05 November 2019

Indonesian Companies Most Upbeat on Business Prospects in the World, HSBC Report

Indonesian companies are more upbeat than their global or Asian counterparts about the near, mid-to-long term prospects of their businesses, as prudent macroeconomic policy by authorities is expected to continue to strengthen both domestic consumption and investment inflows, a HSBC survey showed.

According to HSBC’s 2019 ‘Navigator: Now, next and how’ which gauges sentiment and expectations of the business communities from 35 markets all over the world, “the mood among Indonesian businesses is ‘resoundingly optimistic’ with companies operating in Southeast Asia’s largest economy are far more confident than their global or Asian counterparts,” said Anurag Saigal, Deputy Director, Commerial Banking, PT Bank HSBC Indonesia.

Navigator summarizes a comprehensive survey of 9,131 companies from different six regions was part of a series of ‘Navigator’ reports produced by HSBC to explore sentiments of companies around the world, and take a look at issues they feel challenged by. It also seeks to learn about their investment appetite, how they drive key decisions, make changes, and grow businesses. There were 150 companies sampled from Indonesia.

HSBC sets a criteria to take samples only from companies with at least US$ 1.75 million turnover limit and US$16.5 million corporates limits. The survey took respondents from key decision makers and those having significant influence into the decision making process in the eligible companies.

Indonesia Taking Center Stage

One significant finding of the survey is more than half of Indonesian companies surveyed fall into the ‘Navigator’ category, meaning they expect sales to grow by 15 percent or more in the next year. Indonesian respondents also have gained confidence over their future business prospects, with the findings showing nine out of ten companies are more optimistic about growth than they were a year ago.

“Optimism in Indonesia is above Asia Pacific’s averages, the only countries that come close to that level of optimism are Bangladesh at 74 percent and India at 72 percent,” said Anurag.

“Survey findings also show decision makers from Indonesian companies are optimistic over both the near and the mid-to-long term prospects. Respondents from the archipelago nation have a bullish outlook for the next year as well as for the next 5-years. They are also more optimistic about their growth in the last 12 months, a level that is far ahead of the global average.” added Anurag

Still from “HSBC Navigator: Now, Next and How” – next year, over half the businesses [54 percent] surveyed expect their sales to grow by 15 percent or more, which is substantially higher than the global [22 percent] and Asia Pacific [19 percent] averages.

“Indonesian businesses are the most optimistic across all 35 markets. Bangladesh is the nearest with 50 percent of companies in Bangladesh expecting sales growth of 15 percent or more,” said Anurag.

On a five year horizon, the proportion of businesses in Indonesia expecting sales to grow by 15 percent or more is even higher at 61 percent.

Navigating Global Headwinds

The survey findings also unveiled Indonesian companies expect growth in the near term (next year) is likely to be driven by a combination of increasing focus on sustainability, high quality suppliers and raw materials aided by highly skilled workforce to improve productivity and expansion of business with new markets opening up and introduction of new products/services.

Indonesia, the world’s fourth most populous nation, has been a fast-growing economy for the last decade or so, with growth of around 5 percent every year since 2015. Decision makers within the surveyed companies believe that next year is likely to remain a growth story for the archipelago nation, as prudent macroeconomic policy continues to strengthen both domestic consumption and investment inflows.

“Global headwinds may temper ambitions somewhat, but the immediate future looks bright,” said Dandy Pandi, Country Head, Global Trade and Receivable Finance, PT Bank HSBC Indonesia.

“The main strategies for Indonesian businesses to combat possible threats to business are clearly focussed on improving their offer by various means. Nearly half [48 percent] of the companies mention improving the quality of products or services and to achieve this around a quarter [26 percent] mention investing in innovation, better quality raw materials and suppliers [25 percent] and expanding digital platforms and channels are the other key strategies,” added Dandy.

About 30 percent of the companies also mentioned expanding into new markets is key to their expansion strategy.

Sentiments over International Trade, Protectionism

The survey also captured views by global respondents about international trade. It said almost all businesses (97 percent) expect positive prospects for international business and 45 percent are feeling very positive.

The survey also elaborates respondents from Indonesia is more upbeat when asked about whether international trade will provide new business opportunities in the next five years (Indonesia: 96 percent, global 79 percent), drive innovation (Indonesia:95 percent, global: 80 percent), raise incomes (Indonesia: 96 percent, global: 70 percent), improve efficiency (Indonesia: 94 percent, Global: 78 percent) and support employment (Indonesia: 94 percent, Global: 73 percent).

“These are uniformly higher than they are globally. The top benefits expected in Indonesia spread across direct business benefits [new opportunities and efficiency], benefits for the employees [incomes and employment] as well as benefits for the customer [innovation],” said Dandy.

One interesting finding from the survey is that businesses in Indonesia feel protectionism is increasing in the key markets they operate in, but the majority feel that they have gained more than they have lost. Businesses are addressing the impact of protectionism through focusing on digital channels, cutting costs, changing their offer and sourcing more from local suppliers.

Navigator also reveals, more than 85 percent of Indonesian businesses feel that protectionism is increasing. This is a substantial annual increase from just above half (55 percent) businesses in 2017 to just under three quarters (71 percent) in 2018.

Advice for Businesses

With the ongoing shifts happening to the market both at a regional and domestic level, more and more companies are moving towards digital technology, and creating ecosystems to support those changes. It is imperative that businesses in Indonesia follow suit with the times by using digital technology to improve operational efficiency, grow sales, and find the right strategic partners.

Businesses can also focus on online sales, according to Navigator, 40 percent of firms see this method as a way to counteract protectionism and 34 percent use it as a strategy to bypass geopolitical risk.

“The current global political climate also requires that companies assess the strength and reliability of their supply chain. Securing the supply of raw materials and energy are key,” opined Dandy.

Businesses in Indonesia should also keep mind of calls for sustainability from foreign governments, competitors, and investors, as heeding these calls would ultimately benefit themselves in the long run. Businesses should focus on finance, invest more in technology, as well as develop a sustainability framework of their own. Navigator also suggests for Indonesian manufacturers to focus on a traceable supply chain.

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