Sat, 11 Jul 2009
From: The Jakarta Globe
By Erik Stern
Few Indonesian companies are among the largest in the world. By comparison, Malaysia and Singapore have a handful. No Indonesian companies are global champions or global brands. Singapore has one in Singapore Airlines.

Several Southeast Asian consolidators are invested in Indonesia: Axiata, Maybank, Temasek, Khazanah. But few Indonesian firms have ventured elsewhere. Openness to the outside world remains low.

Indonesia remains focused on industries where government favor and who you know matter more than what you can do. World-beating brands and technologies are not required. Government intervention and dominance by elite families mean success in Indonesia usually results less from competition-driven innovation than from holding one’s own. Owners and families remain satisfied. Company management is locked into complacency.

This introverted perspective have helped spare Indonesia much pain during the current downturn, but also explain why it took almost a decade to recover from the Asian crisis. In some respects, the nation remains stuck in 1999. The advantage is that the current downturn temporarily brought the rest of the world back to 1999. Indonesia’s peers are suffering but its firms are healthy.

However, nothing stays the same indefinitely. The window of opportunity for Indonesian firms is six to 18 months. Eventually, the integration of Asean will continue. The Persian Gulf will begin to take interest in Indonesian resources. The Japanese and Koreans will try to employ their technological prowess here. India will start hunting.

How will Indonesian companies respond? How will they compete? What advantages do they have? Can they succeed only by playing defense, protecting their turf, or can they win by going on the offensive?

Indonesian firms should take advantage of weaknesses elsewhere. Negative growth in many of Asia’s economies, as well as in Europe and the United States, mean much foreign expertise remains unemployed. Indonesian firms should lure it to Jakarta. President Susilo Bambang Yudhoyono should begin his second term boldly, passing legislation to boost competitiveness and help companies attract talent from across the region and the world. Singapore thrives as a port to the world, a conduit to business and a safe haven for labour and capital. Singapore and Malaysia win much business from Indonesia. This can change. It must change.

Indonesian corporations must invest in expertise, branding, and research and development. They must move up the value chain from plantations to manufacturing (hardware), to services (software), to innovation (wetware). They must seek lucrative partnerships and alliances. And they must invest in creating a performance-based culture to bring out the best in their people.

The finance, retail, airline, shipping, media and real estate sectors are hurting. Indonesian financial superstars should begin to build a local and regional powerhouse by hiring foreign talent. The government should encourage the building of a hub for air and sea transportation. Companies should add value to natural resources. As in the Gulf, foreign investment can rapidly build infrastructure. Indonesia should build technological and environmental champions by taking advantage of wind, solar and thermal resources.

Who has the confidence to act so boldly? Which executives will take up the mantle? Will the government dismantle the laws that impede success? How will the status quo react to a performance-based culture? Will locals dismiss incoming foreigners as colonialists?

The near term will prove tough, especially as the window of opportunity begins to close and competition becomes fiercer. Not all risk will be rewarded. But nothing holds back Indonesia except belief! Do Indonesians want to be successful? Will they fight for it? The past is no longer a burden or an excuse. Debt levels are acceptable. GDP is growing. India threw off the restrictive Licence Raj. Deng Xiaopeng rebranded Chinese communism as capitalism written in red. It is now Indonesia’s turn.



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