It is easy to see the potential: around 240 million people living on 17,508 islands, enjoying economic growth expected to be 6.1 per cent this year and 6.3 per cent in 2011 (source: The Asian Development Bank). Also, the population age profile is relatively young, which tends to favour rapid economic growth, unlike more developed nations with growing pension burdens. Even by the strong growth standards of the Far East, Indonesia has enjoyed eye-catching growth in recent years and avoided recession through the credit crisis.

Given the population size, the wealth sector so far is relatively small - suggesting considerable room for future growth. Currently, about 12,000 people work in the wealth management industry there, including front- and back-office; there are about 200,000 high net worth clients of wealth management services. There are 24 “priority” (ie, mass affluent) banks and private banks (source: Certified Wealth Managers’ Association).

Some of the figures also show that this is not an easy market, however. And it is worth remembering that the country’s financial sector endured the trauma of massive losses and bank failures in the 1997-98 Asian market crisis – half of Indonesia’s 250 banks collapsed in that period. Not all of the scars have healed and recent global woes will keep such memories alive. For example, in the last few days and weeks, the Indonesia monetary authorities have sought to prevent the rupiah appreciating too fast against an increasingly sickly US dollar - a situation that puts Indonesia in the same camp as several other emerging market economies seen as better bets for hot-money investors than the US or the Eurozone.

Also, given the country’s size – its coastline measures 54,720 km – knowing where and how to set up a private banking operation, and manage it efficiently and sensitively, is difficult. There are other complexities: a multi-lingual nation, with major language groups comprising Bahasa Indonesia, English, Dutch, Javanese, and a profusion of local dialects. Indonesia is also ethnically and culturally diverse, with a large Muslim, Christian - of varying denominations - Hindu and Bhuddist component. These variations are not insuperable barriers by any means, but they mean getting a wealth management strategy in place is complex and requires careful planning.

This publication has spoken to a number of bankers in the region who can see its great potential but who also realise that taking on this market will not be easy. There is, as yet, a relative lack of available talent, for example. This is a young market, which really dates back not much beyond the turn of the century. While youth has its benefits – it is possible to learn from older banker’s errors – there is always the danger of a lack of deep experience.

Maikel Sajangbati, president director of MCI Private Banking & Wealth Management Consulting, and also founder of the Certified Wealth Managers’ Association, is using his industry background to push for more training and development in this market. He recently talked about the issues while he was travelling to Europe to spread the word about the Indonesia market and also to pick the brains of private bankers in the West.

“The status of the wealth management industry is still in an infant stage. There is a huge niche. In Indonesia, the industry was started by the global, foreign banks. After three or four years, there has been a lot of turnover. Other local banks have begun to start innovating in this area,” Sajangbati said, speaking after attending a reception hosted by headhunter firm ValensGoldberg and this publication in London's Piccadilly district.

“If you look at Asia as a region, it is still dominated by Singapore and Hong Kong. However, a lot of banks want to step into the Indonesia market,” he said.

And banks certainly are moving in. As already mentioned, Standard Chartered has big plans for the country. Torsten Linke, head of relationship management, South East Asia at Standard Chartered Private Bank, told this publication: “We believe Indonesia has huge potential, as its economy is growing quickly and its political situation is stabilising. Indonesia is now the biggest economy in South East Asia, and has successfully turned itself around since the Asian financial crisis more than ten years ago.”

But like Sajangbati, Linke does not expect easy pickings. “The biggest difficulty in the area is the shortage of experienced private bankers to match fast growing needs in the market.”

“The main challenges we see are, firstly, the local regulations for onshore banking, which means there are limitations on products and services roll-out. Secondly, there is strong competition in this market,” he said.

UBS also has named Annie Margono as chief representative of UBS in Indonesia, taking up her role in September; the Swiss bank has been present in the country since the early 1990s, operating via PT UBS Securities Indonesia, with about 50 staff in the country. Other foreign banks looking to tap into the country or who are already there include Singapore-based DBS, RBS Coutts, Credit Suisse, Morgan Stanley and Deutsche Bank. Among domestic banks with a wealth management offering are Permata Bank, BNI Wealth Management, and CIMB Niaga.

StanChart’s general manager for wealth management in Jakarta, Lanny Hendra, said earlier this year that a surge in domestic assets will keep more money onshore in the country, even though a good deal of such money is run offshore via centres such as Singapore. "We believe the Indonesia onshore market is big. We think many foreign banks are not tapping the onshore market enough," she is quoted as saying.

Meanwhile, Sajangbati says a big issue for the country is talent management and developing a new generation of home-grown private bankers, since banks cannot expect to grow by poaching from rivals alone.

“To have the right people is never easy. That’s why our association has a big role in standardising competency. That is also why we have the full support from the central banks and the Ministry of Finance. And we also get good support from academics,” he said.

Sajangbati said his association works closely with universities such as the Erasmus University in the Netherlands for example, as well as universities in Indonesia. The standards adopted by the certification process follow the RMCS approach (Regional Model Competency Standard), that is used by organisations such as the UK’s Financial Services Authority, he said.

An important issue for future development has been to improve corporate governance and regulation – vital at a time when lax standards are decreasingly tolerated, particularly over issues such as tax evasion. Sajangbati said that issues such as anti-money laundering have already been addressed by legislation. The Organisation for Economic Co-operation and Development, meanwhile, classes Indonesia as a jurisdiction that has “substantially implemented the internationally agreed tax standard”.

Even so, Sajangbati said Indonesia needs a simpler regulatory structure. At present, different branches of financial services have their own regulators; what is needed is for a single organisation to bring all these units together, he said.

“If we had one it would be easier for us,” he added.

These issues are of course part of the growing pains of what is a young market. There is a great deal of work that needs to be done to get Indonesia’s market to where its industry figures, such as Sajangbati, want it to be. But the potential is clearly enormous, and many of the world’s top global banks are getting involved. No Asia strategy for wealth management can afford to ignore this mighty archipelago.