Business sentiment strengthens but legal uncertainties remain
Business sentiment strengthens but legal uncertainties remain
Fitri Wulandari, The Jakarta Post, Jakarta
The country's Business Sentiment Index (BSI) rose for the second
consecutive period, as more business leaders expressed confidence
about their current performance and their business outlook for
the next six months, a survey said.
According to the Danareksa Research Institute survey of top
executives at leading companies for the April-May period, the BSI
climbed to 111.3 from 110.2.
"The higher investor sentiment stressed greater confidence in
the vigor of the economic recovery, which signifies a prelude to
stronger growth ahead for both the nation's economy and
companies' financial conditions," the survey said.
According to the survey, the Present Situation Index (PSI)
climbed to 100.9 from 100.3, and the Expectations Index (EI) rose
from 120.2 to 121.6, which contributed to the rising BSI.
The Danareksa survey covered 700 chief executives or directors
from a wide variety of leading companies in various sectors,
ranging from construction, agriculture and mining, to hotels and
restaurants.
The survey was designed to measure CEOs' assessments of
current economic and business conditions, as well as their
expectations for the next six months.
While the BSI rose, the Business Confidence in the Government
Index (BCGI) plunged for the fourth straight time to 104.6 from
106.1. The BCGI's decline was due to a plunge in sentiment about
law enforcement, which hit a fresh low of 78.7.
"The index reflects doubt about committing fresh funds to
expand capacity," Danareksa remarked.
This doubt, Danareksa said, has emerged amid expected
improvements in corporate profitability and liquidity over the
next six months, brought about by an anticipated slide in the
benchmark interest rate on Bank Indonesia's SBI promissory notes
and the appreciation of the rupiah against the US dollar.
With stocks of finished goods almost exhausted, more CEOs
believe existing capacity needs to be expanded to sustain profit
growth, as the increasing use of production capacity approaches
its limits.
"CEOs, however, have to think about the safety of committing
large sums of money in advance of financial returns against any
risks to the future life of their business operations," Danareksa
pointed out.
Business leaders are waiting for signs that the government is
committed to protecting entrepreneurs.
"The most prominent threat is the uncertainty of whether the
state can enforce a valid contract if any party to the contract
reneges unfairly," it added.
Without legal assurance, the translation of sanguine sentiment
into stronger fundamentals remains at best a fashionable topic
for talk shows, Danareksa stressed.