

8
www.globeasia.comIndonesia’s $65 billion equity
rout this year is slowing after
first-half corporate earnings provided some relief, especially
in commodity-related industries.
Investor sentiment, however, remains fragile amid
massive selloffs fueled by a gradual interest rate increase by
the United States Federal Reserve.
Economic growth in Indonesia remains lackluster, with
5.06 percent expansion posted in the first quarter amid
sluggish consumer spending, raising a question whether the
country will ever achieve this year’s 5.4 percent growth target.
The benchmark stock index has declined by about 6
percent so far this year, although it performed a little better
in July. The rupiah depreciated by around 6.25 percent so far
this year and it has broken through the psychological level
of 14,000 – the first time since December 2015. Markets
apparently still need more positive news to allow a solid
rebound from the current position.
Indonesia historically has always been fragile to capital
outflows, as it is one of a few emerging markets in Asia that
run current-account deficits. Furthermore, its financial
markets remain very shallow, and the government runs a
budget deficit, which adds to the country’s greater reliance on
foreign funds to help stimulate the economy.
Despite this bleak short-term picture,
GlobeAsia
’s
performance review of the country’s 100 largest business
groups for this year is still positive, as the giant players are
apparently still enjoying revenue growth, especially those with
assets in the financial, consumer goods and commodity sectors.
Indonesian conglomerate PT Astra International Tbk,
which has diverse interests ranging from automotive to
finance and commodity-related businesses, posted a rebound
in its first-half earnings. The company reported 11 percent
growth in January-June net income, thanks to higher profit in
its commodity-related business arms.
Financial companies and banks also performed well,
with Djarum Group-controlled lender PT Bank Central Asia
Tbk, Indonesia’s largest bank by market value, seeing its net
income rise 8.4 percent, thanks to healthy loan growth.
As we review the giant players’ recent financial
performance, we also look into their long-term strategies,
including moves to enter the next level of modern business
practices with help from the internet-of-things.
Many Indonesian business groups have made serious
investments in the digital economy over the past five years,
banking on the prospect that this will be a steady revenue
generator in the future as operations in their brick-and-
mortar stores are being slimmed down to become more
efficient. This is in response to changing customer behavior
as millions of Indonesians now go online for much of their
daily activities, including shopping, booking accommodation,
buying travel tickets and much more.
Meanwhile, as the country is currently in dire need of
foreign funds, there are high hopes for a significant inflow
of foreign exchange during the Asian Games, scheduled to
take place between Aug. 18 and Sept. 2. Government officials
have already made their own calculations of the prestigious
sporting event’s potential economic impact. This will include
a revenue boost from tourism and ticket sales, and a potential
economic stimulus from the money sponsors are likely to
spend during the event.
At the same time, Indonesia is speeding up its
infrastructure development, while the private sector is also
gearing up hotel development to welcome more foreign
visitors, all of which are expected to create more jobs and
stimulate the economy.
Companies, including large groups, will reap some financial
benefit from the Asian Games, with analysts saying banks,
consumer goods and infrastructure-related companies are
likely to see a boost in income from the international multisport
event, which may also lift the country’s sports industry.
The year 2018 may be a challenging one for Indonesia
amid financial market volatility, lackluster economic growth
and the runup to next year’s legislative and presidential
elections. Good news may have to wait until the end of this
year. Meanwhile, Indonesian companies slowly but surely are
positioning themselves to embark on their journeys to the
digital world, which is expected to offer more steady returns in
the long run.
The Economy Needs a Boost
Editorial
Correction
In our July edition, the correct question on page 36 paragraph
3 should have read
“Citi recorded interest and fee revenue
of more than 1.5 trillion rupiah this quarter. Is there a similar
target for the following quarters and the year?”
We regret the inconvenience.
The Editor