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Consumer goods will remain RI’s economic mainstay
The consumer goods sector will remain the jewel of the Indonesian economy’s crown, thanks to the country’s large population and rising disposable income
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The consumer goods sector will remain the jewel of the Indonesian economy’s crown, thanks to the country’s large population and rising disposable income.
On the Indonesia Stock Exchange (IDX), the consumer goods sector has fared better than other sectors.
Its index has risen the highest at 2,418.11 of all indices and has been moving upward since 2008, data from the IDX show.
Firms that operate in the sector — many of them food producers — have also enjoyed the fastest recovery after the economy began to slow last year, with rising sales and profits.
The positive performance was acknowledged by New York Stock Exchange (NYSE) head of global capital markets Garvis Toler during his visit to the IDX on Thursday.
“I think we’re seeing consumers having more disposable income, so I think that bodes well for consumer sectors,” he said.
Publicly listed giant food producer Indofood CBP Sukses Makmur (ICBP), for instance, posted a 12.6 percent increase year-on-year (yoy) in its sales to Rp 8.9 trillion (US$676.4 million) in the first quarter.
The growth rate was higher than the 8.2 percent that it booked in the first quarter of 2015.
Unilever Indonesia (UNVR), the local arm of Anglo-Dutch consumer goods giant Unilever, managed to boost sales 10 percent on an annual basis to Rp 20.7 trillion in the January-to-June period.
The achievement was better than the sales growth of 7.4 percent in the same period last year.
Economist Hendri Saparini, founder of the Center of Reform on Economics (CORE), shared the same view as Toler regarding the robust growth of the consumer goods industry.
She said that consumer goods played a key role in overall household spending, which is the largest component of the country’s GDP.
According to the Central Statistics Agency (BPS), household spending surged 5 percent yoy in the second quarter from 4.9 percent yoy in the previous quarter. The growth then drove the economy higher to end at 5.2 percent in the second quarter.
However, Hendri said that much still needed to be done to develop the consumer goods sector, citing the country’s shallow financial market.
Bank loans are still the most common financing source in Indonesia, whereas financing options vary greatly in other countries as companies also rely on the stock market.
As most Indonesian banks obtain their funds from short-term sources such as three-month time deposits, financing of the real sector — with longer time periods — has been limited.
Compared to other Asian countries, market capitalization in Indonesia is relatively low, accounting for 48 percent of GDP. The index of capital market utility only reached 11 percent in 2013, as opposed to banking at 57.3 percent.
“We need to have firm, focused and comprehensive policies for the real sectors, which ones to prioritize and the kind of support needed to boost them,” Hendri said, adding that the support should also include other instruments that companies could rely on.
—JP/ Stefani Ribka
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