Weak Talent but Indonesia Remains Attractive Investment Destination
A survey conducted by the Economist Corporate Network (ECN), published on Tuesday (17/01), shows that Indonesia is among Asia's most attractive investment destinations due to the combination of strengthening consumer demand and improvements in the nation's investment and business climate (a positive result of the government's reform efforts). In this survey, titled "Navigating Asia's Risks and Rewards: Asia Business Outlook Survey 2017", a total of 223 Asia-based business executives were asked about their business performance and expectations for the year ahead.
The ECN survey was conducted in November 2016, a month in which Indonesia was plagued by various threats. The surprise victory of Donald Trump in the 2016 US presidential election as well as looming monetary tightening in the USA gave rise to capital outflows from Indonesia. Meanwhile, ethnic and religious tensions were rising in Indonesia due to several massive anti-Ahok demonstrations that were staged in Jakarta. It was also the month in which US multinational banking and financial services firm JP Morgan Chase double downgraded its investment recommendation for Indonesian stocks from overweight to underweight (a move considered "excessive" and was partly undone in January 2017).
However, the ECN survey showed few concern about Indonesia. To the contrary, respondents viewed the central government's responses toward political and economic risks in Indonesia, Myanmar, Vietnam and India as - most likely - to impact positively on business prospects in 2017. Overall, respondents are most optimistic about the four aforementioned countries, specifically the improvement of business conditions that was detected in these countries.
A total of 53.7 percent of respondents indicated that they will increase their investment portfolio in Indonesia, particularly because they detected robust private demand in Southeast Asia's largest economy (this should result in companies' improving corporate earnings). Meanwhile, Indonesia made it in the top three of top destinations in Asia for attracting investors (only China and India were placed above Indonesia). However, there was room for some criticism. Respondents noted that they are skeptical whether Indonesian President Joko Widodo has the ability to enact business reforms in a significant manner.
Indonesia is, by far, the largest economy within the ASEAN region with a USD $861.93 billion economy and USD $11,035 GDP per capita (PPP), followed by Thailand, a USD $395.28 billion economy (but a higher USD $16,305 GDP per capita, PPP).
Global Talent Competitiveness Index 2017
Less positive was the latest report of Insead, published in cooperation with global staffing firm Adecco Group and Singapore-based educational consultant Human Capital Leadership Institute. Together, they publish the Global Talent Competitiveness Index, an index that measures how nations grow, attract and retain talent, providing resources for government, investors and employers in order to make better policies and decisions. In the 2017 edition Indonesia scored 36.81 points, hence ranked 90 (out of a total of 118 countries).
This result is the same compared to the 2016 edition, hence disappointing and implying Indonesia has not improved its ability to compete for the best talent and maintain and grow its existing skilled workforce. Instead, it stagnated, while Indonesia's regional competitors saw improvements.
The report stated that Indonesia still has a long way to go in terms of cultivating a large and competitive talent pool to support the nation's macroeconomic growth in the middle of a massive shift in the global economy led by rapid advancement in machines and technology. Considering technology and machines are to replace part of the workforce, the report advises Indonesia to rethink its growth model and invest in the improvement of workforce skills.
However, a positive finding in the report is that Indonesia is increasingly perceived as being attractive to high-skilled people. This is positive as it would open the possibility of faster skill and knowledge agglomeration.