Indonesia's business prospects in 2001<\/p>\n
The following is based on a presentation by businessman Sofyan
\nWanandi at the recent World Economic Forum in Melbourne.<\/p>\n
MELBOURNE: Three years have gone by since Indonesia and the
\nregion were hit by the financial crisis. Last year's World
\nEconomic Forum proclaimed that the region is back on its feet.
\nIndonesia was lagging behind but it is now well under way towards
\neconomic recovery.<\/p>\n
Efforts to bring the economy out of the crisis have been
\ndifficult and frustrating, largely because of political
\ninstabilities. The country has undergone dramatic political
\nchanges.<\/p>\n
In fact, it has come out of a very serious political crisis in
\na rather good shape. This is a major achievement that is often
\nnot recognized. However, political instabilities cannot be
\navoided.<\/p>\n
They are perhaps inevitable. It will take time for the new
\nsystem to settle down as new rules are being formulated and re-
\nformulated and as a new political culture and behavior is being
\nformed.<\/p>\n
The country has finally embarked on its democratization
\nprocess. It is of utmost importance to Indonesians that this
\nprocess proceeds in a vigorous manner and that the country would
\nneither turn back into authoritarianism nor ends up in an
\nanarchic situation.<\/p>\n
This, in fact, should be Indonesia's main preoccupation. The
\nprimary task of all its people is to make the process of
\ndemocratic transition and consolidation a success. The business
\ncommunity is aware of this, but it tends to be impatient and is
\nfrustrated by the slow progress in economic recovery caused
\nmainly by those political instabilities.<\/p>\n
The business community often becomes the victim of the
\npolitical cross-fires between the opposing political factions or
\nbetween the government and the new assertive parliament. This is
\nperhaps unavoidable.<\/p>\n
The business community will have to take this new situation
\ninto consideration and will have to seek ways in order to be able
\nto overcome it. Key to this ability is the improvement of its
\ncorporate governance, which includes efforts to provide good and
\nresponsible information to the public at large.<\/p>\n
By adopting a more open and transparent management system it
\nwill become less vulnerable to political attacks. Herein lies the
\nimportance of improving corporate governance. The task of
\nimproving corporate government is a main challenge for many
\ncorporations in Indonesia that have been so used to operating
\nunder a more closed, secretive and collusive environment.<\/p>\n
As the political system is undergoing dramatic changes, so too
\nmust the business world undertake fundamental changes in the ways
\nin which it conducts its activities.<\/p>\n
It is perhaps unfortunate that those political changes and the
\nchallenge of undertaking major improvements in corporate
\ngovernance in Indonesia is happening at a time when the economy
\nis in a crisis.<\/p>\n
Yet, it was the economic and financial crisis that have forced
\nus to make those changes. If Indonesia was not hit by an economic
\ncrisis, it is not clear whether such dramatic political changes
\nwould have taken place and whether improving governance would
\nbecome an agenda for the business community.<\/p>\n
The Abdurrahman Wahid government is faced with enormous
\nchallenges because it has to deal with urgent and difficult
\nproblems that have arisen in almost all aspects of life and of
\nthe affairs of the state, including the challenge of maintaining
\nthe integrity of the state itself.<\/p>\n
The first 10 months of its administration have been rather
\ndisappointing. The composition of the cabinet, that was formed as
\na compromise with the major political parties, resulted in an
\nineffective government. At the end of August 2000, Abdurrahman
\nformed a new cabinet that was his own making.<\/p>\n
This promises to produce a more solid cabinet but Abdurrahman
\nruns the risk of alienating the legislature. The only way the
\ngovernment can overcome this political difficulty is to perform
\nand be able to deliver. There is a sense in the country now that
\nthis new cabinet has the basic ingredients of a solid cabinet. As
\nsuch it will be able to deliver.<\/p>\n
There is a limit to which the Indonesian business community
\ncan adopt a \"wait and see\" attitude. As soon as there are some
\nindications that the government can function better, business
\nwill expand its activities.<\/p>\n
In the second quarter of this year the country has begun to
\nrecover as the economy grew by more than 4 percent, driven in
\npart by investments, besides domestic consumption and exports.
\nThis is likely to continue in the third quarter and beyond
\nbecause domestic investments appear to continue to increase.<\/p>\n
Most of these domestic investments are small investments by
\nsmall and medium enterprises (SMEs) that are expanding their
\nactivities. These investments are in areas of low risks and are
\noriented mostly to the domestic consumer's market.<\/p>\n
They are not likely to be affected by what is happening in the
\npolitical field as they are not a target of the political game.
\nThe new economic team under Rizal Ramli is giving greater
\nattention to SMEs, the agricultural sector, and in particular the
\ndevelopment of agro-industries and agro-business. This will open
\nup new opportunities for SMEs.<\/p>\n
The larger companies are still in the process of
\nrestructuring, and once they have resolved this will they begin
\nto undertake larger investments. The next three to six months
\nwill see an increase in restructuring.<\/p>\n
External private debt, which stood at about US$70 billion at
\nthe onset of the crisis, is now perhaps already reduced to $35 to
\n$40 billion as a result of restructuring, including write-offs.<\/p>\n
Of this amount perhaps $15 to $20 billion is debt of the
\nmultinational corporations, which should not be considered as a
\nburden to the country. Hence a solution to the external debt of
\nthe national private sector is not beyond reach and can be
\nachieved much earlier than commonly expected.<\/p>\n
Foreign investments will be next. Expansion of investment by
\nexport-oriented foreign companies and joint ventures in such
\nsectors as electronics and textiles is gaining strength already.
\nAcquisition of domestic companies by foreign interest is likely
\nto increase as the Indonesian Banking Restructuring Agency makes
\navailable many more restructured companies for sale. This will
\nhelp re-invigorate the investment outlook for the country.<\/p>\n
The year 2001 will be the year of economic recovery for
\nIndonesia. We may expect the economy to grow by 5 percent or
\nmore. This is still below the 7 to 8 percent growth in the pre-
\ncrisis period, but is sufficient to create an environment of
\ngreater confidence and hope.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesias-business-prospects-in-2001-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}