Budget watch

Singapore firms eye Indonesia for growth

The Sudirman Business District in Jakarta. Nearly half of 1,100 firms surveyed by SBF last year picked Indonesia as their top overseas destination when it comes to investment opportunities.
The Sudirman Business District in Jakarta. Nearly half of 1,100 firms surveyed by SBF last year picked Indonesia as their top overseas destination when it comes to investment opportunities.PHOTO: REUTERS

Indonesia has jumped to top spot as the most attractive overseas destination for Singapore companies looking to spread their wings.

For many companies here, it is a no brainer, given the vast size of the market of 250 million people sitting right at Singapore's doorstep.

Mr Kenny Tan, chief executive of logistics firm Keyfields, said the company is preparing to move into Jakarta by the third quarter of this year. "It is the biggest market in South-east Asia, and we see a lot of opportunities. Many companies are headed there, but with a population of 250 million, we feel that it is big enough for many players."

Nearly half of 1,100 firms surveyed by Singapore Business Federation (SBF) last year picked Indonesia as their top overseas destination.

The country jumped from third place in 2015 when it was chosen by 28 per cent of companies surveyed. Indonesia displaced Myanmar, which held the top spot in 2015, but fell to fifth place last year.

SBF chief executive Ho Meng Kit said companies in manufacturing and transport/storage will be expanding more in South-east Asia as the region rapidly develops its infrastructure and connectivity.

 

International Enterprise Singapore group director for South-east Asia Ivan Tan said: "In the past, many companies wanted to go to China because it is very big, but now that it has slower growth, many companies are looking to Asean for its high growth."

Other draws for investors include Indonesia's young population and Singapore's strong ties with Indonesia, he added.

Mr Tan singled out infrastructure, especially utilities, as an area for Singapore firms to look into, noting Mr Joko's ambitious plan to generate an additional 35,000 megawatts of electricity by 2019.

Larger firms could look to opportunities in utilities such as electricity and water, while small and medium-sized enterprises (SMEs) can look at renewable energy, he added.

Mr Tay Kiat Seng, chief executive of water engineering firm Memiontec, has been doing business in Indonesia for over a decade and took the plunge to invest last year, given the "energetic administration".

The company is collaborating with Jakarta to convert water from a major canal into clean water.

He added that challenges in the past, such as applying for licences, were less problematic .

Ms Vanessa Leung, head of commercial banking, Singapore, for Standard Chartered Bank, said more firms here are looking abroad for opportunities. Many head to familiar markets such as Vietnam and South Korea, but others have gone as far afield as Africa.

Last year, her team supported more than 500 Singapore companies, helping them with banking facilities in over 26 countries, including Botswana, Ghana and Nigeria.

Vietnam was the star of the region last year, posting stellar growth of 6.21 per cent. It was third in the latest SBF survey, with 43 per cent of firms keen to go there.

Mr Tan said Singapore firms should consider manufacturing there, or servicing some of the large firms which has made large investments, such as Japanese and Korean conglomerates like Samsung.

There are opportunities in sectors from electronics, logistics, food manufacturing and textiles, he said.

One Singapore firm in Vietnam is construction services firm Utracon, which started off small in 2008 but has graduated to projects such as bridges, towers and townships.

Mr S.C. Kuah, Utracon's executive director, said that the company targets emerging markets and is exploring opportunities in countries as far as Uganda where it has enjoyed first-mover advantages.

"At the beginning, your presence may not be big, but over time, it will grow. We were able to make some good returns in Vietnam and Myanmar, but to bring good profit, it has to be five to 10 years down the road," he said.

A version of this article appeared in the print edition of The Straits Times on February 16, 2017, with the headline 'S'pore firms eye Indonesia for growth'. Print Edition | Subscribe