Business confidence continues to fall

Business confidence continues to fall

JAKARTA (JP): The confidence of corporate executives about the
prospects for their businesses continued falling in December as
uncertainty in the country's political front persisted, according
to a survey issued by Danareksa Research Institute on Friday.

The research agency said that chief executive officers (CEOs)
in the survey are less optimistic about the current performance
and prospects of their companies in the next six months.

Although business is still profitable, the overall outlook is
not as bright as in the last quarter of 2000. Good business
opportunities remain for companies engaged in services, finance,
transportation and communications, manufacturing, trade, hotels
and restaurants, it said.

"Companies that operate in the agriculture, mining, or
construction sectors, on the other hand, remain in the doldrums.
Despite good opportunities for certain companies, an unfavorable
business climate is weighing down on the overall outlook,"
Danareksa said.

Prospects for financial services, transportation and
communications services, and other consulting services, appear
most promising in terms of profitability.

This bright outlook may be associated with the restructuring
process, which most companies have had to undertake, that
requires the expertise of professionals in the finance industry.

"Companies that trade goods look good. They are the first to
benefit from the resurgence of consumer spending in the beginning
of 2000, with retail sales spearheading the overall business
expansion. There is no major change in the profile of
manufacturing companies, which continue to post remarkable sales
growth, albeit the contraction in their profit margins," it
added.

Companies that are engaged in agriculture-related businesses
performed poorly with sales shrinking and investment on the wane.

"Similarly, mining companies do not offer good profitability
as a result of weak cash flow and inadequate investment, albeit
strong sales growth and the high use of labor and production
capacity currently installed," the research agency said in a
statement.

The same constraints also face companies in the construction
business. Their performance and outlook are bad, with pessimism
prevailing in their profile of profitability, capacity use, and
investment.

Business growth in 2001 is at risk from uncertainties over
deteriorating domestic conditions. The CEOs of around 700 prime
corporations are concerned about political risk and the
government's weak grip on the security situation, with fears of
social unrest.

Unstable and unclear domestic politics remains the CEOs'
biggest concern, dogging their business and blunting any further
upside potential. Therefore, CEOs have to enter a rough session
in 2001, with downside risk looming for the economy.

"Consequently, overall demand for labor is likely to slow," it
added.

Against this backdrop the recovery of the overall corporate
sector is at risk, as there is a potential setback for the
business community should the risky and jittery business
environment remain. (03)