Steady growth fuelled by domestic consumption means the country may surpass Britain and Germany within 20 years
The heavy throttle of a 1967 Chevy Impala echoes through the conference hall as crowds of men and women sporting 1950s hairdos, skinny jeans and tattoos gather round to ooh. It is day one of Indonesia’s first Kustomfest and thousands are milling about along rows of hot rods, vintage Beetles, slicked-up Triumphs and pared-down Harley-Davidsons – some of which boast price tags of $20,000 (£12,000) and higher.
On the margins, buyers wander among stalls displaying coffin-shaped upright basses and punk baby clothes, a tattoo parlour and a stage for a metal band called Death Vomit.
Ten years ago such an event would have been impossible. But as Indonesia’s economy arcs into becoming what some analysts believe could be the world’s seventh largest by 2030, a growing number of consumers are looking to spend their cash in ways they might not previously have imagined.
“A few years ago there were custom bikes and choppers, but there were just a few in every town,” says the Kustomfest organiser, Lulut Wahyudi, a tattooed Yogyakartan who runs one of Indonesia’s most popular custom-bike shops. “But this culture is growing. Now everyone wants to be part of it.”
Vincent Lutiarso bought his first bike at 18 and has accumulated many more. “This is an expensive hobby for us, but it’s an escape from our daily lives,” said the 35-year-old as he and members of his local motorcycle club took a break from touring under the hot sun. “Back in the day, it was so cheap – now the demand is so high. I bought my first bike for $450 and now it’s $4,500.”
Demand is so high, in fact, Lutiarso left his 18-year career in hospitality to start his own import business. “My sales have increased about 500% in just the last two years. The market is going crazy. Next week I’ve got five bikes coming from the US [retailing for] $75,000 each.”
Unlike many of its neighbouring Asian tiger economies, Indonesia has been growing steadily over the past decade, thanks mostly to increases in domestic consumption rather than to exports or manufacturing – both of which are prone to global fluctuations. Its GDP per capita has almost doubled in the past 10 years, with few signs of the boom and bust that have plagued richer countries, according to analysts at McKinsey, the research and consulting firm, which has forecast that Indonesia’s economy will surpass Germany and the UK by 2030.
“The key thing is the growth [here] has been stable,” said Raoul Oberman, from McKinsey. “If you grow too fast you get overheating, you get delivery problems, you get even more inequality or people going overboard … In the last 10 years [in Indonesia], it’s been 5% every year and the volatility around that [growth] has been the lowest of all the Brics [Brazil, Russia, India and China] and even of the OECD countries.”
Increases in labour productivity may have driven the bulk of Indonesia’s economic growth in the past 20 years (GDP is expected to rise by 6% this year), but low inflation rates, strong investment and rising purchasing power have helped maintain it. Labour groups have become vocal, demanding better job protection, higher wages, more benefits.
Jakarta’s governor, Joko Widodo, has responded by increasing the capital’s minimum monthly pay by 40% to 2.2m rupiah (£143), a move expected to trickle across the nation as local authorities set wages for their own regions.
While it may yet have issues to iron out Indonesia’s development is remarkable because it can be seen everywhere and at every social level – from the new villas sprouting up in Jakarta’s suburbs to the number of farmers in the vast archipelago now able to buy electronic goods such as mobile phones, washing machines and motorbikes.
Yet it is in Indonesia’s second- and third-tier cities where the growth is highest, says McKinsey: places such as Yogyakarta, Surabaya and Medan, where there are, perhaps surprisingly, a growing number of “biker brotherhoods”.
Lutiarso says his “bros” work mostly as waiters, cafe supervisors and four-star hotel managers. Most average salaries of about 4-5m rupiah a month (£260 to £325). But their low earnings do not stop them from saving and buying big. “My own bike cost me $35,000 [£22,000] so far and it’s not even done yet – it still has to be gold-plated.”
This consumption phenomenon has not been lost on local and international businesses – whether they’re Yogyakartan bike shops or global corporations – each regarding this 240