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The Indonesian economy is known globally for many things: tourism, agriculture, and defense. But maybe transport manufacturing should be added to the list. The production of Indonesian factories were most efficient all year last month; According to a report by Markit Economics and HSBC Bank, the purchasing managers’ index (PMI) for Indonesia's manufacturing sector increased from 50.5 in September to 51.9 in October. Any reading above 50 on a PMI indicates expansion, which can be attributed to a multitude of variables. However, the prime conclusion has been that the increase in PMI is a direct reflection of higher order intakes. This is most apparent in Indonesia's auto industry.
A surge in new car orders placed has put doubt in the minds in the government. Because of their fear of a credit bubble in a booming economy, officials required consumers to make a minimum down-payment of 30%. Yet, despite the stifling regulation, Indonesia continues to be South-East Asia’s fastest-growing vehicle market. Unusual, right? The reason for this atypical reaction is rooted to firms. They have actually taken in more orders than usual, launched new products, and opened several factories each. They have deterred exceptions by accepting increasing not only output, but also the workforce. Making owning a car more affordable.
All things considered, rarely does the power of consumer demand defy government mandate. This exceptional case is one to watch because of its monumental impact on the global economy. Foreign investors are finally pushing the Southeast Asian powerhouse to its full potential. Although the price of certain commodities like cotton, coal, and unrefined oil will rise, the price of final goods these intermediate goods will be used to make will decrease. Additional costs burdening the manufactures will decrease and competitions will become more competitive. But this can only happen if the government opens the country to trade and allows for privatization of key industries.
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