OBG Event

23 May 2017

Jakarta, May 2017: Investor confidence and expectation look to be on the rise in Indonesia, according to a new survey by the global research and consultancy firm Oxford Business Group (OBG), in collaboration with PwC Indonesia, with concerns relating to political uncertainty, infrastructural shortfalls and frequent legislative changes giving way to an increasingly favourable outlook.

As part of its first-time Business Barometer: Indonesia CEO Survey, OBG asked high-level executives from across the industries a wide-ranging series of questions on a face-to-face basis aimed at gauging business sentiment. The findings are now available to view on OBG’s Editors’ Blog.

From those surveyed, 92% of respondents described their expectations for local business conditions in the coming 12 months as either positive or very positive. In answer to a separate question, 40% of business leaders surveyed said they were very likely to make a significant capital investment within the same timeframe.

OBG’s survey also highlighted the significant role of the private sector in Indonesia’s economy, with over half (54%) of respondents calculating that less than 20% of their business resulted from government spending.

Red tape remains a barrier for decision-makers, however, with almost 50% of those surveyed citing bureaucracy as their top concern in doing business, followed by securing human resources.

PwC Indonesia Senior Partner, Irhoan Tanudiredja, noted that “The positive perception of survey respondents on the Indonesian investment climate bodes well for growth in the coming years. It also indicates that the government’s economic reform packages and efforts to cut bureaucracy and improve transparency are beginning to bear fruit, although there is still room for improvement.”

OBG’s Managing Editor for Asia, Paulius Kuncinas, said improved business sentiment in Indonesia was reflected in higher levels of foreign direct investment, with volumes up 2.1% in the fourth quarter of 2016, according to the country’s Investment Coordinating Board (BKPM).

“Indonesia’s future economic growth will be driven by higher household consumption, as well as a pick-up in private sector investment in sectors such as housing, infrastructure, energy and manufacturing,” he said.

Kuncinas added that the target of 5.1% growth for 2017 could be surpassed if infrastructural projects are accelerated.

“The main challenge going forward remains a lack of infrastructure and relatively high cost of logistics compared to other ASEAN nations,” he noted, “but on balance, the survey signals a shift in expectations amongst business leaders that will likely lead to higher investment flows in 2017.”

Kuncinas’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 35+ high-growth markets covered by the company’s research.