When asked for his thoughts on emerging low-cost country sourcing (LCCS) opportunities during an online Town Hall forum last week, Larry Welch cited an unusual contender; Indonesia. Welch, the former VP of Indirect and Services Procurement at Hewlett Packard, said Indonesia is making strides towards becoming a regional and global player. It was an intriguing pick given how little attention Indonesia gets behind the long shadows of China, India and Vietnam.

According to Larry, Indonesia had seen some interest as a LCCS locale years ago. However, they “lost their advantage due to infrastructure and a slow ability to move product”, problems that have now been rectified. If Larry is correct and their infrastructure is indeed improving, perhaps Indonesia is poised to be the next China/Vietnam/India.

Some recent news stories point to a strengthening infrastructure, economy and perhaps even a middle class.

• Beef exports from Australia - In most societies, meat is a bit of a luxury item…particularly if it’s imported. So seeing that Indonesia is bringing in increasing amounts of beef from Australia - a fact Aussie authorities attribute to Indonesia’s economic growth - it certainly bodes well for the country as a solid consumer economy.
• HSBC buying Ekonomi - In the midst of our global banking meltdown, to see a major bank investing in opportunities abroad (albeit for a modest sum of $607 million) could be a sign of growth in Indonesia and perhaps a precursor to similar moves by other banks in search of profits in emerging markets. As the CEO of HSBC’s Asia-Pacific operations put it, Indonesia provides tremendous opportunity due to their “GDP growth over 5.5% in each of the past three years, rich natural resources, thriving commodities trade and foreign direct investment inflows, favorable demographics and the world’s fourth largest population of 235 million people.”
• Fatburger is moving in - Aside from an additional datapoint on the Indonesian hunger for beef, an American chain restaurant’s move into Indonesia is another sign of economic growth. Unlike their more famous fast-food competitors, Fatburger’s expansions are modest in the US and abroad. So you can bet they did their homework.

It’s unlikely Indonesia would see this sort of interest and investment from outside corporations if they weren’t prepared to handle it from an infrastructure and economic standpoint. From a LCCS perspective, it certainly seems there may be an opportunity to ride Indonesia’s wave of progress. And with many companies looking to their LCCS efforts as a beachhead into emerging consumer economies, the timing might be right.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.