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)