OBG Event

01 Feb 2018

Most decision-makers interviewed for the latest edition of the Business Barometer: Indonesia Survey carried out by Oxford Business Group (OBG) believe the country’s commercial operating environment has improved in the past two years, although they remain concerned about external risks.

As part of its survey, the global research and consultancy firm asked dozens of high-level executives from across the country’s industries a wide-ranging series of questions on a face-to-face basis aimed at gauging business sentiment. The results of what represents the Group’s second survey on Indonesia are now available to view on OBG’s Editors’ Blog at: https://oxfordbusinessgroup.com/blog/patrick-cooke/obg-business-barometer/business-getting-easier-indonesia-ceos-wary-external-risks 

Almost two-thirds (64%) of respondents told OBG they thought doing business had become easier in the past two years. 

An even higher percentage (76%) of executives were either positive or very positive about local business conditions for the year ahead, a sizeable majority, but down from 92% in OBG’s first survey, published in May. 

While domestic events, such as growing political uncertainty, may have weighed on business sentiment in recent months, external risks and their potential effect on economic growth gave greater cause for concern. From those surveyed, 38% felt that a change in demand from China would have the biggest impact on the local economy in the short to medium term, with fall-out from trade protectionism cited by 23%.

With 43% of business leaders interviewed in May citing human resources as their top business concern, the latest survey asked them to expand on what skills were most needed in the labour pool. Leadership attributes were the most sought-after qualities, according to 37% of executives surveyed, followed by engineering skills, cited by 20% of respondents, most likely triggered by the government’s infrastructure drive, computer technology (16%) and research and development (11%).

The Business Barometer: Indonesia Survey was produced in partnership with the professional services firm, BDO Indonesia.

Thano Tanubrata, CEO, BDO Indonesia, said that strong infrastructural development, together with the government’s ongoing efforts to create a more open economy, had helped to keep sentiment on Indonesia’s economic growth and business climate positive, as OBG’s survey reflected.

“While concerns were voiced about the impact of external risks, there is still optimism that this positive trend will continue, with the upcoming 2018 regional election set to provide an added boost for the local economy in the form of new micro and macro opportunities,” he said.

Commenting on the results in his blog, Patrick Cooke, OBG’s regional editor for Asia, said key results in OBG’s survey reflected Indonesia’s rise up the rankings in the World Bank’s latest ease of doing business index to 72nd position from 140 in 2014. 

“This result falls short of the 40th ranking President Jokowi told OBG’s delegation he was targeting in our September meeting, but still represents remarkable progress for a country that has historically had strong protectionist tendencies,” he noted.

Cooke said the launch of a one-stop service at the Indonesia Investment Coordinating Board, an easing of foreign ownership restrictions in the government’s negative investment list (DNI) and increases in electricity generation capacity had all helped to improve the country’s business climate and “translated into tangible, positive results”.

“However, executives surveyed recognised that challenges in key areas could hinder Indonesia in its aim of reaching 7% annual economic growth,” he added. Possible obstacles, Cooke said, included ongoing restrictions on foreign participation in key sectors, trade protectionism and concerns of further divisions ahead of the presidential elections in 2019.

“Irrespective of concerns, Indonesia has the world’s 16th-largest economy by GDP and the fourth-biggest population, providing a wealth of potential to be harnessed as we head into 2018, with government authorities and private sector leaders largely on the same page in terms of development priorities,” he concluded. 

Cooke’s in-depth evaluation of the survey’s results can be found on OBG’s Editors’ Blog, titled ‘Next Frontier’. All four of OBG’s regional managing editors use the platform to share their expert analysis of the latest developments taking place across the sectors of the 30+ high-growth markets covered by the company’s research.