - the wholesale investors, funds and consultants - what a great story Indonesia is, set against the history of the Australia/Indonesian relationship,” he said.
“If Australians are going to invest in our part of the world - Asia - they should be investing with local investment managers… that understand their country and their markets.”
