Prijono Sugiarto, President Director, Astra International: Interview

Interview: Prijono Sugiarto

What is the perception of corporate governance among Indonesian businesses?

PRIJONO SUGIARTO: Corporate governance has taken on a greater importance in this country, with more companies beginning to adhere to its principles. They recognise the positive impact that it can have in terms of their ability to expand their business through better access to capital markets. With a system of corporate governance in place, companies would also find it easier to enter into joint ventures and adapt to unforeseen circumstances.

This trend seems likely to continue, especially with assistance from programmes offered by multilateral agencies such as the IMF, as well as local associations like the Forum for Corporate Governance in Indonesia. Adhering to good corporate governance is an ongoing process and should be continuously improved upon, as the market tends to reward those organisations that have a lasting commitment to the practice. Not only is it good for the company, but it also aids in the development of capital markets and advances the growth of the economy.

Has the country made progress in protecting investors and enhancing disclosure?

PRIJONO: Indonesia is making progress in all areas of corporate governance, but the country still faces challenges when it comes to complying with international standards. That being said, the country is headed in the right direction. For example, the Indonesia Capital Market and Financial Institution Supervisory Agency (BAPEPAM) provides guidance to those companies that would like to comply with internationally recognised corporate governance principles. With the assistance of BAPEPAM, many businesses have been able to implement procedures that have resulted in higher levels of disclosure, investor protection and board performance. Their monitoring at times is so stringent that processing times can be lengthy. However, as the capacity at BAPEPAM steadily improves through the development of local talent, these issues can easily be overcome.

To protect investors, it would also be advisable to improve best practice standards as they relate to owners and those who control company assets. We must strive to adopt principles that will foster the equal rights of shareholders, improve the accountability of board members, encourage ethical actions and improve transparency and disclosure.

Do international companies view Indonesia as a country in which to make investments?

PRIJONO: The perception of the international business community is that Indonesia is a country with great opportunity, highly qualified companies and ample professionals. They also recognise that the country has an abundance of natural resources that it can leverage. If the development process is well-managed, Indonesia could be one of the wealthiest countries in the world within 20-25 years. For the past 12 years, we have enjoyed a level of political stability that did not exist here previously, and our new-found economic and social development will continue to preserve political stability in the future.

While the international community has begun to focus on many of these positive factors, a number of major concerns continue to deter foreign companies from making considerable investments here.

The first, of course, is infrastructure, which is the greatest obstacle to increasing economic growth beyond 7% per year. For example, in terms of the availability of labour, market size and political stability, Indonesia is seen by many international brands as one of the most attractive markets in the Asia-Pacific region for the development of the automobile manufacturing industry. While numerous companies in this sector have submitted proposals that reflect more than $900m in investment, this figure could be exponentially larger if many of the challenges associated with infrastructure were resolved.