Movies in Spotlight as Jokowi Seeks to Reshape Indonesia Economy

(Bloomberg) -- Indonesia wants to lower its reliance on natural resources and President Joko Widodo is turning the spotlight on films, fashion and handicrafts.

Growth in these creative industries is set to exceed the pace of the nation's gross domestic product of about 5 percent, said Triawan Munaf, head of Indonesian Agency for Creative Economy. These sectors accounted for about 7.4 percent of Indonesia's GDP, or about 1,000 trillion rupiah ($73 billion) in 2017, and Widodo seeks to raise it to 9 percent by 2020, he said.

Indonesia's economic fortunes have for long been tied to its resources industry and Widodo, also known as Jokowi, in 2015 set up the agency for creative economy to promote foreign investment in sunrise sectors like entertainment, fashion textiles and packaged food. The government's move to allow foreign investments in films, movie distribution and exhibition has lured foreign investors including 21st Century Fox Inc. and South Korea's Lotte Cinema Co.

“The focus on creative economy is really paying off,” Munaf said in an interview at his office in central Jakarta on April 2. “The removal of the film industry from the negative list for foreign investors has led to a surge in the number of screens and viewership for Indonesian and Hollywood movies alike.”

Within three years of opening film production, exhibition and distribution to foreign investors, the number of movie screens in Indonesia jumped 50 percent to 1,500 while ticket sales soared to 42.7 million last year from 16 million in 2015, Munaf, a former advertising professional appointed by Jokowi, said.

Motion Pictures

Lotte Cinema has acquired land to build theaters in more than 60 locations, while CJ CGV Co., through its Indonesian unit PT Graha Layar Prima, is already present in 13 Indonesian cities. Cinema 21 is Indonesia's largest operator of movie theaters with nearly 1,000 screens and has exclusive distribution rights to Motion Pictures Association of America studio films in the archipelago.

Southeast Asia's largest economy has climbed 45 places in the World Bank's ease of doing business ranking since Jokowi took office in 2014. He wants the country to improve its position to 40 in the next two years from 72 now. The World Bank has called for easier terms for foreign manufacturers and fewer restrictions on ownership in some sectors to lure more foreign direct investment.

The agency is also pushing for exports of Indonesian designer goods such as batik clothes and handicrafts by aggressively marketing at global exhibitions, Munaf said. The government is working with e-commerce platforms like Bukalapak.com and other start-ups to find buyers for Indonesian designers and artisans, he said.

“Fresh graduates are increasingly choosing informal work like developing games and applications and culinary business,” said Josua Pardede, an economist at PT Bank Permata in Jakarta. “If they get support from the government to promote their products in the global market, it will contribute to foreign investment and foreign reserves.”

Jokowi has taken steps to wean the country off commodities and push investment in value-added manufacturing and services to generate more jobs and to finance hundreds of billions of dollars needed for infrastructure. Indonesia's economy has expanded at an average of about 5 percent, below the 7 percent targeted by the president.

To contact the reporter on this story: Fathiya Dahrul in Jakarta at fdahrul@bloomberg.net.

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Thomas Kutty Abraham, Karl Lester M. Yap

©2018 Bloomberg L.P.