Jakarta. Indonesia’s biggest cities will continue to power consumer demand in Southeast Asia as more people move to urban areas, the McKinsey Global Institute said in a report published on Tuesday.
The consulting firm forecast that Bandung, the West Java capital, could be Southeast Asia’s third-largest market for diapers by 2030, followed by the Jakarta satellite cities of Tangerang and Bekasi (in fifth and sixth), and the nation’s capital itself in seventh place.
Jakarta could also become the region’s fifth-largest market for detergents and fourth-largest for facial moisturizer, McKinsey wrote.
The report, “Southeast Asia at the Crossroads: Three Paths for Prosperity,” said that cities in the 10-member Association of Southeast Asian Nations currently accounted for just over a third of the population of the bloc and two-thirds of its combined gross domestic product of $2.4 trillion. More than 90 million people are expected to move to urban areas in the region by 2030, which will add $520 billion to $930 billion to the region’s GDP.
“Urbanization is a major driver of economic growth. In fact, no country has ever climbed from low-income to middle-income status without a significant population shift into cities,” the report said.
Other cities such as Bogor, another Jakarta satellite town, and Surabaya and Malang in East Java will also be among top the 15 largest markets for consumer goods.
McKinsey also identified smaller cities in Indonesia with significant promise for higher consumption, including Denpasar in Bali and Gresik in East Java.
The report identifies 81 million households in Southeast Asia are part of the “consuming class,” with the figure doubling to 163 million by 2030, providing a lucrative market for manufacturers.
“To capture this opportunity, consumer-facing companies need to craft strategies for navigating a fragmented wholesale and retail environment,” the report said.