Business sentiment index 'unchanged'

JAKARTA (JP): The business sentiment is virtually unchanged as uncertainty in the country's political front persists, according to a survey by Danareksa Research Institute.

The research agency said on Thursday that although the business sentiment index in the December-January period rose slightly to 115.3 from 115, business prospects remained uncertain.

"The worsened economic outlook in the expectations index negates the improved economic outcome in the present situation index," it said.

The research agency said most CEOs under the survey viewed that their companies' conditions were good, but the business environment was not yet supportive of their enterprises.

Profits are hard to predict because of the country's destabilizing political situation, it said.

"The profitability of any business may be threatened by the country's uncertain and unstable condition, as seen in the flagging business confidence in government index (BCGI)," the agency said.

According to the agency, businessmen have to guard their businesses against the risk of loss in unpleasant contingencies.

Their confidence in the government's ability to create a stable business climate has been faltering since the second quarter of 2000, with the latest fall from 106.1 to 103.1, reflecting the escalation of risks inside the country, it added.

The weakest component of the BCGI is the law enforcement index which has been in the negative territory since September 2000, marking pessimism toward the government's ability to make the business atmosphere in the country fair and just.

Overwhelmed by an uncertain future, confidence of CEOs in their ability to foresee the future of their businesses has been falling closer to 100. This has resulted in an increased disinclination to enter new contracts or renew current contracts.

"Businessmen are inclined to delay or reduce business spending, as they are becoming less confident in their estimations of profitability," it said.

Since most of businessmen preferred to keep a larger part of their cash and be free of any commitments for the next six-month period, business spending has been on the decline.

"Consequently, the business community's market is shrinking," the agency added.(03)