The UOB Business Outlook Study 2024 reveals that small and medium enterprises (SMEs) and large companies in Indonesia maintain a strong sense of optimism despite facing high inflation and global economic challenges that impact operational costs and supply chains. Many businesses also express a strong desire to boost profitability by expanding abroad, particularly within the ASEAN region. 

The UOB Business Outlook Study surveyed 525 SMEs and large companies in Indonesia between late December 2023 and mid-January 2024. The companies surveyed reported annual revenues ranging from IDR 6 billion to IDR 3 trillion. 

"Over nine out of ten businesses were affected by high inflation in 2023. However, compared to businesses in other countries surveyed, Indonesian businesses are the most optimistic about the future," said Jasmine Yeo, Head of Insights & Transformation at UOB Singapore, during the UOB Media Editors Circle on Monday (August 12). 

To address these challenges, companies in Indonesia have taken several measures. These include boosting productivity to achieve efficiency, adopting digitalization to drive cost savings, and becoming more proactive in negotiating prices with suppliers or vendors. 

Harapman Kasan, Wholesale Banking Director at UOB Indonesia, highlighted the resilience and optimism demonstrated by Indonesian businesses in facing economic challenges. The UOB Business Outlook Study 2024 underscores the positive aspirations and outlook of the business community towards the domestic business climate and provides insights into the steps needed to overcome the issues they are currently facing. 

"UOB Indonesia continues to support business growth by offering financial solutions and advisory services necessary to help companies thrive in an increasingly digital and interconnected world," Harapman added. 

SMEs and large companies surveyed by UOB see digitalization and the adoption of sustainable practices as crucial for future growth. They believe that digitalization will lead to higher productivity, greater customer reach, and improved business performance. 

"As a result, nearly nine out of ten businesses in Indonesia have already implemented digitalization in one or more departments, such as professional services, manufacturing, and engineering," said Jasmine Yeo. 

Among the SMEs and companies that have embraced digitalization, some have reported improvements in customer experience and profitability. However, Indonesian businesses also face several challenges on their digitalization journey. Approximately 47% of respondents are concerned about cybersecurity, and 36% face high risks from data breaches. 

Supply chain management is also deemed critical by 98% of businesses, especially in the manufacturing, engineering, and technology sectors, as well as in media and telecommunications. However, more than seven out of ten businesses stated that geopolitical tensions have significantly impacted supply chains, particularly in manufacturing, engineering, and business services sectors. 

"Increasing supply costs due to inflation and interest rates, coupled with a shift to supply strategies that prioritize contingency planning to mitigate shortages, are among the top three challenges businesses face," Yeo explained. 

Eyeing Expansion in ASEAN 

The UOB Business Outlook Study 2024 also revealed that 93% of respondents expressed a strong desire to increase profitability and revenue through international expansion, particularly within the ASEAN region. Companies in manufacturing, engineering, and business services are primarily targeting this expansion. 

They are motivated to expand internationally to build their reputation, leverage regional or global networks, and capitalize on opportunities for their products and services. "Most of the desire for overseas expansion is directed towards ASEAN countries (78% of respondents) and other North Asian countries (31% of respondents)," Yeo noted. 

Malaysia and Singapore are the top destinations for Indonesian businesses seeking expansion within ASEAN. However, 48% of businesses are still struggling to find suitable partners for collaboration in foreign markets. Additionally, more than 40% of respondents reported inadequate financial support or funding. 

Mardyana Listyowati, Acting Director General of National Export Development at the Ministry of Trade, stated that Indonesian SMEs have already entered many ASEAN countries. "We have mini-markets in the Philippines, Malaysia, and Thailand. There are also Indonesian coffee entrepreneurs in Malaysia, the Philippines, Japan, and Australia," Mardyana said. 

She added that the Directorate General of National Export Development conducts trade promotions abroad and provides assistance for halal certification and overseas exhibitions. The Ministry of Trade also offers the INA Export application to connect Indonesian companies with international buyers and to facilitate participation in overseas trade fairs. 

Original article here

This article is published in partnership with Katadata