By Zubaidah Nazeer
Indonesian correspondent
zubaidah@sph.com.sg

 

THE World Economic Forum (WEF) on East Asia has generated a suite of business deals for host country Indonesia, with about Rp 85 trillion (S$12.2 billion) in investment pledged by businesses eager to enter the country’s booming market.

Longtime challenges such as a lack of physical infrastructure and human resource could still hamper progress.

One of the largest investment pledges at the two-day event, which ended last Monday, came from multinational giant Unilever who reportedly planned to invest up to Rp 2 trillion a year in Indonesia, creating thousands of jobs.

The world’s second-biggest consumer goods company is already in the process of shifting its soap factory from Germany to Indonesia, said Industry Minister Muhammad Sulaiman Hidayat.

The move forms part of Unilever’s shift in focus towards Asia. The company sees over 55 per cent of its business coming from emerging markets.

'Asia, emerging Asia, is a very important part of it. I’m very excited about business prospects in Asia,' said its Asian chief Arish Manwani.

Indonesia is Unilever’s largest manufacturing base for household goods in South-east Asia, according to data from Bloomberg.

The WEF brings together business leaders, politicians and analysts. It had its East Asia session in Jakarta for the first time this year, a sign of the growing importance Indonesia plays on the regional and global economic stage.

Dubai-based private equity firm, Abraaj Capital, announced its interest in investing in energy and retail sectors in Indonesia, said its chief executive Omar Lodhi.

Citing vast potential in the country’s manufacturing and supply chain sectors, he said that Indonesia has become a major investment destination after China and India.

Companies located in other emerging markets are also hoping to deepen their presence here.

Indian companies such as the Essar group, Tata Power and Reliance Power have indicated their intentions to expand operations in Indonesia.

Essar CEO Prashant Ruia told the media that his group is looking at investing in the energy and mineral resources sector, such as coal, power plants and oil and gas.

While the mood was generally bullish about prospects in Indonesia and Asia, it was clear from the plenary sessions and talks along the corridors that infrastructure remains a major concern for investors.

Investors have often complained about a lack of roads, bridges and efficient ports. They would also like clearer regulatory frameworks for doing business as well as more skilled workers.

In a recent briefing, Nomura Indonesia, a local subsidiary of Japan’s largest brokerage firm, noted that Indonesia’s economy can achieve 8 per cent economic growth by 2015 if it meets 10 development markers.

These include reducing red-tape and lowering corruption.

The Indonesia government expects a 6.4 per cent economic growth this year, higher than last year’s 6.1 per cent.

World Bank figures showed that the Indonesian workforce lags far behind the region in education - only 27.1 per cent of Indonesian workers have secondary education and above compared to higher levels in other countries in the region. The figures are from 2007.

Indonesian-born Sehat Sutardja, chairman and co-founder of Marvell Technology Group based in USA, said that throwing in money was not the solution.

'The government should have a targeted approach...such as creating more technical schools or institutions that can produce a workforce with specialised skills,' he said at a session on entreprenuership.

zubaidah@sph.com.sg