Survey shows Indonesian SMEs to be reveling in optimism

Andi Haswidi, The Jakarta Post, Jakarta

Indonesian small-and-medium enterprises (SMEs) have the highest investment expectations among to their peers in eight Asian markets, plus Australia, according to a survey conducted by HSBC.

The investment expectations survey, the first of its kind to be conducted by the London-based bank, indicates that about 64 percent of all respondents in Indonesia plan to increase their investment this year, leaving mainland China in second place on 54 percent, followed by Australia on 45 percent.

The survey was conducted in collaboration with ACNielsen in the first quarter of 2007, and covered 1,800 SMEs in nine countries and territories: Hong Kong, mainland China, Taiwan, Singapore, India, Korea, Malaysia, Indonesia and Australia.

"We conducted this survey as SMEs are one of the main engines of economic growth as they employ the largest number of employees. In Indonesia alone, about 50 million people work for SMEs," HSBC Indonesia head of commercial banking Khuresh Faizullabhoy said, citing figures from the Central Statistics Agency (BPS).

With the exception of Australia, the countries were chosen because they were representative of the economies of East Asia, Khuresh said, adding that the survey would cover more countries in the future.

A key finding of the investment expectations survey was that none of the Indonesian respondents were planning to cease trading any time soon. This was also the case in India.

"This shows that Indonesian businesses are very optimistic about the future. This is obviously the result of how they perceive the country's economic outlook," said HSBC senior vice president for business banking Andre S. Sudjono.

According to the survey, about 55 percent of Indonesian businesses expect faster economic growth this year, while 29 percent see it continuing at the same pace and 15 percent expect slower growth.

As investment plans directly affect hiring, the survey says that 22 percent of Indonesian small businesses expect to increase the number of their employees by more than 10 percent, while another 22 percent expect the figure to be lower than 10 percent, meaning that a total of 44 percent of the 209 Indonesian respondents are positive about recruiting more workers this year.

This means that Indonesian SMEs are the second most optimistic on hiring after mainland China, where 57 percent of SMEs expect to recruit more workers this year. After Indonesia in third place on 43 percent is India.

In terms of trade growth, 63 percent of Indonesian SMEs expected trade with mainland China to grow, 72 percent saw trade with the rest of Asia growing and 61 percent said trade with the rest of the world would grow.

"Compared to other countries, Indonesian SMEs on 72 percent show the highest expectations of increased trade with other Asian countries rather than China, while in countries such as India and Singapore, SMEs expected more trade with mainland China," Andre said.

Overall, HSBC concludes that the optimism of Indonesian SMEs provides a very good barometer of economic health as they are major job creators and form a critically important part of the economy.

"Their optimism, therefore, is a clear reflection of economic growth," Khuresh said.