UK firms pick over the rubble

AS A SHAKY stability returns to the Indonesian economy following weeks of turmoil, British companies, the biggest foreign investors in Indonesia, are reassessing their positions.

While some projects in the South-east Asian nation are being put on hold, some firms are optimistic that rich pickings can be found among the rubble.

Dozens of British companies have piled into Indonesia in recent years, attracted by one of the highest growth rates in the world, low wages and 200 million potential customers.

UK direct investment in the country last year topped $5.5bn (pounds 3.4bn) according to the Indonesian Investment Co-ordination Board (IICB). The UK was the biggest investor in Indonesia in 1995, the second biggest in 1996 and the biggest again last year, according to figures provided by the IICB and the Department of Trade and Industry.

Ambitious plans by BAA to take over the management of Bali airport have now been scrapped. British Steel has also delayed indefinitely a $750m investment in partnership with Indonesia's Bakrie Group to build a mini- mill in Indonesia capable of producing 1.5 million tones of steel plates a year.

Spokesman Mike Hitchcock said one of the main reasons for the delay was "whether the country would be able to finance big infrastructure projects that would use steel". Earlier this month the Indonesian government suspended 15 big infrastructure projects worth billions of dollars as part of its programme to slash government debt.

British Steel also fears Indonesia will start producing its own steel for export.

Other manufacturing companies with factories in Indonesia believe the devaluation of the local currency could benefit them. Porcelain maker Royal Doulton has a pounds 15m factory just outside Jakarta.

"We don't seem to have been troubled by the current problems" said Peter Walley, Royal Doulton's finance director. "Going forward, providing we don't have rampant inflation, it's good news. It's going to be cheaper producing there."

Courtaulds, the chemicals and textiles firm that runs a toothpaste tube factory in Indonesia in conjunction with Unilever, is also quite calm.

"We will obviously lose when translating profits back to Britain. But, providing the economy can be sorted out, it's not all bad news because we are a domestic supplier," said company economist Donald Anderson.

For Unilever, which has been present in the country for 64 years and which produces consumer products such as soap and shampoo for the Indonesian market, the financial crisis has thrown up another unexpected problem - illegal smuggling of its products to other parts of Asia where they are now more expensive. As well as undercutting the company in other markets - especially China and Malaysia, where Unilever also has manufacturing operations - the increase in smuggling also means stocks are short in Indonesia.

In 1997 Unilever's turnover in Indonesia totalled $700m. The company is in a good position to take advantage of the Asian financial crisis.

"When things settle there will be a number of ailing companies. We will certainly be looking around for alliances and acquisitions, and I am sure there will be others doing the same thing," said Desmond Dempsey, commercial director for Unilever Indonesia.

The Dutch, Indonesia's former colonisers, have already jumped in with the purchase by Nutricia, Europe's biggest baby food maker, of a 50 per cent stake in Indonesia baby food maker Sari Husada for 328.9bn rupiah (pounds 23m).

"A lot of companies, British and otherwise, are having a close look at the new opportunities," said one Jakarta-based analyst.

"Over the next six months we will see a lot of people sneaking in and buying stakes in local companies. The big worry for anyone picking over the rubble is not to get something saddled with massive debt."

Business opportunities have also increased for British security and parcels delivery firm Securicor, the biggest security company in Indonesia.

"The possibility of social unrest is making people nervous about their operations," said one company employee - who didn't want to be named.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy