As the global economy recovers, Indonesian companies must innovate to increase productivity, and expand cross-border operations within Asia through mergers and acquisitions, a Cambridge University management expert says
s the global economy recovers, Indonesian companies must innovate to increase productivity, and expand cross-border operations within Asia through mergers and acquisitions, a Cambridge University management expert says.
Asia did not need to wait for consumption to pick up in the US, as the global economy would not likely return to its "normal" condition, Prof. Peter Williamson said.
"The key to recovery in Asia will be in the ability of companies to unlock growth in developing markets," Williamson told a breakfast forum jointly organized by the Association of Indonesian Banks (Perbanas), the Perbanas Institute of Asian Banking Finance and Informatics (ABFI), and the Cambridge Judge Business School.
The combined GDPs, based on purchasing power parity, of the developing world surpassed that of the developed world in 2005, meaning market growth in developing economies remained largely untapped.
Williamson expressed concern at the ability of Indonesian companies to tap into this potential, noting that they had been cushioned from the global recession by relying on a huge domestic market, making them less dependent on exports.
"We should not congratulate ourselves too much," he cautioned.
As the global economy recovers, China will continue to set the pace for overall productivity improvement, said Williamson, the author of Winning in Asia - Strategies for Competing in the New Millennium and Dragons at Your Door - How Chinese Cost Innovation is Disrupting Global Competition.
"China will raise the bar for everyone," Williamson said, stressing that China's higher productivity was not only a result of its lower wages but also was from its overall strong productivity through investment in new technologies.
China will compete in both low- and high-end products.
Total factor productivity in China is growing by more than 4 percent a year, compared with around 1.5 percent in Indonesia, he said.
Williamson warned that companies should get used to high energy prices, prompted mainly by strong demand in China and India and now also by carbon pricing imposed by governments as part of the fight against global warming.
"You need to turn energy prices into a competitive advantage," he said.
Indonesian companies should be looking at expanding operations within Asia through corporate acquisitions and becoming major players in the increasingly more integrated region, Williamson said.
"Indonesian companies have been a little bit reticent in doing that," he noted.
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