After an engaging and drama-filled election season in Indonesia, we’re not far off from everything settling down and plans being put into action – and there’s a LOT of plans.
I’m not just referring to plans of the President-elect either. For many businesses (both domestic and international), the main issue wasn’t actually who won (although many had a strong preference), it was more about stability – politically, socially, and economically.
In the last few months, not much has actually happened in Indonesia – at least in terms of business. Afraid to end up in an unknown situation, most projects have waited, and are still waiting, for the new President to officially take up office and get through a full week without incident before signing off on their plans.
Throughout this time though, they haven’t stopped planning. As it’s turned out, I think it’s accurate to say that due to the long wait, a lot of projects are actually a lot better prepared than they otherwise would have been – and that will be evident from October through to the end of the year by the sheer number of plans which are ready to implement at the point of announcement – which previously was something of a rarity.
Expect to hear a lot of IPO announcements (companies listing on the Indonesian stock exchange), a lot of M&A announcements (mergers and acquisitions), and a lot of development projects (predominantly construction, agriculture, infrastructure, and large resources/energy projects).
But a word of caution – there’s a strong likelihood that it’s not going to be automatic wealth creation for all – there’s going to be losers.
Change, generally, benefits companies who are good at adapting and innovating – and most certainly doesn’t benefit companies who are looking back to the past rather than to the future. There are plenty of very strong Indonesian companies, but also plenty of not-so-strong ones, which might run into problems in the next two or three years.
For this reason, I don’t expect the Jakarta Composite Index to dramatically increase, although a few quick wins with IPO’s will help. And whilst there’s a huge amount of “foreign money” waiting to invest in Indonesia (a large part of that being money controlled by wealthy Indonesians but currently held offshore), most of that will be put into ground-level business, rather than investing into stocks.
President Jokowi’s much-publicised plan to gradually remove fuel subsidies (which is entirely necessary) will almost certainly be accompanied by a raft of “populist” measures to prevent the poorest Indonesians being disadvantaged. He’s made no secret of his intention to build Indonesia from the bottom up – focussing on the needs of the poor, not the rich – and whilst nothing will change overnight when he becomes President, it’s worth noting that one of his first major acts as Governor of Jakarta was to raise the minimum wage by 44%… I’d be very surprised if he didn’t attempt something similar at a national level.
Both of these will have an impact on the rate of inflation, as businesses would immediately take the opportunity to raise prices, which in turn would have an impact on the Rupiah currency exchange rates. But on the other hand, taking millions of Indonesians out of poverty, and making millions of Indonesians slightly richer, immediately creates millions of new consumers, which in turn benefits the wealthy people who own the companies which make and sell things to these consumers. Good, adaptive companies will do very well; others will do badly. Quick tip: Steer clear of companies and/or projects which aren’t embracing the changes, they’re the ones at risk of doing badly.
Some of these upcoming projects are open to investment – we’ve got some great opportunities coming up soon that we’re involved in, including some very cleverly structured investment property, some fully insured project finance deals (insured with a global A-rated insurer), as well as IPO financing and other investment banking projects. If you’d like to hear about them as soon as we’re able to go public, let me know, and I’ll make sure you’re among the first to hear about them.
I’d also love to hear from business owners and/or senior management who are interested in giving their staff (of all levels, including the very lowest paid) the option of accessing some of the higher-end investment opportunities as a collective (particularly the fully insured ones), perhaps through a bespoke company pension or optional savings scheme – it would be a shame if it’s only those who are already relatively wealthy who benefit from this sort of thing.